Market Talk – March 4, 2020

ASIA:

India’s central Bank Governor Shaktikanta Das told Bloomberg that he’s ready to act to shield the economy from the coronavirus and reiterated there’s room to cut interest rates if needed. The spread of coronavirus has raised the prospects of an emergency monetary policy action in India.

India restored the social media access for people in Kashmir for two weeks for the first time in last eight months after the abrogation of Article 370. The government told that it has temporarily lifted the ban on social media services and on the much broader internet, giving some relief to people and tens of thousands of businesses in the Himalayan region for two weeks.

According to an official and private survey released in recent days, the coronavirus outbreak could plunge the Chinese economy into its first contraction since the 1970s. That data — which mostly follows small and medium-sized companies — largely tracked with a government survey of primarily state-owned firms in the services sector released over the weekend. Macquarie Group chief China economist Larry Hu suggested that the country could be in for a historic economic decline.

China’s effort to improve labor mobility by arranging buses and aircrafts to pick up migrant workers in the interior have failed to solve the problem. Since China declared the coronavirus epidemic as a national emergency, local governments have imposed strict restrictions on resident’s movements and this is taking a toll its citizens which in turn is hurting the Chinese economy.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 17.33 points or 0.08% to 21,100.06
  • Shanghai increased 18.77 points or 0.63% to 3,011.67
  • Hang Seng decreased 62.75 points or -0.24% to 26,222.07
  • ASX 200 decreased 110.30 points or -1.71% to 6,325.40
  • Kospi increased 45.18 points or 2.24% to 2,059.33
  • SENSEX decreased 214.22 points or -0.55% to 38,409.48

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0030 or 0.46% to 0.6610
  • NZDUSD increased 0.0006 or 0.09% to 0.6278
  • USDJPY increased 0.34 or 0.32% to 107.34
  • USDCNY decreased 0.0228 or 0.33% to 6.9243

Precious Metals:

  • Gold decreased 2.25 USD/t oz. or -0.14% to 1,643.20
  • Silver decreased 0.08 USD/t. oz or -0.46% to 17.1700

Some economic news from last night:

China:

Caixin Services PMI (Feb) decreased from 51.8 to 26.5

Hong Kong:

Manufacturing PMI (Feb) decreased from 46.8 to 33.1

South Korea:

FX Reserves – USD (Feb) decreased from 409.65B to 409.17B

Japan:

Services PMI (Feb) decreased from 51.0 to 46.8

Australia:

AIG Construction Index (Feb) increased from 41.3 to 42.7

Services PMI decreased from 50.6 to 49.0

GDP (YoY) (Q4) increased from 1.7% to 2.2%

GDP (QoQ) (Q4) decreased from 0.6% to 0.5%

GDP Capital Expenditure (Q4) decreased from -0.2% to -1.0%

GDP Chain Price Index (Q4) decreased from 0.7% to -1.2%

GDP Final Consumption (Q4) increased from 0.3% to 0.5%

New Zealand:

Building Consents (MoM) (Jan) decreased from 9.8% to -2.0%

ANZ Commodity Price Index (MoM) decreased from -0.9% to -2.1%

Some economic news from today:

India:

Nikkei Services PMI (Feb) increased from 55.5 to 57.5

EUROPE/EMEA:

European Union (EU) chiefs could be issued a huge blow if a US-UK Free Trade Agreement (FTA) is secured. German businesses might find relocating to Britain incredibly profitable, former UK Independent Party MP Douglas Carswell told. This week, Britain and the European Union kicked off the first round of talks on their future relationship. The two sides are set for a big showdown as they have starkly different views on what constitutes fair competition between their economies. Yet, a trade deal with the US appears to be a lot more straightforward.

Italy’s economy performed woefully in 2019 and is set to do even worse this year due to the coronavirus, with the threat of recession looming large, experts said on Monday. The economy expanded last year by just 0.3 percent — its worst figure since 2014 when gross domestic product (GDP) growth was zero.

France has seen a 30% to 40% fall in tourists following the coronavirus outbreak. France is one of the most visited countries in the world. According to the country’s Ministry for Europe and Foreign Affairs, 89.4 million visitors toured France in 2018 and tourism accounts for nearly 8% of its gross domestic product. France has reported 12 confirmed cases of the virus and one death at the time of this report.

The major Europe stock markets had a green day today:

  • CAC 40 increased 71.72 points or 1.33% to 5,464.89
  • FTSE 100 increased 97.39 points, or 1.45% to 6,815.59
  • DAX 30 increased 142.30 points or 1.19% to 12,127.69

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00467 or -0.42% to 1.11323
  • GBPUSD increased 0.00196 or 0.15% to 1.28436
  • USDCHF decreased 0.00013 or -0.01% to 0.95527

Some economic news from Europe today:

Germany:

German Retail Sales (MoM) (Jan) increased from -2.0% to 0.9%

German Retail Sales (YoY) (Jan) increased from 1.7% to 1.8%

German Composite PMI (Feb) decreased from 51.2 to 50.7

German Services PMI (Feb) decreased from 54.2 to 52.5

Norway:

Current Account (Q4) decreased from 29.5B to 19.1B

House Price Index (YoY) (Feb) increased from 3.20% to 3.60%

Swiss:

CPI (YoY) (Feb) decreased from 0.2% to -0.1%

CPI (MoM) (Feb) increased from -0.2% to 0.1%

Spain:

Spanish Services PMI (Feb) decreased from 52.3 to 52.1

Italy:

Italian Composite PMI (Feb) increased from 50.4 to 50.7

Italian Services PMI (Feb) increased from 51.4 to 52.1

Italian GDP (YoY) (Q4) decreased from 0.3% to 0.1%

Italian GDP (QoQ) (Q4) decreased from 0.1% to -0.3%

France:

French Markit Composite PMI (Feb) increased from 51.1 to 52.0

French Services PMI (Feb) increased from 51.1 to 52.5

Euro Zone:

Markit Composite PMI (Feb) increased from 51.3 to 51.6

Services PMI (Feb) increased from 52.5 to 52.6

Retail Sales (YoY) (Jan) remain the same at 1.7%

Retail Sales (MoM) (Jan) increased from -1.1% to 0.6%

UK:

Composite PMI (Feb) decreased from 53.3 to 53.0

Services PMI (Feb) decreased from 53.9 to 53.2

US/AMERICAS:

The US market showed signs of recovery this Wednesday after all three major indexes rose by over 3.5%. The Dow recovered  1,173.45 points, a 4.53% rise, with UnitedHealth (10.72%), American Express (7.12%), Pfizer (6.12%), and 3M (6.02%) making significant gains.

Private payrolls in the US rose by 183,000 last month, exceeding analysts’ expectations of 155,000 or less due to the coronavirus slowdown. January’s figure was revised down from 291,000 new positions to 209,000. The majority of hiring was focused on big businesses that added 133,000 new jobs.

US media agencies are claiming Joe Biden won big on Super Tuesday. Mike Bloomberg announced this Wednesday that he is suspending his half-billion-dollar campaign and is now backing Joe Biden. At the time of this writing, Biden won the favor of 566 delegates, Sanders won 501, Warren 61, and Gabbard 1.

The Bank of Canada lowered its target rate by 50 bps this Wednesday. The current target now stands at 1.25%. The central bank said that the affects on the economy due to the coronavirus outbreak was the main catalyst for a rate cut. The Bank of Canada issued the following statement: “Before the outbreak, the global economy was showing signs of stabilizing.. In consequence [of COVID-19], business activity in some regions has fallen sharply and supply chains have been disrupted. This has pulled down commodity prices and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.”

US Market Closings:

  • Dow advanced 1,173.45 points or 4.53% to 27,090.86
  • S&P 500 advanced 126.75 points or 4.22% to 3,130.12
  • Nasdaq advanced 334 points or 3.85% to 9,018.09
  • Russell 2000 advanced 45.11 points or 3.04% to 1,531.20

Canada Market Closings:

  • TSX Composite advanced 355.91 points or 2.17% to 16,779.53
  • TSX 60 advanced 21.73 points or 2.22% to 1,001.16

Brazil Market Closing:

  • Bovespa advanced 1,687.08 points or 1.6% to 107,224.22

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil decreased 0.44 USD/BBL or -0.93% to 46.8100
  • Brent decreased 0.74 USD/BBL or -1.43% to 51.1600
  • Natural gas decreased 0.001 USD/MMBtu or -0.05% to 1.9010
  • Gasoline increased 0.0036 USD/GAL or 0.24% to 1.5129
  • Heating oil increased 0.0019 USD/GAL or 0.13% to 1.5209
  • Top commodity gainers: Lean Hogs (1.87%), Ethanol (17.01%), Palm Oil (2.03%), and Steel (2.29%)
  • Top commodity losers: Cheese (-3.64%), Milk (-3.77%), Rubber (-1.91%), and Coffee (-3.30%)

The above data was collected around 12:20 EST on Wednesday.

BONDS:

Japan -0.10%(-4bp), US 2’s 0.67% (-3bps), US 10’s 0.98%(-2bps); US 30’s 1.60%(-1bps), Bunds -0.64% (-2bp), France -0.24% (-4bp), Italy 1.02% (+1bp), Turkey 11.28 % (-80bp), Greece 1.22% (-13bp), Portugal 0.20% (-1bp); Spain 0.18% (-1bp) and UK Gilts 0.37% (-1bp).

  • UK 5-Year Treasury Gilt Auction decreased from 0.536% to 0.222%