Market Talk – May 5, 2020

ASIA:

Early this morning, China launched a pivotal new rocket, carrying a prototype deep-space spacecraft. China declared the launch a success, and it now paves the way for a slew of critical launches over the next year.

China reported one new coronavirus case for May 4, down from three the day before, data from the national health authority showed on Tuesday. The new case was imported from outside the country, the National Health Commission said.

US President Donald Trump urged China on Tuesday to be transparent about the origins of the novel coronavirus outbreak that has killed more than a quarter of a million people since it started in the Chinese city of Wuhan late last year.

India is planning to evacuate thousands of its nationals stranded in several countries due to the ongoing pandemic. As part of this mega mission, Modi’s administration plans to evacuate close to 15,000 Indians stranded in 12 countries between May 7 and May 13. As many as 64 flights will be operated by the central government in the first week.

India’s manufacturing activity contracted at its sharpest pace on record in April as a lockdown to combat the rapid spread of the coronavirus led to a slump in demand and massive supply chain disruptions. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, plunged to 27.4 last month from March’s 51.8, by far its lowest since the survey began in March 2005 and its first time below the 50-mark, separating growth from contraction, in nearly three years.

Japan will launch a subsidy program to encourage domestic manufacturers to transfer their overseas production bases to Southeast Asia, as the coronavirus pandemic has greatly disrupted their supply chains heavily dependent on China. The 220 million USD program is incorporated into the government’s emergency stimulus package to ease the economic fallout from the pandemic. This will help firms diversify their supply chains by financially assisting the construction of production facilities as well as feasibility studies in ASEAN countries.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 closed
  • Shanghai closed
  • Hang Seng increased 254.86 points or 1.08% to 23,868.66
  • ASX 200 increased 87.30 points or 1.64% to 5,407.10
  • Kospi closed
  • SENSEX decreased 261.84 points or -0.83% to 31,453.51

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00288 or 0.45% to 0.64524
  • NZDUSD increased 0.00126 or 0.21% to 0.60623
  • USDJPY decreased 0.17 or -0.16% to 106.53
  • USDCNY decreased 0.0129 or -0.18% to 7.11680

Precious Metals:

  • Gold decreased 2.39 USD/t oz. or -0.14% to 1,699.05
  • Silver increased 0.09 USD/t. oz or 0.61% to 14.9300

Some economic news from last night:

Australia:

AIG Construction Index (Apr) decreased from 37.9 to 21.6

Services PMI decreased from 38.5 to 19.5

New Zealand:

Building Consents (MoM) (Mar) decreased from 5.7% to -21.3%

ANZ Commodity Price Index (MoM) increased from -2.0% to -1.1%

Some economic news from today:

Indonesia:

GDP (YoY) (Q1) decreased from 4.97% to 2.97%

GDP (QoQ) (Q1) decreased from -1.74% to -2.41%

Australia:

RBA Interest Rate Decision (May) remain the same at 0.25%

New Zealand:

GlobalDairyTrade Price Index increased from -4.2% to -0.8%

Hong Kong:

Retail Sales (YoY) (Mar) increased from -44.0% to -42.0%

Singapore:

Retail Sales (MoM) (Mar) increased from -8.4% to -1.3%

Retail Sales (YoY) (Mar) decreased from -8.4% to -13.3%

EUROPE/EMEA:

European markets bounced back today after a big down day yesterday.

The UK has now overtaken Italy as having the highest number of deaths caused by the coronavirus. The EU agency for disease control has suggested that the UK is lagging behind most of Europe when dealing with the coronavirus, as they were called out as one of five countries failing to slow the virus.

UK negotiator Michael Gove said he may accept tariffs in trade with the EU in order to finalize a deal between the two. He said that tariffs would be worth the price if it led to the UK’s release from EU rules.

European Union MEPs have accused the UK of putting EU citizens living in the UK for more than five years at a disadvantage by outright denying claims for benefits.

UK airline Virgin airways is set to cut 3,000 jobs in the UK, with the airline stating that they could fail without government aid.

The major Europe stock markets had a green day today:

  • CAC 40 increased 104.90 points or 2.40% to 4,483.13
  • FTSE 100 increased 95.64 points, or 1.66% to 5,849.42
  • DAX 30 increased 262.66 points or 2.51% to 10,729.46

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00662 or -0.61% to 1.08368
  • GBPUSD increased 0.00034 or 0.03% to 1.24467
  • USDCHF increased 0.00768 or 0.80% to 0.97319

Some economic news from Europe today:

Swiss:

SECO Consumer Climate (Q2) decreased from -7 to -56

CPI (MoM) (Apr) decreased from 0.1% to -0.4%

CPI (YoY) (Apr) decreased from -0.5% to -1.1%

France:

French Government Budget Balance (Mar) decreased from -35.2B to -52.5B

Spain:

Spanish Unemployment Change decreased from 302.3K to 282.9K

Spanish Consumer Confidence decreased from 63.3 to 49.9

UK:

Composite PMI (Apr) decreased from 36.0 to 13.8

Services PMI (Apr) decreased from 34.5 to 13.4

Euro Zone:

PPI (YoY) (Mar) decreased from -1.4% to -2.8%

PPI (MoM) (Mar) decreased from -0.7% to -1.5%

US/AMERICAS:

House Speaker Pelosi has not announced when Congress will return. “By Congress not wanting the special 5 minute testing apparatus, they are saying that they are not “essential,” President Trump tweeted on Monday. “If it is essential for doctors, nurses, health care workers, truck drivers, grocery store workers and other brave Americans to keep carefully manning their duty stations, then it is essential for senators to carefully man ours and support them,” Senate Majority Leader Mitch McConnell stated after reopening the Senate yesterday.

Vice President Mike Pence told reporters this Tuesday that the coronavirus task force appointed by the Trump administration may dismantle by June. Pence said their responsibilities would be distributed to other government agencies and expressed confidence that the situation was under control. Dr. Anthony Fauci denied Pence’s claims later in the day and said that the task force does not plan to disassemble anytime soon.

Carnival Cruise Line (-8.46%) plans to reopen eight ports across the US on August 1. The cruiseliner made headlines after dozens of people died from COVID-19 aboard their ships. The CDC issued a “No Sail Order” in March that has been extended to July 24. It is unclear how Carnival will implement social distancing measures aboard its vessels.

In less optimistic news for travel, Airbnb may be forced to lay off 25% of its workforce. CEO Brian Chesky noted that “revenue this year is forecasted to be less than half of what we earned in 2019.” The company halted new hires when the pandemic first began, and now plans to halt all ongoing projects. “Travel in this new world will look different, and we need to evolve Airbnb accordingly,” Chesky stated. The company was previously planning to launch an IPO in 2020.

US Market Closings:

  • Dow advanced 133.33 points or 0.56% to 23,883.09
  • S&P 500 advanced 25.7 points or 0.90% to 2,868.44
  • Nasdaq advanced 98.41 points or 1.13% to 8,809.12
  • Russell 2000 advanced 9.54 points or 0.75% to 1,273.51

Canada Market Closings:

  • TSX Composite advanced 66.52 points or 0.45% to 14,811.56
  • TSX 60 advanced 3.89 points or 0.44% to 896.99

Brazil Market Closing:

  • Bovespa advanced 594.56 points or 0.75% to 79,470.78

ENERGY:

WTI and Brent both jumped double digits today as data on demand as well as the coronavirus lockdown easing helped pushed up the price.

A Venezuelan oil storage facility burst due to the oversupply in the market, apparently leaking for four days.

The oil markets had a green day today:

  • Crude Oil increased 4.38 USD/BBL or 21.48% to 24.7700
  • Brent increased 3.47 USD/BBL or 12.76% to 30.6700
  • Natural gas increased 0.122 USD/MMBtu or 6.02% to 2.1490
  • Gasoline increased 0.0568 USD/GAL or 6.76% to 0.8971
  • Heating oil increased 0.0633 USD/GAL or 7.60% to 0.8966

The above data was collected around 12.47 EST on Tuesday.

  • Top commodity gainers: Crude Oil (21.48%), Brent (12.76%), Heating Oil (7.60%), and Ethanol (10.53%)
  • Top commodity losers: Palladium (-3.62%), Cocoa (-3.53%), Cotton (-1.71%), and Lean Hogs (-1.96%)

The above data was collected around 12.49 EST on Tuesday.

BONDS:

Japan -0.03%(+1bp), US 2’s 0.18% (+0bps), US 10’s 0.66%(+2bps); US 30’s 1.32%(+3bps), Bunds -0.58% (-2bp), France -0.07% (-1bp), Italy 1.89% (+14bp), Turkey 11.62% (+4bp), Greece 2.20% (+3bp), Portugal 0.92% (+4bp); Spain 0.87% (+4bp) and UK Gilts 0.20% (-3bp).

  • Spanish 6-Month Letras Auction decreased from -0.039% to -0.287%
  • Spanish 12-Month Letras Auction decreased from 0.079% to -0.097%