Market Talk – May 20, 2020

ASIA:

China has expressed its “strong indignation” after the US secretary of state, Mike Pompeo, sent a message hailing the re-elected Taiwanese president’s “courage and vision” to be read at her inauguration ceremony. China’s foreign ministry said Pompeo’s act had severely damaged peace and stability in the strait between Taiwan and China. It warned it would take “necessary countermeasures” and the US would have to bear the consequences, but did not elaborate.

Nearly 108 million people in China’s Jilin province could be forced back into lockdown after a growing group of new coronavirus infections triggered a backslide in the nation’s push to return to normal. The abrupt reversal in China’s northeast region has once again cut off public transportation, closed schools and led to another round of quarantine.

The Indian government has announced that it will enact all necessary measures to create a level playing field for the private sector to take part in all Indian space activities. The initiative to open up Indian space to the private sector includes drafting and implementing policies and regulations that provide private companies the predictable legal and regulatory environment they need for sustained investment and risk mitigation. This will, in turn, level the playing field for companies when competing and cooperating with India’s large state space sector.

India’s Finance Ministry published a macroeconomic report which highlights that banks were reluctant to lend to shadow lenders in April despite excessive liquidity in the system, and parked their funds with the Reserve Bank of India. In the report, the ministry said banks were risk-averse, and parked a staggering 100 billion USD with the RBI under its reverse repo window despite an unattractive interest rate of 3.5%. It was also mentioned in the report that although RBI’s sustained liquidity operations flushed the Indian banking system with liquidity in April 2020, banks’ response remained lukewarm, and credit to the commercial sector continued to see muted growth.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 161.70 points or 0.79% to 20,595.15
  • Shanghai decreased 14.84 points or -0.51% to 2,883.74
  • Hang Seng increased 11.82 points or 0.05% to 24,399.95
  • ASX 200 increased 13.50 points or 0.24% to 5,573.00
  • Kospi increased 9.03 points or 0.46% to 1,989.64
  • SENSEX increased 622.44 points or 2.06% to 30,818.61

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00449 or 0.69% to 0.65888
  • NZDUSD increased 0.00469 or 0.77% to 0.61352
  • USDJPY decreased 0.34 or -0.32% to 107.53
  • USDCNY decreased 0.0112 or -0.16% to 7.10650

Precious Metals:

  • Gold increased 3.54 USD/t oz. or 0.20% to 1,747.35
  • Silver increased 0.14 USD/t. oz or 0.79% to 17.4725

Some economic news from last night:

China:

PBoC Loan Prime Rate remain the same at 3.85%

Japan:

Reuters Tankan Index (May) decreased from -30 to -44

Core Machinery Orders (MoM) (Mar) decreased from 2.3% to -0.4%

Core Machinery Orders (YoY) (Mar) increased from -2.4% to -0.7%

Indonesia:

Balance of Payments (EUR) (Q1) decreased from 4.3B to -8.5B

Current Account % of GDP (Q1) increased from -2.84% to -1.40%

Australia:

MI Leading Index (MoM) decreased from -0.7% to -1.5%

New Zealand:

FPI (MoM) (Apr) increased from 0.7% to 1.0%

Some economic news from today:

India:

M3 Money Supply increased from 10.7% to 11.5%

EUROPE/EMEA:

After the UK’s David Frost criticized the EU, his counterpart Michel Barnier said that he did not like the UK’s tone and that a new dynamism must be found in order to move forward constructively. He continued to say that the UK had no guarantees of an automatic trade deal. So currently, both sides are blaming each other for the lack of progress. There were back and forth disagreements with the trade deal, with the UK being refused high-quality access to the EU market because they are not able to offer reassurances that competition remains fair.

German Chancellor Angela Merkel has said it is the obligation of the world’s richest countries to help those poorer countries get through the coronavirus crisis. The wealthier countries should help on development and debt relief.

The Spanish Foreign Minister said that a lot of Spanish islands are COVID free and can open up to tourists sooner than the major cities such as Barcelona and Madrid, as they hope to open up the country to tourists before the summer is over.

The major Europe stock markets had a green day today:

  • CAC 40 increased 38.82 points or 0.87% to 4,496.98
  • FTSE 100 increased 64.93 points or 1.08% to 6,067.16
  • DAX 30 increased 148.42 points or 1.34%% to 11,223.71

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00585 or 0.54% to 1.09853
  • GBPUSD decreased 0.00202 or -0.16% to 1.22377
  • USDCHF decreased 0.0065 or -0.67% to 0.9648

 

Some economic news from Europe today:

UK:

Core CPI (YoY) (Apr) decreased from 1.6% to 1.4%

Core CPI MoM (MoM) (Apr) remain the same at 0.1%

Core PPI Output (MoM) (Apr) decreased from 0.3% to -0.1%

Core PPI Output (YoY) (Apr) decreased from 0.9% to 0.6%

Core RPI (YoY) (Apr) decreased from 2.7% to 1.6%

Core RPI (MoM) (Apr) decreased from 0.2% to 0.0%

CPI (MoM) (Apr) decreased from 0.0% to -0.2%

CPI (YoY) (Apr) decreased from 1.5% to 0.8%

CPI, n.s.a (Apr) decreased from 108.60 to 108.50

PPI Input (YoY) (Apr) decreased from -3.1% to -9.8%

PPI Input (MoM) (Apr) decreased from -3.8% to -5.1%

PPI Output (MoM) (Apr) decreased from -0.2% to -0.7%

PPI Output (YoY) (Apr) decreased from 0.3% to -0.7%

RPI (MoM) (Apr) decreased from 0.2% to 0.0%

RPI (YoY) (Apr) decreased from 2.6% to 1.5%

Euro Zone:

Current Account (Mar) decreased from 40.2B to 27.4B

Current Account n.s.a. (Mar) increased from 33.8B to 40.7B

Core CPI (MoM) (Apr) decreased from 1.1% to 0.7%

Core CPI (YoY) (Apr) decreased from 1.0% to 0.9%

CPI (YoY) (Apr) decreased from 0.7% to 0.3%

CPI (MoM) (Apr) decreased from 0.5% to 0.3%

CPI ex Tobacco (YoY) (Apr) decreased from 0.7% to 0.2%

CPI ex Tobacco (MoM) (Apr) decreased from 0.5% to 0.3%

HICP ex Energy & Food (YoY) (Apr) remain the same at 1.1%

HICP ex Energy and Food (MoM) (Apr) decreased from 1.0% to 0.7%

Consumer Confidence (May) increased from -22.0 to -18.8

US/AMERICAS:

The Federal Open Market Committee unanimously voted to maintain interest rates until the US displays clear signs of recovery. According to the minutes report that was released today, “the economic effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term.” The Fed is also concerned about the possibility of a second resurgence of the virus.

Delta CEO Edward Bastian anticipates an uptick in domestic air travel over the summer months as lockdown restrictions continue to ease. In an interview with Fox, Bastian said that Delta has been operating with a passenger capacity around 30%-40%, but plans to add more flights once capacity reaches the 60% mark. Despite a devastating Q1 and Q2 for airliners, Bastian anticipates the industry making a full recovery in the next 12-18 months.

Brazilian President Bolsonaro is advocating the use of chloroquine to treat the coronavirus. The anti-malaria drug has the same properties of hydroxychloroquine, which US President Trump admitted to taking as a preventative measure. Ongoing studies of the drug’s effectiveness remain inconclusive. “If you don’t want it, you don’t do it. You’re not forced to take chloroquine,” President Bolsonaro said, “Those who are on the right take chloroquine. Those on the left take Tubaína [a soft drink].”

US Market Closings:

  • Dow advanced 369.04 points or 1.52% to 24,575.9
  • S&P 500 advanced 48.67 points or 1.67% to 2,971.61
  • Nasdaq advanced 190.67 points or 2.08% to 9,375.78
  • Russell 2000 advanced 39.21 points or 3% to 1,346.93

Canada Market Closings:

  • TSX Composite advanced 112.15 points or 0.75% to 14,997.63
  • TSX 60 advanced 7.06 points or 0.79% to 906.09

Brazil Market Closings:

  • Bovespa advanced 577.1 points or 0.71% to 81,319.45

ENERGY:

The EIA report gave a case for a bullish oil market today as it reported a draw of 5 million barrels for the week up to the 15th of May.

The oil markets had a mixed day today:

  • Crude Oil increased 0.58 USD/BBL or 1.78% to 33.0800
  • Brent increased 0.81 USD/BBL or 2.34% to 35.4600
  • Natural gas decreased 0.054 USD/MMBtu or -2.97% to 1.7650
  • Gasoline increased 0.0009 USD/GAL or 0.09% to 1.0351
  • Heating oil increased 0.0184 USD/GAL or 1.90% to 0.9877

The above data was collected around 13.55 EST on Wednesday.

  • Top commodity gainers: Brent (2.34%), Wheat (2.76%), Sugar (3.32%), and Lumber (4.06%)
  • Top commodity losers: Natural Gas (-2.97%), Palm Oil (-2.17%), Orange Juice (-2.90%), and Cotton (-1.45%)

The above data was collected around 14.05 EST on Wednesday.

BONDS:

Japan 0.02%(+1bp), US 2’s 0.17% (-0bps), US 10’s 0.70%(-1bps); US 30’s 1.43%(-0bps), Bunds -0.47% (-1bp), France -0.03% (-2bp), Italy 1.64% (-0bp), Turkey 12.09% (-63bp), Greece 1.81% (-6bp), Portugal 0.78% (-1bp); Spain 0.74% (+3bp) and UK Gilts 0.23% (-1bp).

  • French 3-Year BTAN Auction decreased from -0.43% to -0.53%
  • French 5-Year BTAN Auction increased from -0.36% to -0.33%
  • German 10-Year Bund Auction increased from -0.480% to -0.470%