Market Talk – July 24, 2020

ASIA:

Beijing has ordered the closure of a US consulate in south-western China, in a move that will escalate tensions between the two countries to a new level. On Friday, China’s ministry of foreign affairs said it had ordered the US consulate in Chengdu, in Sichuan province, to cease all operations. Authorities notified the US of China’s decision to revoke its consent for the consulate to operate, according to a notice on the ministry’s website.

India on Thursday said bidders from bordering countries eyeing government contracts would need prior registration and security clearances, a move seen as New Delhi’s latest effort to counter China following a border clash between the two nations. The Indian government’s statement said the decision was taken to “strengthen the defense of India and national security.” India shares borders with China, Pakistan, Bangladesh, Myanmar, Nepal, and Bhutan, but the government statement did not name any specific country.

India is working on offering production linked incentives for up to five sectors to boost domestic manufacturing, a top finance ministry official said on Thursday, bolstering efforts to attract new investments in the coronavirus-stricken economy. Tarun Bajaj, economic affairs secretary at the Ministry of Finance, told a virtual conference that incentives would be offered to sectors to push manufacturing and help struggling industries. The government has announced a raft of measures including direct food subsidy to nearly 810 million people and credit guarantees of 3 trillion rupees ($40.17 billion) on loans to small businesses to counter the economic slowdown caused by coronavirus led lockdown in the country.

The major Asian stock markets had a negative day today:

  • NIKKEI 225 closed
  • Shanghai decreased 128.34 points or -3.86% to 3,196.77
  • Hang Seng decreased 557.67 points or -2.21% to 24,705.33
  • ASX 200 decreased 70.50 points or -1.16% to 6,024.00
  • Kospi decreased 15.75 points or -0.71% to 2,200.44
  • SENSEX decreased 11.57 points or -0.03% to 38,128.90
  • Nifty50 decreased 21.3 points or -0.19% to 11,194.15

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00143 or -0.20% to 0.70878
  • NZDUSD decreased 0.00078 or -0.12% to 0.66282
  • USDJPY decreased 1.11 or -1.04% to 105.72
  • USDCNY increased 0.01477 or 0.21% to 7.02491

Precious Metals:

  • Gold increased 12.75 USD/t oz. or 0.68% to 1,899.75
  • Silver increased 0.012 USD/t. oz or 0.05% to 22.600

Some economic news from last night:

Australia:

Manufacturing PMI increased from 51.2 to 53.4

Services PMI increased from 53.1 to 58.5

New Zealand:

Exports (Jun) decreased from 5.40B to 5.07B

Imports (Jun) increased from 4.11B to 4.64B

Trade Balance (MoM) (Jun) decreased from 1,286M to 426M

Trade Balance (YoY) (Jun) increased from -1,290M to -1,200M

Singapore:

URA Property Index (QoQ) increased from -1.10% to 0.30%

Some economic news from today:

India:

FX Reserves, USD increased from 516.36B to 517.64B

Singapore:

Industrial Production (MoM) (Jun) increased from -15.8% to 0.2%

Industrial Production (YoY) (Jun) increased from -8.1% to -6.7%

EUROPE/EMEA:

The US and UK have accused Russia of testing a weapon-like projectile in space that could be used to target satellites in orbit. It is the first time the UK has made accusations about Russian test-firing in space. This comes just days after an inquiry said the UK government “badly underestimated” the threat posed by Russia. Russia’s defense ministry earlier said it was using new technology to perform checks on Russian space equipment.

A survey conducted IHS Markit’s shows Germany’s manufacturing sector stabilized in July, avoiding a contraction for the first time in 19 months, giving hope for a recovery from a long recession exacerbated by the COVID-19 pandemic. IHS Markit’s flash manufacturing Purchasing Managers’ Index (PMI) edged up to 50.0 from 45.2 in June, reaching the mark that separates growth from contraction for the first time since December 2018, when activity grew.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 77.33 points or -1.54% to 4,956.43
  • FTSE 100 decreased 87.62 points or -1.41% to 6,123.82
  • DAX 30 decreased -265.33 points or -2.02% to 12,838.06

 

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00414 or 0.36% to 1.16394
  • GBPUSD increased 0.00489 or 0.38% to 1.27833
  • USDCHF decreased 0.00306 or -0.33% to 0.92216

 

Some economic news from Europe today:

UK:

GfK Consumer Confidence (Jul) increased from -30 to -27

Core Retail Sales (MoM) (Jun) increased from 10.6% to 13.5%

Core Retail Sales (YoY) (Jun) increased from -9.6% to 1.7%

Retail Sales (YoY) (Jun) increased from -12.9% to -1.6%

Retail Sales (MoM) (Jun) increased from 12.3% to 13.9%

Composite PMI increased from 47.7 to 57.1

Manufacturing PMI increased from 50.1 to 53.6

Services PMI increased from 47.1 to 56.6

Spain:

Spanish PPI (YoY) increased from -8.8% to -6.1%

France:

French Manufacturing PMI (Jul) decreased from 52.3 to 52.0

French Markit Composite PMI (Jul) increased from 51.7 to 57.6

French Services PMI (Jul) increased from 50.7 to 57.8

Germany:

German Composite PMI (Jul) increased from 47.0 to 55.5

German Manufacturing PMI (Jul) increased from 45.2 to 50.0

German Services PMI (Jul) increased from 47.3 to 56.7

Italy:

Italian Business Confidence (Jul) increased from 80.2 to 85.2

Italian Consumer Confidence (Jul) decreased from 100.7 to 100.0

Italian Trade Balance Non-EU (Jun) increased from 4.08B to 4.44B

Euro Zone:

Manufacturing PMI (Jul) increased from 47.4 to 51.1

Markit Composite PMI (Jul) increased from 48.5 to 54.8

Services PMI (Jul) increased from 48.3 to 55.1

US/AMERICAS:

China has ordered the US to close its consulate in Chengdu in retaliation for the US closing the Chinese consulate in Houston. Wang Wenbin, a foreign ministry spokesperson for China, called the decision a “legitimate and necessary response to the unjustified act by the United States.” Wenbin said that China does not want to see rising tensions between the two nations, and urged the US to reverse its “wrong decision.” The US maintains that closing the consulate in Houston was a necessary measure to protect American intellectual security. Secretary of State Mike Pompeo called the Houston consulate “a hub of spying and intellectual property theft,” and said the US will begin to crack down on the practice.

President Trump’s own party has denied his wish to cut payroll taxes as part of the next coronavirus stimulus package. The president has previously noted that reducing the payroll tax would help working Americans and employers by lowering their tax responsibility. “It’s a tremendous saving, and I think it’s an incentive for companies to hire their workers back and to keep their workers,” Trump announced earlier in the week. However, Treasury Secretary Steven Mnuchin confirmed that a payroll cut will not be included in the next stimulus package, and said the main objective “is to make sure that we send out direct payments quickly.”

The Federal Aviation Administration (FAA) implemented an emergency airworthiness directive for 2,000 Boeing aircrafts that have been idle throughout the coronavirus pandemic. “[W]ith airplanes being stored or used infrequently due to lower demand during the COVID-19 pandemic, the valve can be more susceptible to corrosion,” a representative for Boeing stated this Friday. Delta, United, American Airlines, and Southwest said that they are complying with the new inspection requirements. Alaska Airlines states that one of their Boeing aircrafts experienced a recent engine issue, but maintains it did not jeopardize the safety of the flight at the time.

Brazilian lawmakers are calling to have President Bolsonaro impeached, However, lower house speaker Rodrigo Maia declared that now is not the right time to accept impeachment inquiries. So far, 48 separate impeachment requests have been filed against the Brazilian president, but Maia, the final decision maker, said he does not see “room for this nor conditions to accept it.”

US Market Closings:

  • Dow declined 182.44 points or -0.68% to 26,469.89
  • S&P 500 declined 20.03 points or -0.62% to 3,315.63
  • Nasdaq declined 98.24 points or -0.94% to 10,363.18
  • Russell 2000 declined 22.65 points or -1.52% to 1,467.55

Canada Market Closings:

  • TSX Composite declined 21.59 points or -013% to 15,997.06
  • TSX 60 declined 1.51 points or -0.16% to 960.06

Brazil Market Closing:

  • Bovespa advanced 85.82 points or 0.08% to 102,379.13

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil decreased 0.17 USD/BBL or -0.41% to 40.9000
  • Brent decreased 0.33 USD/BBL or -0.76% to 42.9800
  • Natural gas increased 0.001 USD/MMBtu or 0.06% to 1.7820
  • Gasoline increased 0.002 USD/GAL or 0.16% to 1.2665
  • Heating oil decreased 0.0035 USD/GAL or -0.28% to 1.2508

The above data was collected around 13:26 EST on Friday.

  • Top commodity gainers: Platinum (1.48%), Wheat (1.23%), Lumber (3.64%), and Palladium (4.30%)
  • Top commodity losers: Ethanol (-4.64%), Sugar (-2.21%), Cotton (-3.53%), and Bitumen (-2.28%)

The above data was collected around 13:32 EST on Friday.

BONDS:

Japan 0.02%(+0bp), US 2’s 0.15% (-0bps), US 10’s 0.59%(+1bps); US 30’s 1.25%(-0bps), Bunds -0.44% (+7bp), France -0.14% (+4bp), Italy 1.08% (+3bp), Turkey 11.95% (+1bp), Greece 1.11% (+2bp), Portugal 0.37% (+3bp); Spain 0.36% (+10bp) and UK Gilts 0.15% (+3bp).