Market Talk – February 5, 2021

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ASIA:

Australian farmers have warned that the country’s trade dispute with China and supply chain disruption linked to the coronavirus pandemic will cost the industry $28bn over the next decade. In a pre-budget submission published on Friday, the National Farmers’ Federation appealed to the government to invest A$3.5bn (US$2.66bn) to support a trading strategy aimed at diversifying the nation’s export markets and improving supply chains. China has targeted Australia’s farm sector over the past 18 months, slapping trade sanctions on barley, seafood, wine, and other exports as bilateral ties have sunk to their lowest level in a generation. Relations soured after Australia called for an international probe into the origins of Covid-19 and resisted China’s more aggressive foreign policy.

India’s central bank, the Reserve Bank of India, has decided to provide retail investors online access to the government securities market, primary as well as secondary. Retail investors will also get a facility to open their gilt securities accounts (Retail Direct) with the RBI. This move, RBI says, is part of continuing efforts by the central bank and the government to increase retail participation in G-Secs and improve ease of access. The government has a large borrowing program. Finance Minister Nirmala Sitharaman has set a target of approx. USD 185 billion via market borrowings in 2021-22. Allowing retail investors in this backdrop will certainly help the Centre tap a large pool of investors.

India’s largest lender, State Bank of India, cut its annual loan growth expectations on Thursday as corporate lending remained subdued, while a return to pre-pandemic levels of retail growth drove third-quarter profit well past estimates. The Mumbai-based bank expects credit growth to be 7% for the financial year ending March 31, compared to a prior estimate of 8%-9%. Lower spending by the country’s private sector has slowed corporate loan growth and it is unlikely to improve significantly in the last two months of this financial year, Reuters reported.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 437.24 points or 1.54% to 28,779.19
  • Shanghai decreased 5.53 points or -0.16% to 3,496.33
  • Hang Seng increased 175.18 points or 0.60% to 29,288.68
  • ASX 200 increased 75.00 points or 1.11% to 6,840.50
  • Kospi increased 33.08 points or 1.07% to 3,120.63
  • SENSEX increased 117.34 points or 0.23% to 50,731.63
  • Nifty50 increased 28.60 points or 0.19% to 14,924.25

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0053 or 0.70% to 0.76567
  • NZDUSD increased 0.0031 or 0.43% to 0.71923
  • USDJPY decreased 0.1050 or -0.10% to 105.45
  • USDCNY decreased 0.0104 or -0.16% to 6.46189

Precious Metals:

  • Gold increased 17.63 USD/t oz. or 0.98% to 1,809.89
  • Silver increased 0.595 USD/t. oz or 2.26% to 26.887

Some economic news from last night:

India:

Cash Reserve Ratio remain the same at 3.00%

Interest Rate Decision remain the same at 4.00%

Reverse REPO Rate remain the same at 3.35%

Japan:

Household Spending (MoM) (Dec) increased from -1.8% to 0.9%

Household Spending (YoY) (Dec) decreased from .1.1% to -0.6%

Foreign Reserves (USD) (Jan) decreased from 1,394.7B to 1,392.1B

South Korea:

Current Account (Dec) increased from 9.18B to 11.51B

Australia:

AIG Services Index (Dec) increased from 52.9 to 54.3

Retail Sales (MoM) (Dec) increased from -4.2% to -4.1%

Retail Sales (QoQ) (Q4) decreased from 6.5% to 2.5%

Indonesia:

GDP (YoY) (Q4) increased from -3.49% to -2.19%

GDP (QoQ) (Q4) decreased from 5.05% to -0.42%

GDP Annual decreased from 5.02% to -2.07%

FX Reserves (USD) (Jan) increased from 135.90B to 138.00B

Some economic news from today:

India:

FX Reserves, USD increased from 585.33B to 590.19B

Japan:

Coincident Indicator (MoM) (Dec) decreased from -0.4% to -1.2%

Leading Index (MoM) (Dec) decreased from 2.1% to -1.2%

Hong Kong:

Foreign Reserves (USD) (Jan) increased from 491.80B to 493.50B

Singapore:

Retail Sales (YoY) (Dec) decreased from -1.9% to -3.6%

Retail Sales (MoM) (Dec) decreased from 7.3% to -0.9%

EUROPE/EMEA:

European Central Bank President Christine Lagarde said Thursday the bank will keep its COVID-19-related economic stimulus package in place as the 19-nation Eurozone economy continues facing economic threats from the pandemic. Speaking in Berlin, Lagarde said that while newly approved vaccines and vaccination programs in Europe are a plus, the surges of COVID-19 cases throughout the continent have prompted new lockdowns and restrictions that affect the service economy of most nations. In December, the bank added $607 billion to the plan, bringing the value of the program to $2.2 trillion, and extended it to March 2022.

UK residents returning from coronavirus hotspots abroad will have to quarantine in hotels from February 15, the government has confirmed. UK residents returning from coronavirus hotspots abroad will have to quarantine in hotels from February 15, the government has confirmed. Passengers will have to stay in their rooms for 10 nights, with security guards accompanying if they go outside. Labour called the measures “too little, too late” to deal properly with new overseas strains of Covid.

Barclays said the UK financial services industry should focus on competing with the US and Asia rather than the EU. Barclays chief Jes Staley told the BBC that although jobs that would have been created here have been moved to the EU, Brexit gives one of the UK’s most important sectors the chance to define its own agenda.

The major European stock markets had a mixed day:

  • CAC 40 increased 50.72 points or 0.90% to 5,659.26
  • FTSE 100 decreased 14.39 points or -0.22% to 6,489.33
  • DAX 30 decreased 3.57 points or -0.03% to 14,056.72

The major European currency markets had a mixed day today:

  • EURUSD increased 0.00685 or 0.57% to 1.20363
  • GBPUSD increased 0.00499 or 0.36% to 1.37274
  • USDCHF decreased 0.00434 or -0.48% to 0.89961

Some economic news from Europe today:

Germany:

German Factory Orders (MoM) (Dec) decreased from 2.7% to -1.9%

Norway:

Manufacturing Production (MoM) (Dec) decreased from 1.5% to -0.2%

France:

French Current Account (Dec) increased from -1.40B to -1.20B

French Exports (Dec) remain the same at 39.3B

French Imports (Dec) decreased from 43.1B to 42.7B

French Non-Farm Payrolls (QoQ) (Q4) decreased from 1.6% to -0.2%

French Reserve Assets Total (Jan) increased from 189,505.0M to 189,807.0M

French Trade Balance (Dec) increased from -3.8B to -3.4B

UK:

Halifax House Price Index (MoM) (Jan) decreased from 0.2% to -0.3%

Halifax House Price Index (YoY) decreased from 6.0% to 5.4%

Italy:

Italian Retail Sales (YoY) (Dec) increased from -8.5% to -3.1%

Italian Retail Sales (MoM) (Dec) increased from -7.3% to 2.5%

Spain:

Spanish Consumer Confidence decreased from 63.1 to 55.7

US/AMERICAS:

Friday marked another green day for Wall Street despite a lackluster jobs report for January. The S&P 500 rallied to a new historic high after advancing 0.39% to 3,886.81. Activision Blizzard showed the most notable advancement after gaining 10.16%, followed by Wynn Resorts (7.37%), Estee Lauder (7.29%), and Freeport-McMoRan (6.58%).

After a near deadlock and 15 hours of debate, the US Senate passed President Biden’s $1.9 trillion coronavirus relief plan. However, this is only a budget resolution, and a separate voting process will need to occur to implement the relief package. Lawmakers hope to come to a final agreement before the $300 weekly unemployment supplement expires on March 14. The proposal currently includes $400 weekly unemployment aid that would last until September as well as $1,400 direct stimulus payments. However, there are currently talks of changing the eligibility requirements to anyone earning under $50,000 instead of $75,000. COVID vaccination programs would receive $20 billion, with an additional $50 billion for testing. State and local governments would receive $350 billion, schools would receive $170 billion, and $30 billion would be provided for rental assistance.

Unemployment in the US fell to 6.3% in January, according to data released by the Labor Department this Friday. Nonfarm payrolls advanced by 49,000, close to analysts’ estimates of 50,000. However, the participation rate declined to 61.4% after 406,000 Americans exited the workforce.  Part-time and discouraged workers fell to 11.1% from 11.7% the month prior. Unemployment remained elevated well-above pre-pandemic levels when it stood at a historic low of 3.5%.

Canada’s unemployment rate rose to 9.4% in January, according to Statistics Canada. The economy shed 213,000 positions last month, marking the highest rate of unemployment since August. Ontario and Quebec experienced the most significant decline in jobs due to increased lockdown measures. Canada remains 4.5% or 858,300 positions away from reaching pre-pandemic levels of employment.

US Market Closings:

  • Dow advanced 92.12 points or 0.3% to 31,147.98
  • S&P 500 advanced 15.07 points or 0.39% to 3,886.81
  • Nasdaq advanced 78.55 points or 0.57% to 13,856.3
  • Russell 2000 advanced 30.91 points or 1.4% to 2,233.33

Canada Market Closings:

  • TSX Composite advanced 93.33 points or 0.52% to 18,135.9
  • TSX 60 advanced 4.67 points or 0.44% to 1,073.65

Brazil Market Closing:

  • Bovespa advanced 979.44 points or 0.82% to 120,240.26

ENERGY:

The oil markets had a green day today:

  • Crude Oil increased 0.63 USD/BBL or 1.12% to 56.8600
  • Brent increased 0.59 USD/BBL or 1.00% to 59.4300
  • Natural gas increased 0.041 USD/MMBtu or 1.40% to 2.9760
  • Gasoline increased 0.0144 USD/GAL or 0.88% to 1.6592
  • Heating oil increased 0.0207 USD/GAL or 1.22% to 1.7212

The above data was collected around 11:49 EST on Friday

  • Top commodity gainers: Silver (2.26%), Lumber (2.97%), Bitumen (2.76%) and Palladium (2.28%)
  • Top commodity losers: Canola (-0.60%), Corn (-0.18%), Cotton (-1.15%), and Rice (-1.04%)

The above data was collected around 12:01 EST on Friday.

BONDS:

Japan 0.06%(+1bp), US 2’s 0.11%(-0.010%), US 10’s 1.14%(+0bps); US 30’s 1.94%(+0.006%), Bunds -0.46% (+3bp), France -0.25% (-1bp), Italy 0.54% (-1bp), Turkey 12.61% (+0bp), Greece 0.67% (+2bp), Portugal 0.06% (-1bp); Spain 0.13% (+0bp) and UK Gilts 0.48% (+4bp).