Market Talk – January 19, 2021

Posted Jan 19, 2021 by Martin Armstrong |

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ASIA:

China’s economy grew at the slowest pace in more than four decades last year, official figures show but remains on course to be the only major economy to have expanded in 2020. The economy grew 2.3% last year, despite Covid-19 shutdowns causing output to slump in early 2020. China’s mainland share markets as well as Hong Kong’s Hang Seng posted modest gains on the latest figures, which exceeded economists’ expectations, according to a Reuters poll.

India’s trade deficit in goods widened to $15.44 billion in December as imports rose to $42.59 billion, pushed by a surge in gold imports, while merchandise exports were up marginally, revised data released by the government on Friday showed. The merchandise trade deficit was $12.49 billion in December 2019. The merchandise exports rose 0.14% in December from a year earlier to $27.15 billion, the data showed.

India’s central bank is likely to propose tightening rules on “shadow banks” in a bid to strengthen solvency and sustainability of a sector that has been showing signs of stress in recent years, Reuters reported. The Reserve Bank of India has been trying to tighten regulatory norms on the sector since Infrastructure Leasing & Financial Services, the largest nonbank financial company, went bankrupt in 2018, and Dewan Housing Finance Corp and Altico Capital defaulted on payments in 2019. The RBI is expected to set out proposals in a discussion paper next week, recommending that bigger shadow banks maintain a statutory liquidity ratio, the sources said. The RBI could also suggest large nonbanks be required to maintain a cash reserve ratio. For banks this ratio is 3%, reduced from 4% in a measure the central bank imposed that is to be reversed after March 31.

Singapore’s economy contracted by less than expected in 2020 as activity picked up further in the fourth quarter following the easing of Covid-related restrictions, advance estimates by the Ministry of Trade and Industry showed on Monday. The Southeast Asian economy contracted by 5.8% in 2020 compared with the previous year, said the ministry. That’s better than the official forecast for an annual contraction of between 6% and 6.5%.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 391.25 points or 1.39% to 28,633.46
Shanghai decreased 29.84 points or -0.83% to 3,566.38
Hang Seng increased 779.51 points or 2.70% to 29,642.28
ASX 200 increased 79.60 points or 1.19% to 6,742.60
Kospi increased 78.73 points or 2.61% to 3,092.66
SENSEX increased 834.02 points or 1.72% to 49,398.29
Nifty50 increased 239.85 points or 1.68% to 14,521.15

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00137 or 0.18% to 0.76982
NZDUSD increased 0.00015 or 0.02% to 0.71147
USDJPY increased 0.2 or 0.19% to 103.89
USDCNY decreased 0.01827 or -0.28% to 6.47799

Precious Metals:

Gold increased 5.04 USD/t oz. or 0.27% to 1,841.93
Silver decreased 0.08 USD/t. oz or -0.32% to 25.249

Some economic news from last night:

Australia:

HIA New Home Sales (MoM) increased from 15.2% to 91.8%

New Zealand:

NZIER Business Confidence (Q4) increased from -40% to -6%

NZIER QSBO Capacity Utilization (Q4) increased from 92.6% to 95.1%

Electronic Card Retail Sales (YoY) (Dec) increased from 1.4% to 3.5%

Electronic Card Retail Sales (MoM) (Dec) increased from 0.1% to 19.2%

Some economic news from today:

Indonesia:

Motorbike Sales (YoY) (Dec) increased from -56.70% to -45.10%

New Zealand:

GlobalDairyTrade Price Index increased from 3.9% to 4.8%

Hong Kong:

Unemployment Rate (Dec) increased from 6.3% to 6.6%

EUROPE/EMEA:

A Reuters poll suggests that it will take more than two years for Britain’s economy to recover to its pre-COVID-19 level, but the Bank of England was still expected to keep rates steady until at least 2024 and to avoid negative borrowing costs. Median forecasts in the Jan. 11-14 poll of over 70 economists said the economy would contract 1.4% this quarter after shrinking 2.0% in the final three months of 2020. In December, before the new national lockdown was announced, the economy was predicted to grow 1.7% this quarter.

The president of the European Central Bank has called for greater regulation of BTC, after linking its use to global criminality and money laundering, according to reports. ECB chief Christine Lagarde said the digital currency was increasingly being used by criminals worldwide to cover their tracks online, and for laundering money beneath the detection of the authorities, Reuter reported. Due to the largely anonymous nature of transactions, Lagarde said criminals were relying on BTC and patchy regulation to move illegitimate money without oversight or supervision. As a result, she called for more urgency around global regulation of the sector and more of an effort to develop common standards, to prevent criminals from abusing digital currencies as a backdoor to money laundering and other nefarious activities.

Top German officials were set to discuss an order that would make wearing higher-quality FFP2 masks mandatory in certain situations, the German media reported on Monday. The reports came as the heads of all 16 German states were due to decide on tougher anti-pandemic measures at a meeting with the federal government on Tuesday.

The major Europe stock markets had a negative day:

CAC 40 decreased 18.66 points or -0.33% to 5,598.61

FTSE 100 decreased 7.70 points or -0.11% to 6,712.95

DAX 30 decreased 33.29 points or -0.24% to 13,815.06

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00451 or 0.37% to 1.21213

GBPUSD increased 0.00453 or 0.33% to 1.36244

USDCHF decreased 0.00206 or -0.23% to 0.88895

Some economic news from Europe today:

UK:

Car Registration (MoM) (Dec) increased from -19.3% to 16.6%

Car Registration (YoY) (Dec) increased from -27.4% to -10.9%

Labour Productivity (Q3) increased from -1.0% to 4.0%

Italy:

Italian Trade Balance (Nov) decreased from 7.575B to 6.766B

Italian Trade Balance EU (Nov) decreased from 0.42B to 0.09B

Italian Car Registration (MoM) (Dec) decreased from -11.8% to -13.7%

Italian Car Registration (YoY) (Dec) decreased from -8.3% to -14.9%

Germany:

German Car Registration (YoY) (Dec) increased from -3.0% to 9.9%

German Car Registration (MoM) (Dec) increased from 5.8% to 7.3%

German CPI (YoY) (Dec) remain the same at -0.3%

German CPI (MoM) (Dec) increased from -0.8% to 0.5%

German HICP (YoY) (Dec) remain the same at -0.7%

German HICP (MoM) (Dec) increased from -1.0% to 0.6%

German ZEW Current Conditions (Jan) increased from -66.5 to -66.4

German ZEW Economic Sentiment (Jan) increased from 55.0 to 61.8

France:

French Car Registration (MoM) (Dec) increased from -26.3% to 47.8%

French Car Registration (YoY) (Dec) increased from -27.0% to -11.8%

Swiss:

PPI (MoM) (Dec) increased from -0.1% to 0.5%

PPI (YoY) (Dec) increased from -2.7% to -2.3%

Euro Zone:

Current Account (Nov) decreased from 26.6B to 24.6B

Current Account n.s.a. (Nov) decreased from 34.1B to 26.8B

Construction Output (MoM) (Nov) increased from 0.47% to 1.41%

ZEW Economic Sentiment (Jan) increased from 54.4 to 58.3

US/AMERICAS:

Joe Biden will officially take office this Wednesday, and he plans to redo a number of Trump administration policies. Biden has stated that he would like the US to return to the World Health Organization and the Paris Climate Agreement. Biden has several additional provisions for climate change, including curbing access to new oil and imposing methane pollution limits. Most significantly for US-Canada relations, Biden would like to cancel the Keystone Pipeline designed to bring oil from Canada to the US. The new president will also open the borders to permit additional immigration to the US.

The incoming Biden administration said it would not lift international travel restrictions on January 26, as Trump originally ordered. The current rules prohibit entry for those from the UK, Ireland, most of Europe, Brazil, China, and Iran. Numerous countries have barred Americans from entering their borders. Additionally, international travelers will be required to produce a negative COVID-19 test prior to boarding their flight.

Treasury Secretary nominee Janey Yellen is asking Biden to “go big” on the next round of coronavirus stimulus aid. Biden has already proposed a $1.9 trillion plan, stating that combating the aftermath of the coronavirus lockdowns outweighs the growing deficit. Yellen expressed similar sentiments. “Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen stated.

Yellen is also in favor of raising taxes, claiming that America could afford a higher tax rate if it coordinated with the Organization for Economic Cooperation and Development. Biden previously stated he would like to raise corporate taxes from 28% to 21% and repeal many of the 2017 tax cuts implemented under the Trump administration when the corporate tax rate stood at 35%.

The International Revenue Service (IRS) has postponed tax season to February 12. The IRS is concerned that beginning the season in January will complicate stimulus checks and rebate credits for those who have not collected them. The agency admittedly has a large backlog of mail and is encouraging Americans to file electronically to receive their refund faster. The deadline is still April 15 at this time.

US Market Closings:

Dow advanced 116.26 points or 0.38% to 30,930.52
S&P 500 advanced 30.66 points or 0.81% to 3,798.91
Nasdaq advanced 198.68 points or 1.53% to 13,197.18
Russell 2000 advanced 27.94 points or 1.32% to 2,151.14

Canada Market Closings:

TSX Composite advanced 12.49 points or 0.07% to 17,957.37
TSX 60 declined 1.31 points or -0.12% to 1,066.73

Brazil Market Closing:

Bovespa declined 605.24 points or -0.5% to 120.636.39

ENERGY:

The oil markets had a mixed day today:

Crude Oil increased 0.77 USD/BBL or 1.48% to 52.8600
Brent increased 1.05 USD/BBL or 1.92% to 55.8000
Natural gas decreased 0.075 USD/MMBtu or -2.85% to 2.5570
Gasoline increased 0.0155 USD/GAL or 1.02% to 1.5391
Heating oil increased 0.0105 USD/GAL or 0.66% to 1.5985
Top commodity gainers: Brent (1.92%), Crude Oil (1.48%), Gasoline (1.02%) and Cocoa (2.89%)

Top commodity losers: Sugar (-2.25%), Orange Juice (-2.17%), Lumber (-15.95%), and Natural Gas (-2.85%)

The above data was collected around 14:24 EST on Tuesday.

BONDS:

Japan 0.04%(-1bp), US 2’s 0.13%(-0.006%), US 10’s 1.09%(-1bps); US 30’s 2.00%(-0.01%), Bunds -0.52% (+4bp), France -0.29% (+1bp), Italy 0.57% (-4bp), Turkey 13.04% (-3bp), Greece 0.68% (-2bp), Portugal 0.03% (-0bp); Spain 0.07% (-1bp) and UK Gilts 0.29% (+0bp).