Market Talk – July 31, 2020

ASIA:

Buoyed by a construction boom, China’s economic recovery continued apace in July, new sentiment data suggested. The official manufacturing purchasing managers’ index (PMI) for July stood at 51.1, with a reading above 50.0 suggesting expansion in factory output. This was slightly better than June’s reading of 50.9 and was better than analysts’ expectations, with the median result of a Bloomberg survey standing at 50.8.

President Donald Trump plans to announce a decision ordering China’s Byte Dance Ltd. to divest its ownership of the music-video app TikTok, which is popular with US teens, according to people familiar with the matter. The US has been investigating potential national security risks due to the company’s control of the app, and Trump’s decision could be announced as soon as Friday, the people said.

India’s gold demand in 2020 is expected to fall to the lowest level in 26 years with domestic bullion prices hitting a record high and as falling disposable incomes could curtail retail purchases, the World Gold Council (WGC) said on Thursday. India’s gold consumption in the first half of 2020 plunged 56% on-year to 165.6 tonnes. Meanwhile, the coronavirus-triggered lockdown also slashed demand by 70% in the June quarter to 63.7 tonnes, the lowest in more than a decade, the WGC said in a report published on Thursday.

A government audit of India’s flagship payments processor last year found more than 40 security vulnerabilities including several it called “critical” and “high” risk, according to an internal government document seen by Reuters. The audit, which took place over four months to February 2019, highlighted a lack of encryption of personal data at the National Payments Corporation of India (NPCI) which forms the backbone of the country’s digital payments system and operates the RuPay card network championed by Prime Minister Narendra Modi.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 629.23 points or -2.82% to 21,710.00
  • Shanghai increased 23.18 points or 0.71% to 3,310.01
  • Hang Seng decreased 115.24 points or -0.47% to 24,595.35
  • ASX 200 decreased 123.30 points or -2.04% to 5,927.80
  • Kospi decreased 17.64 points or -0.78% to 2,249.37
  • SENSEX decreased 129.18 points or -0.34% to 37,606.89
  • Nifty50 decreased 28.7 points or -0.26% to 11,073.45

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00497 or -0.69% to 0.71453
  • NZDUSD decreased 0.00616 or -0.92% to 0.66328
  • USDJPY increased 1.29 or 1.23% to 105.99
  • USDCNY decreased 0.01274 or -0.18% to 6.98600

Precious Metals:

  • Gold increased 8.80 USD/t oz. or 0.45% to 1,968.30
  • Silver increased 0.47 USD/t. oz or 1.99% to 24.013

Some economic news from last night:

China:

Chinese Composite PMI (Jul) decreased from 54.2 to 54.1

Manufacturing PMI (Jul) increased from 50.9 to 51.1

Non-Manufacturing PMI (Jul) decreased from 54.4 to 54.2

Japan:

Jobs/applications ratio (Jun) decreased from 1.20 to 1.11

Unemployment Rate (Jun) decreased from 2.9% to 2.8%

Industrial Production (MoM) (Jun) increased from -8.9% to 2.7%

Industrial Production forecast 1m ahead (MoM) (Jul) increased from 5.7% to 11.3%

Industrial Production forecast 2m ahead (MoM) (Aug) decreased from 9.2% to 3.4%

South Korea:

Industrial Production (YoY) (Jun) increased from -9.6% to -0.5%

Industrial Production (MoM) (Jun) increased from -7.0% to 7.2%

Retail Sales (MoM) decreased from 4.6% to 3.4%

Service Sector Output (MoM) (Jun) decreased from 2.4% to 2.2%

Australia:

Housing Credit (Jun) remain the same at 0.2%

PPI (YoY) (Q2) decreased from 1.3% to -0.4%

PPI (QoQ) (Q2) decreased from 0.2% to -1.2%

Private Sector Credit (MoM) (Jun)decreased from 0.1% to -0.3%

Some economic news from today:

Hong Kong:

M3 Money Supply (Jun) increased from 0.1% to 1.4%

Japan:

Household Confidence (Jul) increased from 28.4 to 29.5

Housing Starts (YoY) (Jun) decreased from -12.3% to -12.8%

Construction Orders (YoY) (Jun) decreased from -6.1% to -13.4%

India:

Federal Fiscal Deficit (Jun) increased from 4,663.43B to 6,623.63B

Bank Loan Growth decreased from 6.1% to 5.8%

Deposit Growth decreased from 11.0% to 10.8%

FX Reserves, USD increased from 517.64B to 522.63B

Infrastructure Output (YoY) (Jun) increased from -22.0% to -15.0%

EUROPE/EMEA:

The British government is going to the UK’s Supreme Court to challenge the return of a woman who ran away from home as a teenager in London to join the Islamic State group. A lower appeals court ruled earlier this month that Shamima Begum had the right to come back to her home country to mount a legal challenge aimed at restoring her British citizenship, which was revoked on national security grounds.

A report by the London School of Economics claims “Brexit will have a profound impact on the UK economy,” as it warns business conditions will worsen for most sectors, even those that managed to avoid the negative impact of the coronavirus lockdown. The report titled ‘COVID-19 and Brexit: Real-Time Updates on Business Performance in the United Kingdom’ by the LSE’s Centre for Economic Performance, warns Brexit will negatively impact the UK economy as new structures arise at the conclusion of the EU transition period. It states that transitioning to new trade and investment rules will be difficult and costly for many businesses. Govt representative has criticized the report and argues the coronavirus will have the largest and most overarching impact on the UK’s economy.

France’s economy shrank by nearly 14% in the second quarter when the country was in coronavirus-related lockdown, a third consecutive quarter of negative growth in a worsening recession, the national statistics agency said on July 31. The startling plunge of 13.8% from April-June starkly illustrated the punishing economic cost of the two-month lockdown. The pain was so damaging to jobs and industries that the government is talking down the possibility of another nationwide lockdown as infections tick upward again.

Huawei’s top manager in Germany has appealed to the government not to shut it out of building 5G mobile networks, Der Spiegel said on Friday. Chancellor Angela Merkel’s government has put off a decision on tougher certification rules until after the summer break, amid pressure from some lawmakers who sympathize with US calls to ban Huawei outright.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 69.25 points or -1.43% to 4,783.69
  • FTSE 100 decreased 92.23 points or -1.54% to 5,897.76
  • DAX 30 decreased 66.29 points or -0.54% to 12,313.36

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00728 or -0.61% to 1.17946
  • GBPUSD decreased 0.00085 or -0.06% to 1.31028
  • USDCHF increased 0.00366 or 0.40% to 0.91247

Some economic news from Europe today:

France:

French GDP (QoQ) (Q2) decreased from -5.9% to -13.8%

French Consumer Spending (MoM) (Jun) decreased from 37.4% to 9.0%

French CPI (YoY) increased from 0.2% to 0.8%

French CPI (MoM) increased from 0.1% to 0.4%

French HICP (MoM) increased from 0.1% to 0.4%

French HICP (YoY) increased from 0.2% to 0.9%

UK:

Nationwide HPI (YoY) (Jul) increased from -0.1% to 1.5%

Nationwide HPI (MoM) (Jul) increased from -1.6% to 1.7%

Germany:

German Retail Sales (YoY) (Jun) increased from 3.2% to 5.9%

German Retail Sales (MoM) (Jun) decrease from 12.7% to -1.6%

Swiss:

Retail Sales (YoY) (Jun) decreased from 6.2% to 1.1%

Spain:

Spanish GDP (YoY) (Q2) decreased from -4.1% to -22.1%

Spanish GDP (QoQ) (Q2) decreased from -5.2% to -18.5%

Spanish Current account (May) increased from -1.53B to 0.75B

Italy:

Italian GDP (QoQ) (Q2) decreased from -5.4% to -12.4%

Italian GDP (YoY) (Q2) decreased from -5.5% to -17.3%

Italian CPI (YoY) (Jul) decreased from -0.2% to -0.3%

Italian CPI (MoM) (Jul) decreased from 0.1% to -0.1%

Italian HICP (YoY) (Jul) increased from -0.4% to 0.9%

Italian HICP (MoM) (Jul) decreased from -0.3% to -0.6%

Italian Retail Sales (MoM) (Jun) decreased from 24.0% to 12.1%

Italian Retail Sales (YoY) (Jun) increased from -10.5% to -2.2%

Norway:

Central Bank Currency Purchase (Aug) increased from -2,500.0M to -2,000.0M

Unemployment Rate n.s.a. (Jul) increased from 4.80% to 4.90%

Euro Zone:

Core CPI (YoY) increased from 0.8% to 1.2%

CPI (YoY) (Jul) increased from 0.3% to 0.4%

CPI, n.s.a (Jul) decreased from 105.69 to 105.36

GDP (YoY) decreased from -3.1% to -15.0%

GDP (QoQ) decreased from -3.6% to -12.1%

HICP ex Energy & Food (YoY) (Jul) increased from 1.1% to 1.3%

US/AMERICAS:

The Trump administration is considering granting asylum to those wishing to escape Hong Kong due to China’s new laws that violate the “one country, two systems” agreement. Secretary of State Mike Pompeo stated the administration is “actively considering how we ought to treat those who seek asylum coming to us from Hong Kong, or to grant a visa program that surrounds that.” The consideration has unsurprisingly angered Beijing, and came a day after the US demanded that China pay for the coronavirus outbreak that originated in Wuhan. “I’m very confident that the world will look at China differently and engage with them on fundamentally different terms than they did before this catastrophic disaster,” Pompeo said in a separate interview this week.

The Canadian government is cracking down on non-citizens traveling to Canada via Alaska. The Canada Border Services Agency announced, beginning today, foreign nationals will only be allowed to return from Alaska through five border crossings in Western Canada. Drivers will receive a “to support compliance,” tag on their car after receiving inspection. “We look forward to the day when our borders are open and we can welcome travelers from all over but we aren’t there yet,” BC Premier John Horgan stated. Currently, Americans wishing to travel to or from Alaska have 24 hours to cross the Yukon and are required to stick to a preset route.

Today’s report from Statics Canada shows that the Canadian economy is nearly 15% away from returning to pre-pandemic (February 2020) levels. In May, GDP rose to 4.5%, beating analysts’ expectations of 3.5%. The agency anticipates GDP rising 5% in June, and expects manufacturing, retail, and construction sectors to see notable uptick. If June’s forecast is correct, Canada’s GDP will be close to returning to normalcy.

Brazil’s President Bolsonaro claimed that he “might have mold” in his lungs as he recovers from the coronavirus. The president stated that he is cured of the coronavirus, but has a different infection, he speculated, that is a result of quarantining. “It must have been those 20 days inside the house, we catch other things. I’ve caught mold, mold in my lungs. It must be that,” Bolsonaro stated on Thursday. First Lady Michelle Bolsonaro recently tested positive for the virus as well. Bolsonaro also praised the controversial drug hydroxychloroquine for his recovery. “I’m healed from COVID. I have antibodies, no problems. In my particular case, I first thank God, and secondly, the medication prescribed by the presidential doctor: hydroxychloroquine,” Brazil’s president stated.

US Market Closings:

  • Dow advanced 115.09 points or 0.44% to 26,428.74
  • S&P 500 advanced 24.99 points or 0.77% to 3,271.21
  • Nasdaq advanced 157.46 points or 1.49% to 10,745/28
  • Russell 2000 declined 14.67 points or -0.98% to 1,480.43

Canada Market Closings:

  • TSX Composite declined 130.09 points or -0.8% to 16,169.2
  • TSX 60 declined 9.64 points or -0.99% to 968.67

Brazil Market Closing:

  • Bovespa declined 2,090.87 points or -1.99% to 102,917.83

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil decreased 0.2 USD/BBL or -0.50% to 39.7200
  • Brent increased 0.06 USD/BBL or 0.14% to 43.0000
  • Natural gas decreased 0.033 USD/MMBtu or -1.79% to 1.8110
  • Gasoline decreased 0.0832 USD/GAL or -6.75% to 1.1488
  • Heating oil decreased 0.0087 USD/GAL or -0.71% to 1.2199

The above data was collected around 12:29 EST on Friday.

  • Top commodity gainers: Silver (1.99%), Coffee (2.90%), Sugar (4.05%), and Cocoa (2.52%)
  • Top commodity losers: Cotton (-1.80%), Gasoline (-6.75%), Steel (-3.40%), and Natural Gas (-1.79%)

The above data was collected around 12:33 EST on Friday.

BONDS:

Japan 0.02%(-0bp), US 2’s 0.12% (-1bps), US 10’s 0.54%(+0bps); US 30’s 1.21%(+1bps), Bunds -0.53% (+2bp), France -0.19% (+2bp), Italy 1.08% (+5bp), Turkey 12.70% (+12bp), Greece 1.10% (+0bp), Portugal 0.36% (+3bp); Spain 0.34% (+2bp) and UK Gilts 0.10% (+1bp).