Market Talk – May 6, 2020

ASIA:

China is aiming to complete work on its space station within about two years, officials said after the launch of a new spacecraft on Tuesday. China eventually plans to send four crewed space missions and cargo craft to complete work on its permanent space station.

China challenged US Secretary of State Mike Pompeo to present evidence that would back his recent claim that the new coronavirus came from a Chinese laboratory. This comment by Chinese Foreign Ministry spokeswoman Hua Chunying was the first official Chinese government reaction to Mr. Pompeo’s statement.

The Trump administration is pressing the European Union to support an international inquiry into China’s handling of the coronavirus, including the origins of the pandemic, as Brussels seeks to avoid taking sides in an increasingly bitter battle between Beijing and Washington over responsibility for the crisis.

India’s number of confirmed COVID-19 cases crossed the 50,000 mark on Wednesday with a large number of healthcare professionals and security personnel testing positive amid the worsening spread of the deadly virus, while authorities also flagged high fatality rates in states like West Bengal, Gujarat, and Maharashtra.

India’s unemployment rate is now at a record high of 27.1%, according to the Centre for Monitoring the Indian Economy (CMIE). The major reason for the record increase is said to be the lockdown, which brought most economic activity (except essential services such as hospitals, pharmacies and food supplies) to a standstill.

The Indian government on Tuesday announced a Rs 13 a litre hike in excise duty on diesel and a Rs 10 a litre hike in excise duty on petrol in an attempt to shore up revenues as demand remains subdued due to the lockdown. Finance Ministry officials said the hike in excise duty, which comes into effect Wednesday, will not result in an increase in retail prices for the consumers. Government sources said the revenue generated from these duties would be used for infrastructure and other developmental expenditure.

Japan will donate more than $15.3 million to assist vulnerable communities in Zimbabwe affected by droughts and floods, according to media reports on Wednesday. The funds will be channeled through the World Food Programme (WFP), the United Nations Children’s Fund (UNICEF), and the International Organization for Migration (IOM), Zimbabwe’s Daily Herald reported.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 closed
  • Shanghai increased 18.06 points or 0.63% to 2,878.14
  • Hang Seng increased 268.82 points or 1.13% to 24,137.48
  • ASX 200 decreased 22.50 points or -0.42% to 5,384.60
  • Kospi increased 33.39 points or 1.76% to 1,928.76
  • SENSEX increased 232.24 points or 0.74% to 31,685.75

 

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00195 or -0.30% to 0.64175
  • NZDUSD decreased 0.0036 or -0.59% to 0.6023
  • USDJPY decreased 0.3930 or -0.37% to 106.0380
  • USDCNY increased 0.0082 or 0.12% to 7.12699

 

Precious Metals:

  • Gold decreased 16.71 USD/t oz. or -0.98% to 1,689.25
  • Silver decreased 0.088 USD/t. oz or -0.59% to 14.9320

Some economic news from last night:

Australia:

Retail Sales (MoM) (Mar) increased from 0.5% to 8.5%

Retail Sales (QoQ) (Q1) increased from 0.5% to 0.7%

New Zealand:

Labor Cost Index (QoQ) (Q1) decreased from 0.6% to 0.3%

Labor Cost Index (YoY) (Q1) remain the same at 2.4%

Employment Change (QoQ) (Q1) increased from 0.0% to 0.7%

Participation Rate (Q1) increased from 70.10% to 70.40%

Unemployment Rate (Q1) increased from 4.0% to 4.1%

Hong Kong:

Manufacturing PMI (Apr) increased from 34.9% to 36.9%

Some economic news from today:

India:

Nikkei Services PMI (Apr) decreased from 49.3 to 5.4

M3 Money Supply increased from 10.2% to 10.7%

Indonesia:

Consumer Confidence (Apr) decreased from 113.8 to 84.8

EUROPE/EMEA:

According to the European Commission, the recovery from the pandemic will take until 2021, with most countries suffering a 7-8% decline in GDP this year. The European Commission said that the downturn would be the worst since the Great Depression, with countries relying on tourists being affected the most.

The EU Chief Trade Commissioner Phil Hogan said that UK trade partners would delay signing any agreement before seeing a finalized UK-EU deal. Yesterday, the UK and US launched negotiations on a free trade agreement. He also spoke about the effects of the coronavirus on the economy and said it could be until 2024 until we see a recovery in Europe.

The US explained to the World Trade Organisation (WTO) that they did not violate any rules in dealing with Airbus or Boeing subsidy disputes by offering heavy tax breaks. The EU later retaliated by putting a levy on US goods.

The major Europe stock markets had a mixed day today:

  • CAC 40 decreased 49.75 points or -1.11% to 4,433.38
  • FTSE 100 increased 4.34 points, or 0.07% to 5,853.76
  • DAX 30 decreased 123.26 points or -1.15% to 10,606.20

 

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00405 or -0.37% to 1.07976
  • GBPUSD decreased 0.00964 or -0.77% to 1.23468
  • USDCHF increased 0.00243 or 0.25% to 0.97498

 

Some economic news from Europe today:

Germany:

German Factory Orders (MoM) (Mar) decreased from -1.2% to -15.6%

German Composite PMI (Apr) decreased from 35.0 to 17.4

German Services PMI (Apr) decreased from 31.7 to 16.2

Spain:

Spanish Services PMI (Apr) decreased from 23.0 to 7.1

Italy:

Italian Composite PMI (Apr) decreased from 20.2 to 10.9

Italian Services PMI (Apr) decreased from 17.4 to 10.8

France:

French Markit Composite PMI (Apr) decreased from 28.9 to 11.1

French Services PMI (Apr) decreased from 27.4 to 10.2

UK:

Construction PMI (Apr) decreased from 39.3 to 8.2

Norway:

House Price Index (YoY) (Apr) decreased from 1.50% to 1.20%

Euro Zone:

Markit Composite PMI (Apr) decreased from 29.7 to 13.6

Services PMI (Apr) decreased from 26.4 to 12.0

Retail Sales (MoM) (Mar) decreased from 0.6% to -11.2%

Retail Sales (YoY) (Mar) decreased from 2.5% to -9.2%

US/AMERICAS:

Private payrolls plummeted by 20 million positions in April, according to data released by the ADP this Wednesday. April’s data marks the most significant monthly loss in the history of ADP reporting, as the previous record was 834,665 in February 2009 during the Great Recession. Over 30 million Americans have filed unemployment claims in the past six weeks alone. The Bureau of Labor Statistics plans to release its payroll report this Friday, and many anticipate data showing up to a 16% unemployment rate.

The vast difference between state policies and politics is abundantly clear in the manner in which each state is reopening. States such as Florida, Georgia, and Texas have begun to reopen their economies in loose accordance with the federal government’s mandated three-phase system. Other states remain under lockdown with no clear end date in sight. Today, New Jersey Governor announced that his state will remain locked down for “many more weeks.” New York Governor Cuomo stated that reopening efforts in the tri-state area will require cooperation from NJ, NY, and CT governments.

NY Governor Cuomo elaborated on his plan to reopen the state by stating it will require intensive testing. “You’re going to have to know who had the virus, who resolved the virus, who never had it, and that’s going to come down to testing,” Cuomo declared. New data released this Wednesday shows that lockdown measures have been ineffective in combating the virus in New York. “If you notice, 18% of the people came from nursing homes, less than 1% came from jail or prison, 2% came from the homeless population, 2% from other congregate facilities, but 66% of the people were at home, which is shocking to us,” Cuomo stated this Wednesday.

Yesterday, Vice President Mike Pence declared that the coronavirus task force would be dismantled in the coming weeks, only to be rebuked later in the day by claims from Anthony Fauci. Today, President Trump claimed that he may add or substract members from the task force where needed. He also stated that they are focused on vaccines and therapeutics.

US Market Closings:

  • Dow declined 218.45 points or -0.91% to 23,664.64
  • S&P 500 declined 20.02 points or -0.7% to 2,848.42
  • Nasdaq advanced 45.27 points or 0.51% to 8,854.39
  • Russell 2000 declined 10.5 points or -0.82% to 1,263.01

Canada Market Closings:

  • TSX Composite advanced 19.18 points or 0.13% to 14,830.74
  • TSX 60 advanced 1.74 points or 0.19% to 898.73

Brazil Market Closing:

  • Bovespa declined 407.1 points or -0.51% to 79,063.68

ENERGY:

The EIA report showed a build of crude oil inventory of 4.6 million barrels for the week of April 24th. Which the figure was less than expected after last week showed a build of 9 million. Crude oil moved down slightly, hovering just below 30 USD per barrel.

The oil markets had a negative day today:

  • Crude Oil decreased 1.38 USD/BBL or -5.62% to 23.1800
  • Brent decreased 1.99 USD/BBL or -6.43% to 28.9800
  • Natural gas decreased 0.134 USD/MMBtu or -6.37% to 1.9690
  • Gasoline decreased 0.0741 USD/GAL or -7.95% to 0.8579
  • Heating oil decreased 0.1044 USD/GAL or -11.42% to 0.8099

The above data was collected around 11.43 EST on Wednesday.

  • Top commodity gainers: Lean Hogs (1.44%), Bitumen (3.93%), Coal (1.56%), and Ethanol (1.74%)
  • Top commodity losers: Heating Oil (-11.42%), Gasoline (-7.95%), Brent (-6.43%), and Natural Gas (-6.37%)

The above data was collected around 11.50 EST on Wednesday.

BONDS:

Japan -0.03%(+1bp), US 2’s 0.19% (+0bps), US 10’s 0.72%(+7bps); US 30’s 1.44%(+11bps), Bunds -0.52% (+6bp), France 0.00% (+6bp), Italy 1.96% (+9bp), Turkey 12.30% (+68bp), Greece 2.19% (-1bp), Portugal 0.99% (+8bp); Spain 0.92% (+6bp) and UK Gilts 0.23% (+3bp).

  • German 5-Year Bobl Auction decreased from -0.660% to -0.740%