Market Talk – July 16, 2020

ASIA:

China’s economy returned to growth in the second quarter after a deep slump at the start of the year, but unexpected weakness in domestic consumption underscored the need for more policy support to bolster the recovery after the shock of the coronavirus crisis. Gross domestic product (GDP) rose 3.2% in the second quarter from a year earlier, the National Bureau of Statistics said on Thursday, faster than the 2.5% forecast by analysts in a Reuters poll, as lockdown measures ended and policymakers ramped up stimulus to combat the virus-led downturn.

The US is reportedly considering imposing travel restrictions on Chinese Communist Party members as well as their families, the New York Times reported. The travel ban may apply to as many as 92 million party members as per the New York Times’ report. Reuters news agency confirmed the report on Thursday, saying a draft presidential order had been circulated, but deliberations were at an early stage and the issue had not yet been brought to Trump.

India posted a trade surplus of $790 million in June, its first in over 18 years, with imports plunging as the coronavirus pandemic hit domestic demand for crude oil, gold, and other industrial products, government data showed on Wednesday. India last posted a trade surplus – of $10 million – in January 2002, according to Refinitiv data.

The Japanese government plans to begin a contentious travel initiative next week as planned, despite a resurgence in new coronavirus cases, by excluding hardest-hit Tokyo from the campaign, the tourism minister said Thursday.

Foreign nationals traveling to Japan in June totaled an estimated 2,600, posting a year-on-year plunge of 99.9 percent for the third consecutive month amid the novel coronavirus pandemic, government data showed Wednesday. Inbound visitors sank to 1,700 in May, marking the lowest figure since 1964 when the government began compiling such statistics, according to the Japan Tourism Agency.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 175.14 points or -0.76% to 22,770.36
  • Shanghai decreased 151.21 points or -4.50% to 3,210.10
  • Hang Seng decreased 510.89 points or -2.00% to 24,970.69
  • ASX 200 decreased 42.00 points or -0.69% to 6,010.90
  • Kospi decreased 18.12 points or -0.82% to 2,183.76
  • SENSEX increased 419.87 points or 1.16% to 36,471.68
  • Nifty50 increased 121.75 points or 1.15% to 10,739.95

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00382 or -0.54% to 0.69710
  • NZDUSD decreased 0.00467 or -0.71% to 0.65300
  • USDJPY increased 0.46 or 0.43% to 107.36
  • USDCNY increased 0.01402 or 0.20% to 6.99638

Precious Metals:

  • Gold decreased 15.4 USD/t oz. or -0.85% to 1,797.10
  • Silver decreased 0.2685 USD/t. oz or -1.38% to 19.1730

Some economic news from last night:

China:

House Prices (YoY) (Jun) remain the same at 4.9%

Fixed Asset Investment (YoY) (Jun) increased from -6.3% to -3.1%

GDP (YoY) (Q2) increased from -6.8% to 3.2%

GDP (QoQ) (Q2) increased from -9.8% to 11.5%

Chinese GDP YTD (YoY) (Q2) increased from -6.8% to -1.6%

Industrial Production (YoY) (Jun) increased from 4.4% to 4.8%

Chinese Industrial Production YTD (YoY) (Jun) increased from -2.8% to -1.3%

Retail Sales (YoY) (Jun) increased from -2.8% to -1.8%

Chinese Retail Sales YTD (YoY) (Jun) increased from -14.01% to -11.76%

Chinese Unemployment Rate decreased from 5.9% to 5.7%

Japan:

Foreign Bonds Buying increased from -520.7B to 1,065.7B

Foreign Investments in Japanese Stocks increased from -77.0B to 67.2B

South Korea:

Interest Rate Decision (Jul) remain the same at 0.50%

Australia:

HIA New Home Sales (MoM) increased from -4.2% to 87.2%

MI Inflation Expectations decreased from 3.3% to 3.2%

Employment Change (Jun) increased from -227.7K to 210.8K

Full Employment Change (Jun) increased from -89.1K to -38.1K

Participation Rate (Jun) increased from 62.9% to 64.0%

Unemployment Rate (Jun) increased from 7.1% to 7.4%

New Zealand:

CPI (YoY) (Q2) decreased from 2.5% to 1.5%

CPI (QoQ) (Q2) decreased from 0.8% to -0.5%

RBNZ Offshore Holdings (Jun) decreased from 43.00% to 41.40%

Some economic news from today:

China:

FDI (Jun) increased from -3.8% to -1.3%

Indonesia:

Deposit Facility Rate (Jul) decreased from 3.50% to 3.25%

Lending Facility Rate (Jul) decreased from 5.00% to 4.75%

Interest Rate Decision decreased from 4.25% to 4.00%

India:

M3 Money Supply increased from 12.3% to 12.4%

EUROPE/EMEA:

The UK’s economy rebounded more slowly than expected in May, growing just 1.8% from the previous month, as the gradual easing of lockdown had a modest impact. The UK’s economy rebounded more slowly than expected in May, growing just 1.8% from the previous month, as the gradual easing of lockdown had a modest impact. As a result of big contractions in previous months, the UK economy is now 24.5% smaller than it was in February, the Office for National Statistics added.

Newly-appointed French Prime Minister Jean Castex has put the struggle to contain Islamist networks’ grassroots influence at the center of his administration’s agenda for the year ahead. Speaking to parliamentarians before a summer break, Mr. Castex said there would be a new bill to revive the separation of secular institutions, such as education and community organizations, from religious practice.

Germany’s federal and regional governments on Thursday agreed on tougher, more targeted lockdown measures to contain local outbreaks and ward off the threat of a second coronavirus wave. The new rules allow for a ban on travel “in and out of the affected areas” to limit the spread of the virus, according to an agreement adopted by federal and local authorities. It comes as countries across the world are reimposing curbs on public life in response to a surge in new infections.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 23.70 points or -0.46% to 5,085.28
  • FTSE 100 decreased 41.96 points or -0.67% to 6,250.69
  • DAX 30 decreased 56.01 points or -0.43% to 12,874.97

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00389 or -0.34% to 1.13785
  • GBPUSD decreased 0.0047 or -0.37% to 1.25464
  • USDCHF increased 0.00137 or 0.15% to 0.94541

Some economic news from Europe today:

UK:

Average Earnings ex Bonus (May) decreased from 1.7% to 0.7%

Average Earnings Index +Bonus (May) decreased from 1.0% to -0.3%

Car Registration (YoY) (Jun) increased from -89.0% to -34.9%

Car Registration (MoM) (Jun) increased from 368.6% to 618.0%

Claimant Count Change (Jun) decreased from 566.4K to -28.1K

Employment Change 3M/3M (MoM) (May) decreased from 6K to -125K

Unemployment Rate (May) remain the same at 3.9%

Italy:

Italian Car Registration (YoY) (Jun) increased from -49.6% to -23.1%

Italian Car Registration (MoM) (Jun) decreased from 2,230.2% to 32.8%

Italian Trade Balance (May) increased from -1,131B to 5,584B

Italian Trade Balance EU (May) increased from -0.98B to 1.51B

Germany:

German Car Registration (MoM) (Jun) decreased from 39.1% to 31.0%

German Car Registration (YoY) (Jun) increased from -49.5% to -32.3%

France:

French Car Registration (YoY) (Jun) increased from -50.3% to 1.2%

French Car Registration (MoM) (Jun) decreased from 358.7% to 142.8%

French CPI (MoM) (Jun) remain the same at 0.1%

French CPI (YoY) decreased from 0.4% to 0.2%

French HICP (YoY) (Jun) decreased from 0.4% to 0.2%

French HICP (MoM) (Jun) decreased from 0.2% to 0.1%

Euro Zone:

Deposit Facility Rate (Jul) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Jul) remain the same at 0.00%

US/AMERICAS:

US retail sales advanced 7.5% in June, according to the Commerce Department, which exceeded expectations as analysts at Reuters anticipated a 5% increase. May experienced a historic 18.2% rise in retail sales, largely due to easing coronavirus related restriction. Many are skeptical about July’s figures as numerous US states have rolled back to previous phases and implemented new lockdown measures.

Attorney General Barr pointed the finger at Hollywood and big tech for being “all too willing to collaborate” with China’s Communist Party. Barr pointed at Disney’s willingness to change their movies to appease China’s media censorship. He accused Apple of allowing the Chinese government backdoor access to iPhones, speculating that the phone would not be sold in China otherwise. “The Chinese Communist Party thinks in terms of decades and centuries, while we tend to focus on the next quarterly earnings report,” Barr touted. “America’s big tech companies have also allowed themselves to become pawns of Chinese influence.”

The US Defense Department is seeking to allot $740 billion for the 2021 National Defense Authorization Act (NDAA). President Trump has objected to calls to rename US military bases honoring Confederate generals, which is one of two reasons that may cause the president to veto the bill. The other point of contention is Trump’s desire to pull US troops out of Germany after accusing the nation of not committing to the agreed upon NATO spending.

The US, Canada, and Britain issued a joint statement accusing Russian spies of attempting to steal coronavirus vaccine data. The Kremlin has denied any wrongdoing, but investigations point to a hacker cell known as “Cozy Bear” or APT29 operating on behalf of Russia. “Cozy Bear” is also the group that was accused of hacking the Democratic Party prior to the 2016 US presidential election.

President of Brazil’s Central Bank, Roberto Campos Neto, is predicting a V-shaped slingshot economic recovery. Although the bank forecasts a -6.4% contraction in Brazil’s GDP this year, Campos believes that consumer spending will drive the recovery after emergency aid and new credit programs targeting small to mid-sized businesses are launched.

US Market Closings:

  • Dow declined 135.39 points or -0.5% to 26,734.71
  • S&P 500 declined 10.99 points or -0.34% to 3,215.57
  • Nasdaq declined 76.66 points or -0.73% to 10,473.83
  • Russell 2000 declined 10.71 points or -0.72% to 1,467.56

Canada Market Closings:

  • TSX Composite declined 38.83 points or -0.24% to 16,024.5
  • TSX 60 declined 1.14 points or -0.12% to 964.87

Brazil Market Closing:

  • Bovespa declined 1,237.27 points or -1.22% to 100,553.27

ENERGY:

California Resources, the largest oil driller in the state, has filed for Chapter 11 bankruptcy protection, becoming the latest casualty of an oil price crash that coincided with the coronavirus pandemic that wiped out as much as 20 million bpd of demand in April alone. In a press release, the company said it had agreed on a restructuring plan with most of its shareholders, which will see its debt pile significantly reduced, by about $5 billion, “enabling the Company to operate safely through the current downturn in commodity prices and establishing a solid financial foundation to enhance future value creation.”

The oil markets had a negative day today:

  • Crude Oil decreased 0.49 USD/BBL or -1.19% to 40.7100
  • Brent decreased 0.53 USD/BBL or -1.21% to 43.2600
  • Natural gas decreased 0.065 USD/MMBtu or -3.64% to 1.7210
  • Gasoline decreased 0.0274 USD/GAL or -2.18% to 1.2308
  • Heating oil decreased 0.0159 USD/GAL or -1.28% to 1.2275

The above data was collected around 15:50 EST on Thursday.

  • Top commodity gainers: Lean Hogs (13.31%), Live Cattle (2.07%), Oat (2.55%), and Feeder Cattle (2.49%)
  • Top commodity losers: Natural Gas (-3.64%), Lumber (-12.63%), Orange Juice (-2.60%), and Wheat (-2.90%)

The above data was collected around 15:55 EST on Thursday.

BONDS:

Japan 0.02%(-0bp), US 2’s 0.15% (-1bps), US 10’s 0.62%(-1bps); US 30’s 1.31%(-2bps), Bunds -0.46% (-2bp), France -0.15% (-2bp), Italy 1.26% (-1bp), Turkey 12.34% (+0bp), Greece 1.28% (-2bp), Portugal 0.44% (-0bp); Spain 0.43% (+0bp) and UK Gilts 0.14% (-3bp).

  • US 4-Week Bill Auction increased from 0.100% to 0.105%
  • US 8-Week Bill Auction decreased from 0.120% to 0.110%
  • French 3-Year BTAN Auction decreased from -0.56% to -0.58%
  • French 5-Year BTAN Auction increased from -0.48% to -0.45%
  • Spanish 10-Year Obligacion Auction decreased from 0.451% to 0.270%
  • Spanish 5-Year Bonos Auction decreased from -0.153% to -0.194%