Market Talk – July 1, 2020

ASIA:

The United States stepped in to stall a United Nations Security Council (UNSC) statement pushed hard by China on this week’s Karachi terror attack. This is in light of India’s reservations over the Imran Khan government’s efforts to politicize the attack at the Pakistan Stock Exchange. Officials said that there was a good chance that the statement on the terrorist strike in Pakistan would be approved by the UNSC sooner or later. The delay, however, is the message to the China-Pakistan team that it could not expect a smooth ride at international fora.

US Secretary of State Mike Pompeo on Wednesday applauded India’s sweeping ban on Chinese apps, including TikTok, saying New Delhi was ensuring its own security. Pompeo told reporters, “We welcome India’s ban on certain mobile apps” from China, saying the move would “boost India’s integrity and national security.”

India’s eight infrastructure sectors showed signs of bottoming out in May while the country’s fiscal showed increasing signs of stress. The current account turned positive in the March quarter on the back of lower imports—all three impacted by the unfolding coronavirus pandemic in Asia’s third-largest economy. The eight infrastructure sectors contracted sharply for the third month in a row in May though lower than the record dip in April, with only fertilizer production (7.5%) registering positive growth. In May, the core sector data released by the industry department shrank 23.4% compared to 37% in April, mostly due to large dip in outputs of steel (48.4%), cement (22.2), electricity (15.6) and refinery products (21.3%).

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 166.41 points or -0.75% to 22,121.73
  • Shanghai increased 41.31 points or 1.38% to 3,025.98
  • Hang Seng closed
  • ASX 200 increased 36.50 points or 0.62% to 5,934.40
  • Kospi decreased 1.63 points or -0.08% to 2,106.70
  • SENSEX increased 498.65 points or 1.43% to 35,414.45
  • Nifty50 increased 127.95 points or 1.24% to 10,430.05

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00189 or 0.27% to 0.69194
  • NZDUSD increased 0.00286 or 0.44% to 0.64796
  • USDJPY decreased 0.51 or -0.47% to 107.47
  • USDCNY decreased 0.00052 or -0.01% to 7.06892

Precious Metals:

  • Gold decreased 12.45 USD/t oz. or -0.70% to 1,771.80
  • Silver decreased 0.17 USD/t. oz or -0.92% to 18.0325

Some economic news from last night:

China:

Caixin Manufacturing PMI (Jun) increased from 50.7 to 51.2

Japan:

Tankan All Big Industry CAPEX (Q2) increased from 1.8% to 3.2%

Tankan All Small Industry CAPEX (Q2) decreased from -11.7% to -16.5%

Tankan Big Manufacturing Outlook Index (Q2) decreased from -11 to -27

Tankan Large Manufacturers Index (Q2) decreased from -8 to -34

Tankan Large Non-Manufacturers Diffusion Index (Q2) decreased from -1 to -14

Tankan Large Non-Manufacturers Index (Q2) decreased from 8 to -17

Tankan Small Manufacturers Diffusion Index (Q2) decreased from -29 to -47

Tankan Small Manufacturing Index (Q2) decreased from -15 to -45

Tankan Small Non-Manufacturers Diffusion Index (Q2) decreased from -19 to -33

Tankan Small Non-Manufacturing Index (Q2) decreased from -1 to -26

Manufacturing PMI (Jun) increased from 37.8 to 40.1

South Korea:

Exports (YoY) (Jun) increased from -23.6% to -10.9%

Imports (YoY) (Jun) increased from -21.0% to -11.4%

Trade Balance (Jun) increased from 0.45B to 3.67B

Nikkei Manufacturing PMI (Jun) increased from 41.3 to 43.4

Australia:

Private House Approvals (May) decreased from 2.7% to -4.4%

Indonesia:

Motorbike Sales (YoY) decreased from -79.30% to -96.10%

Nikkei Manufacturing PMI (Jun) increased from 28.6 to 39.1

Singapore:

URA Property Index (QoQ) (Q3) decreased from -1.00% to -1.10%

Some economic news from today:

Japan:

Household Confidence (Jun) increased from 24.0 to 28.4

India:

Nikkei Markit Manufacturing PMI (Jun) increased from 30.8 to 47.2

M3 Money Supply remain the same at 12.3%

Australia:

Building Approvals (MoM) (May) decreased from -1.8% to -16.4%

Indonesia:

Inflation (YoY) (Jun) decreased from 2.19% to 1.96%

Inflation (MoM) (Jun) increased from 0.07% to 0.18%

Core Inflation (YoY) (Jun) decreased from 2.65% to 2.26%

EUROPE/EMEA:

The United Nations has approved a landmark deal curbing the impact of aviation on climate change. It was watered down at a United Nations (UN) meeting on Tuesday. This means airlines likely will not have to start offsetting their growing carbon emissions for several years later than planned. Four years ago, 191 countries agreed for the first time to tackle aviation’s fast-growing carbon footprint by making the industry pay for tree planting and other schemes to offset its growth in emissions between 2020 and 2035.

The United Kingdom said Wednesday it would offer a path to citizenship for eligible Hong Kong residents and condemned China’s new security law as a threat to the city’s freedom. The UK Foreign Minister has called this new security law “a clear violation of the autonomy of Hong Kong, and a direct threat to the freedoms of its people.”

More than 12,000 people in the UK are set to lose their jobs after a raft of firms announced cuts in the past 48 hours. High Street retailers are mainly making the cuts and in aviation — two of the sectors hardest hit by the coronavirus lockdown. John Lewis has said it would close stores but has not confirmed how many jobs will go.

US President Donald Trump has approved a plan to withdraw 9,500 American troops from bases in Germany, the Pentagon said. The move would reduce the number of US troops stationed in the country from about 34,500 to 25,000.

German Development Minister Gerd Müller warned Wednesday that Germany may see a new “wave of refugees” from poorer countries because of the coronavirus pandemic. He announced that Germany has earmarked €3 billion for aid to developing countries.

France’s foreign minister said on Wednesday that European Union foreign ministers would meet on July 13 to discuss Turkey and said new sanctions on Ankara could be considered.

Saudi Arabia will be tripling its value-added tax (VAT) rate on July 1, from 5 percent to 15 percent. The announcement came in mid-May following a wave of enormous cost-cutting programs to help counter the unprecedented economic fallout caused by the ongoing coronavirus pandemic. Government has also announced cutting spending on major projects by around $26 billion as it grapples with blows from the coronavirus pandemic and low oil prices on its economy. Saudi citizens will also lose a bonus cost-of-living allowance that had been in place since 2018, according to the country’s finance minister.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 9.05 points or -0.18% to 4,926.94
  • FTSE 100 decreased 11.78 points or -0.19% to 6,157.96
  • DAX 30 decreased 50.36 points or -0.41% to 12,260.57

 

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.0022 or 0.20% to 1.12557
  • GBPUSD increased 0.00984 or 0.79% to 1.24853
  • USDCHF decreased 0.00112 or -0.12% to 0.94594

Some economic news from Europe today:

UK:

Nationwide HPI (YoY) (Jun) decreased from 1.8% to -0.1%

Nationwide HPI (MoM) (Jun) increased from -1.7% to -1.4%

Manufacturing PMI (Jun) increased from 40.7 to 50.1

Germany:

German Retail Sales (YoY) (May) increased from -6.4% to 3.8%

German Retail Sales (MoM) (May) increased from -6.5% to 13.9%

German Manufacturing PMI (Jun) increased from 36.6 to 45.2

German Unemployment Change (Jun) decreased from 238K to 69K

German Unemployment Rate (Jun) increased from 6.3% to 6.4%

German Unemployment (Jun) increased from 2.875M to 2.943M

German Unemployment n.s.a. (Jun) increased from 2.813M to 2.853M

Spain:

Spanish Manufacturing PMI (Jun) increased from 38.3 to 49.0

Swiss:

procure.ch PMI (Jun) decreased from 42.1 to 41.9

Italy:

Italian Manufacturing PMI (Jun) increased from 45.4 to 47.5

France:

French Manufacturing PMI (Jun) increased from 40.6 to 52.3

Norway:

Manufacturing PMI (Jun) increased from 44.9 to 48.9

Euro Zone:

Manufacturing PMI (Jun) increased from 39.4 to 47.4

US/AMERICAS:

The ADP and Moody’s Analytics estimates that private payrolls in the US grew 2.369 million in June, slightly beneath estimates of 2.5 million. May’s figure was revised drastically to show a 3.065 million uptick in payrolls. Zark Zandi, Moody’s chief economist, explained that their objective is to predict the Bureau of Labor Statistics’ official data, combined with the ADP data, and it often produces a rough estimate. Zandi went on to say that despite the rough data, “it looks like an economic recovery began in June.”

Democratic nominee Joe Biden announced plans earlier in the week to undo tax cuts implemented by the Trump administration if elected. Biden also announced that he would increase the corporate tax rate to 28%, which would cost businesses $1.3 trillion over the next ten years. Corporate taxes declined from 35% to 21% under the Trump administration.

Tesla became the highest-valued automaker in the world this Wednesday, surpassing Toyota for the top title. Tesla shares rose to a new high of $1,135 midday (closed at $1,119.63), which brought the company’s valuation to around $206.5 billion (Toyota’s current valuation is $202 billion).

At least 331,901 Brazilians lost their livelihoods this May, according to the Economy Ministry. Although the number seems grim, it is drastically less than April’s record of 860,503 jobs lost. The current number of Brazilians who became unemployed during 2020 now totals 1.14 million.

The Brazilian Business Cycle Dating Committee, or Codace, declared that Brazil official entered a recession during Q1 amid the coronavirus. The country’s GDP shrank -1.5% during Q1, and figures for Q2 are expected to show another contraction.

US Market Closings:

  • Dow declined 77.91 points or -0.3% to 25,734.97
  • S&P 500 advanced 15.57 points or 0.5% to 3,115.86
  • Nasdaq advanced 95.86 points or 0.95% to 10,154.63
  • Russell 2000 declined 14.05 points or -0.97% to 1,427.31

Canada Market Closings:

  • TSX Composite advanced 125.5 points or 0.82% to 15,515.22
  • TSX 60 advanced 5.61 points or 0.6% to 934.21

Brazil Market Closing:

  • Bovespa advanced 1,147.38 points or 1.21% to 96,203.2

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil increased 0.54 USD/BBL or 1.38% to 39.8100
  • Brent increased 0.88 USD/BBL or 2.14% to 42.0200
  • Natural gas decreased 0.04 USD/MMBtu or -2.15% to 1.6860
  • Gasoline increased 0.00 USD/GAL or 0.01% to 1.2163
  • Heating oil increased 0.01 USD/GAL or 0.58% to 1.1994

The above data was collected around 15.50 EST on Wednesday.

  • Top commodity gainers: Cheese (9.33%), Milk (9.01%), Rice (37.19%), and Live Cattle (6.41%) (3.21%)
  • Top commodity losers: Natural Gas (-2.15%), Palladium (-1.10%), Cocoa (-1.87%), and Steel (-4.16%)

The above data was collected around15:55 EST on Wednesday.

BONDS:

Japan 0.05%(+2bp), US 2’s 0.17% (+1bps), US 10’s 0.68%(+3bps); US 30’s 1.43%(+2bps), Bunds -0.39% (+7bp), France -0.06% (+6bp), Italy 1.35% (+2bp), Turkey 11.59% (+9bp), Greece 1.19% (-4bp), Portugal 0.51% (+2bp); Spain 0.54% (+6bp) and UK Gilts 0.21% (+4bp).

 

  • UK 30-Year Treasury Gilt Auction increased from 0.604% to 0.668%