Market Talk – July 29, 2020

ASIA:

China on Wednesday expressed its strong dissatisfaction and firm opposition to smears against China on a series of issues by the US and Australia, and has lodged solemn representations with them, Wang Wenbin, a spokesperson for Chinese Foreign Ministry said at a press briefing. Wang’s remarks came after the US Secretary of State Mike Pompeo and US Secretary of Defense Mark Esper met with their Australian counterparts during the Australia-US Ministerial Consultations.

Chinese factories are exploring “business-to-consumer” (B2C) sales on e-commerce platforms that bypass wholesale distributors to sell directly to individuals. Buyers can purchase a customized version of an item, while a factory can produce inventory as needed. Some Chinese companies are tapping a new growth opportunity in online shopping amid trade tensions and the coronavirus pandemic.

The Indian government is working on completing the stake sale process of about 23 public sector companies whose divestment has already been cleared by the Cabinet, Finance Minister Nirmala Sitharaman said on Monday. The minister also said she would soon meet small finance firms and non-banking finance companies (NBFCs) to review the credit being extended by them to businesses. The Indian government has also announced opening up of all sectors for private participation.

India’s e-Commerce major Flipkart said on Tuesday it plans to offer 90-minute deliveries for groceries and home accessories, as the Walmart-owned online retailer goes head to head with Amazon.com Inc. in a key growth market for e-commerce. Flipkart said its hyperlocal service, dubbed Flipkart Quick, will also sell mobile phones and stationery items, taking it a step further than Amazon’s quick-delivery service that mainly offers just groceries.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 260.27 points or -1.15% to 22,397.11
  • Shanghai increased 66.59 points or 2.06% to 3,294.55
  • Hang Seng increased 110.38 points or 0.45% to 24,883.14
  • ASX 200 decreased 14.10 points or -0.23% to 6,006.40
  • Kospi increased 6.17 points or 0.27% to 2,263.16
  • SENSEX decreased 421.82 points or -1.10% to 38,071.13
  • Nifty50 decreased 97.7 points or -0.86% to 11,202.85

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00098 or 0.14% to 0.71699
  • NZDUSD decreased 0.00063 or -0.09% to 0.66517
  • USDJPY decreased 0.1 or -0.09% to 104.98
  • USDCNY decreased 0.00433 or -0.06% to 7.00193

Precious Metals:

  • Gold increased 1.58 USD/t oz. or 0.08% to 1,960.51
  • Silver decreased 0.01 USD/t. oz or -0.03% to 24.180

Some economic news from last night:

Australia:

CPI (QoQ) (Q2) decreased from 0.3% to -1.9%

CPI (YoY) (Q2) decreased from 2.2% to -0.3%

CPI Index Number (Q2) decreased from 116.60 to 114.40

Trimmed Mean CPI (YoY) (Q2) decreased from 1.8% to 1.2%

Trimmed Mean CPI (QoQ) (Q2) decreased from 0.5% to -0.1%

Weighted mean CPI (QoQ) (Q2) decreased from 0.5% to 0.1%

Weighted mean CPI (YoY) (Q2) decreased from 1.7% to 1.3%

South Korea:

Consumer Confidence (Jul) increased from 81.8 to 84.2

Singapore:

Unemployment Rate increased from 2.4% to 2.9%

Some economic news from today:

Hong Kong:

GDP (QoQ) increased from -5.3% to -0.1%

GDP (YoY) decreased from -8.9% to -9.0%

EUROPE/EMEA:

Leading travel and airline industry figures in the UK have urged Prime Minister Boris Johnson to replace blanket quarantine measures with regional travel corridors. In a letter to Boris Johnson, they said the 14-day quarantine for people coming from Spain had caused disruption. They called for quarantine-free travel to areas unaffected by any spike in coronavirus cases. This would include not just Spain, but other key markets for trade and tourism, such as the US and Canada.

The National Institute of Economic and Social Research has said Closing the government scheme which is paying furloughed workers’ wages is a “mistake.” It could push unemployment to 10% this year, the research suggests. The latest furlough figures show 9.5 million people are using the scheme, the same as a week ago, and at a total cost of £31.7bn to the Treasury. The Treasury says the scheme will have protected millions of jobs for eight months when it comes to a close. The UK’s coronavirus furlough scheme will finish at the end of October. Earlier this month, Chancellor Rishi Sunak said he was sorry he could not protect every job. He also admitted that some of the £1,000 bonuses being offered to take back furloughed staff would go to firms that were already keeping workers on.

Germany is now “on the frontline of a new Cold War” as it has become a key target for Chinese and Russian interference, a UK-based think tank is warning. The declaration made in a report released Wednesday by the Royal United Services Institute — which studies international security and defense said, “Russia’s activities are largely political, attempting to undermine public confidence in democratic institutions,” Sky news reported.

The major Europe stock markets had a mixed day:

  • CAC 40 increased 29.80 points or 0.61% to 4,958.74
  • FTSE 100 increased 2.20 points or 0.04% to 6,131.46
  • DAX 30 decreased 13.02 points or -0.10% to 12,822.26

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00537 or 0.46% to 1.17737
  • GBPUSD increased 0.00481 or 0.37% to 1.29718
  • USDCHF decreased 0.00439 or -0.48% to 0.91346

Some economic news from Europe today:

UK:

BRC Shop Price Index (YoY) increased from -1.6% to -1.3%

BoE Consumer Credit (Jun) increased from -4.542B to -0.086B

M4 Money Supply (MoM) (Jun) decreased from 2.1% to 1.0%

Mortgage Approvals (Jun) increased from 9.27K to 40.01K

Mortgage Lending (Jun) increased from 1.28B to 1,89B

Net Lending to Individuals increased from -3.4B to 1.8B

Germany:

German Import Price Index (MoM) (Jun) increased from 0.3% to 0.6%

German Import Price Index (YoY) (Jun) increased from -7.0% to -5.1%

France:

French Consumer Confidence (Jul) decreased from 96 to 94

Spain:

Spanish Retail Sales (YoY) (Jun) increased from -18.9% to -4.7%

Italy:

Italian PPI (YoY) (Jun) increased from -5.3% to -4.5%

Italian PPI (MoM) (Jun) increased from -0.1% to 0.5%

Swiss:

ZEW Expectations (Jul) decreased from 48.7 to 42.4

US/AMERICAS:

The Federal Open Market Committee (FOMC) voted to maintain rates at the current near-zero level that it has held since mid-March. The FOMC noted that economic and employment activity has begun to pick up after a sharp decline that started when the coronavirus lockdown measures were implemented. Despite signs of improvement, economic activity is well beneath pre-pandemic levels and the high unemployment level is a serious cause for concern. “Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses,” the Committee declared. The FOMC expects GDP to decline by -6.5% this year, before rebounding to 5% in 2021 and 3.5% in 2022. Overall, the central bank notes that the path of the virus and corresponding political actions could drastically change their economic outlook.

The US Committee on Foreign Investment is currently investigating the social media platform TikTok for allegedly providing backdoor information to the Chinese government. Secretary of State Mike Pompeo previously suggested that numerous Chinese tech companies are potential “Trojan horses for Chinese intelligence.” TikTok’s new CEO Kevin Mayer maintains that his company is not a threat to national security, and suggested that his competitor, Facebook, is “disguised as patriotism and designed to put an end to our very presence in the US.”

Facebook CEO Mark Zuckerberg testified before Congress today, as did Amazon CEO Jeff Bezos, Apple CEO Tim Cook, and CEO of Google parent Alphabet Sundar Pichai. The companies face antitrust opposition from regulators who are considering dispersing the giant tech companies. “If we allow our tech companies to become so big that they stifle innovation in this country we will never be able to compete with China because that’s really what separates us from China is our ability to innovate and move forward,” Rep. Ken Buck stated on Monday.

Rep. Jerry Nadler commented that Facebook’s acquisition of Instagram “tells a very disturbing story.” “Rather than compete with it, Facebook bought it. This is exactly the type of anticompetitive acquisition that antitrust laws were designed to prevent,” Nadler stated. Zuckerberg maintains that the $1 billion acquisition occurred during a time (2012) when Instagram was not viewed as a competitor.

Apple CEO Tim Cook maintained that “Apple does not have a dominant market share in any market where we do business.” Cook claims his company is constantly competing with other giants such as Samsung, Huawei, and Google.  Amazon CEO Jeff Bezos, who recently became the world’s richest person, played devil’s advocate. “We should scrutinize all large institutions, whether they’re companies, government agencies, or non-profits. Our responsibility is to make sure we pass such scrutiny with flying colors,” Bezos said in his opening statement. Despite the probe, Facebook, Google, and Apple all closed in the green this Wednesday.

US Market Closings:

  • Dow advanced 160.29 points or 0.61% to 26,539.57
  • S&P 500 advanced 40 points or 1.24% to 3,258.44
  • Nasdaq advanced 140.85 points or 1.35% to 10,542.94
  • Russell 2000 advanced 30.87 points or 2.1% to 1,500.63

Canada Market Closings:

  • TSX Composite advanced 173.34 points or 1.08% to 16,294.66
  • TSX 60 advanced 11.5 points or 1.19% to 977.15

Brazil Market Closing:

  • Bovespa increased 1,496.1 points or 1.44% to 105,605.17

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil increased 0.25 USD/BBL or 0.61% to 41.2900
  • Brent increased 0.47 USD/BBL or 1.09% to 43.6900
  • Natural gas increased 0.064 USD/MMBtu or 3.45% to 1.9210
  • Gasoline decreased 0.0111 USD/GAL or -0.88% to 1.2435
  • Heating oil increased 0.0105 USD/GAL or 0.85% to 1.2515

The above data was collected around 12:56 EST on Wednesday.

  • Top commodity gainers: Natural Gas (3.45%), Cocoa (2.49%), Lumber (2.50%), and Bitumen (2.10%)
  • Top commodity losers: Platinum (-2.06%), Lean hogs (-2.40%), Oat (-1.23%), and Palladium (-4.49%)

The above data was collected around 13:00 EST on Wednesday.

BONDS:

Japan 0.02%(+0bp), US 2’s 0.13% (-1bps), US 10’s 0.58%(+0bps); US 30’s 1.24%(+2bps), Bunds -0.50% (+1bp), France -0.18% (+1bp), Italy 1.07% (-1bp), Turkey 12.58% (+13bp), Greece 1.10% (+0bp), Portugal 0.36% (-1bp); Spain 0.35% (+6bp) and UK Gilts 0.12% (+1bp).

  • Italian 6-Month BOT Auction decreased from -0.224% to -0.276%