Market Talk – June 26, 2020

ASIA:

The Academy of Military Medical Sciences, a research institute run by China’s military, received approval to conduct human clinical trials of a new COVID-19 vaccine developed using advanced genetics technology, in a notable breakthrough for China’s quickly developing pharmaceutical industry. The approval comes as other Chinese drugmakers move to expand testing of more traditional coronavirus vaccines outside China. The vaccine was built using the messenger RNA on human subjects, and is the first to reach clinical trial stage in China.

China has deployed large numbers of troops and weapons along a disputed Himalayan border in violation of bilateral agreements, India’s foreign ministry said on Thursday. After senior military commanders held parleys this week, both sides have since agreed to disengage their troops on the disputed border. But in satellite images reviewed by Reuters, China appears to have added new structures near the site of the Galwan Valley clash that India says is on its side of the LAC. These include camouflaged tents or covered structures and a potential new camp under construction with walls or barricades.

Indian automobile and pharmaceuticals industries have said that weaning off China to promote local manufacturing by raising import taxes is easier said than done for these two sectors. Like many countries, India relies on China for products such as electronic components and drug ingredients because it cannot make them or source them elsewhere as cheaply, company and industry figures say. Thus, any moves to curb imports or make them costlier without developing alternatives will hurt local businesses.

India’s sugar output could rise to 30.5 million tonnes in the marketing year from Oct. 1, up from 27.2 million tonnes this year, the Indian Sugar Mills Association (ISMA) said in a statement. Higher production could force India to extend incentives for overseas sales of sugar into the new season, weighing on global prices which are already under pressure due to rising production in Brazil.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 252.29 points or 1.13% to 22,512.08
  • Shanghai closed
  • Hang Seng decreased 231.59 points or -0.93% to 24,549.99
  • ASX 200 increased 86.40 points or 1.49% to 5,904.10
  • Kospi increased 22.28 points or 1.05% to 2,134.65
  • SENSEX increased 329.17 points or 0.94% to 35,171.27
  • Nifty50 increased 94.10 points or 0.91% to 10,383.00

 

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00232 or -0.34% to 0.68683
  • NZDUSD decreased 0.0003 or -0.05% to 0.64294
  • USDJPY decreased 0.01 or -0.01% to 107.16
  • USDCNY increased 0.00575 or 0.08% to 7.08534

Precious Metals:

  • Gold increased 6.46 USD/t oz. or 0.37% to 1,767.95
  • Silver decreased 0.06 USD/t. oz or -0.34% to 17.8185

Some economic news from last night:

Japan:

Tokyo Core CPI (YoY) (Jun) remain the same at 0.2%

Tokyo CPI (YoY) (Jun) decreased from 0.4% to 0.3%

CPI Tokyo Ex Food and Energy (MoM) (Jun) decreased from 0.5% to 0.4%

South Korea:

Consumer Confidence (Jun) increased from 77.6 to 81.8

Some economic news from today:

Singapore:

Industrial Production (MoM) (May) decreased from -0.5% to -16.5%

Industrial Production (YoY) (May) decreased from 13.6% to -7.4%

India:

FX Reserves, USD decreased from 507.60B to 505.57B

EUROPE/EMEA:

Intu, one of the United Kingdom’s largest shopping mall owners, said on Friday that it is entering administration. The company has debts of £4.5 billion ($5.6 billion) and was unable to agree repayment holidays with its creditors. Its shares, which have been on a downward trajectory for several years, plunged 54% on Friday before they were suspended. Intu owns 17 UK shopping centers and two in Spain, accommodating 800 brands and 400 million shopper visits a year, according to the company. These centers will remain open during the insolvency process and individual retailers will have to enter transitional agreements with the administrators, KPMG.

Marks & Spencer (M&S) and Next, Britain’s two best-known clothing retailers, are vying to take control of the British operations of Victoria’s Secret, the lingerie brand. Sky News has reported that the two high street giants are among the parties interested in becoming Victoria’s Secret’s parent company’s new UK franchise partner.

A spike of more than 1,500 coronavirus infections within days has dealt a sudden blow to Germany’s efforts to reopen the country, calling into question the durability of what had been widely considered a success story in managing the contagion in Europe. The new clusters have been concentrated in slaughterhouses and crowded, low-income apartment blocks, which have been quarantined, but they are generating increasing concern that the infections could break out and spread among the broader public.

CRE, the French energy regulator, has approved a proposal to change the maximum allowed distance between members of energy communities for self-consumption purposes from 2 km to 20 km. The regulator said the new rules are based on the need to connect people through energy communities in remote and lightly populated areas. The CRE also considered a government proposal to expand the maximum capacity of energy communities from 3 MW to 5 MW, but it decided not to approve the proposed change.

The major Europe stock markets had a mixed day:

  • CAC 40 decreased -8.94 points or -0.18% to 4,909.64
  • FTSE 100 increased 12.16 points or 0.20% to 6,159.30
  • DAX 30 decreased 88.48 points or -0.73% to 12,089.39

 

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00037 or 0.03% to 1.12273
  • GBPUSD decreased 0.00866 or -0.70% to 1.23406
  • USDCHF decreased 0.0012 or -0.12% to 0.9471

Some economic news from Europe today:

Germany:

German Import Price Index (MoM) (May) increased from -1.8% to 0.3%

German Import Price Index (YoY) (May) increased from -7.4% to -7.0%

Norway:

Core Retail Sales (MoM) (May) decreased from 4.8% to 2.8%

France:

French Consumer Confidence (Jun) increased from 93 to 97

Spain:

Spanish Retail Sales (YoY) (May) increased from -31.5% to -19.0%

Italy:

Italian Public Deficit (Q1) decreased from -2.4% to -10.8%

Italian Business Confidence (Jun) increased from 71.5 to 79.8

Italian Consumer Confidence (Jun) increased from 94.3 to 100.6

Euro Zone:

M3 Money Supply (YoY) (May) increased from 8.3% to 8.9%

Loans to Non Financial Corporations (May) increased from 6.6% to 7.3%

Private Sector Loans (YoY) remain the same at 3.0%

US/AMERICAS:

The Federal Reserve is suspending corporate buybacks and restricting dividend payments. The news was announced on Thursday after the annual stress tests hinted that banks were approaching minimum capital levels. “For the third quarter of this year, the Board is requiring large banks to preserve capital by suspending share repurchases, capping dividend payments, and allowing dividends according to a formula based on recent income,” the central bank said in a prepared statement. Furthermore, major banks are required to now “re-assess their capital needs and maintain strong capital planning practices” based on the new developments.

A sharp rise in new coronavirus cases spooked the markets this Friday, sending them into the red. Yesterday, Texas announced it would slow down it’s reopening efforts. Today, Florida announced it’s largest one-day spike after seeing nearly 9,000 new cases emerge. Texas Gov. Greg Abbott and Florida Gov. Ron DeSantis both announced that bars are no longer permitted to operate, which will certainly impact tourism and hospitality a week ahead of the busy Fourth of July weekend. Gov. Abbott said he hopes that this “temporary pause” will help states to “safely enter the next phase of opening our state for business.”

The rise in cases did not deter US President Donald Trump. “Coronavirus deaths are way down. Mortality rate is one of the lowest in the World. Our Economy is roaring back and will NOT be shut down. “Embers” or flare ups will be put out, as necessary!” the president tweeted this Friday afternoon.

AstraZeneca and Moderna are neck-in-neck in developing the first coronavirus vaccine. Both companies secured manufacturing deals this week and have ongoing clinical trials that appear promising.

Microsoft announced plans to shut down all of their physical store locations and offer their products solely online. As brick and mortar stores slowly spiral down the path of creative destruction, more companies are planning to move their business online. The restructuring will cost a pretax charge of $450 million, according to Yahoo Finance. Similarly, Apple recently announced plans to temporarily shut down store locations, but cited the coronavirus as their main motive.

US Market Closings:

  • Dow declined 730.05 points or -2.84% to 25,015.55
  • S&P 500 declined 74.71 points or -2.42% to 2,009.05
  • Nasdaq declined 259.78 points or -2.59% to 9,757.22
  • Russell 2000 declined 34.53 points or -2.44% to 1,378.78

Canada Market Closings:

  • TSX Composite declined 257.16 points or -1.66% to 15,188.98
  • TSX 60 declined 16.62 points or -1.78% to 915.65

Brazil Market Closing:

  • Bovespa declined 2,148.6 points or -2.24% to 93,834.49

ENERGY:

The oil markets had a mixed day today:

 

  • Crude Oil decreased 0.32 USD/BBL or -0.83% to 38.4000
  • Brent decreased 0.16 USD/BBL or -0.39% to 40.8900
  • Natural gas increased 0.025 USD/MMBtu or 1.74% to 1.4630
  • Gasoline decreased 0.0572 USD/GAL or -4.74% to 1.1490
  • Heating oil decreased 0.0265 USD/GAL or -2.29% to 1.1331

The above data was collected around 14.22 EST on Friday.

  • Top commodity gainers: Natural Gas (1.74%), Orange Juice (4.95%), Coal (1.46%), and Oat (6.23%)
  • Top commodity losers: Lean Hogs (-3.47%), Rice (-3.36%), Cocoa (-7.38%), and Gasoline (-4.74%)

The above data was collected around 14:22 EST on Friday.

BONDS:

Japan 0.01%(+0bp), US 2’s 0.17% (-2bps), US 10’s 0.64%(-4bps); US 30’s 1.38%(-4bps), Bunds -0.48% (-1bp), France -0.12% (-0bp), Italy 1.37% (+1bp), Turkey 11.40% (+7bp), Greece 1.33% (+2bp), Portugal 0.48% (+1bp); Spain 0.48% (+2bp) and UK Gilts 0.17% (+1bp).

  • Italian 6-Month BOT Auction decreased from 0.012% to -0.224%