Market Talk – October 14, 2020

Posted Oct 14, 2020 by Martin Armstrong |

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ASIA:

China’s stock market has soared to a record high of more than $10tn as the world’s second-largest economy continues a rapid bounce back from the coronavirus pandemic. The total value of all company shares listed on the Shanghai and Shenzhen markets rallied to hit USD 10.08tn (£7.7bn) on Wednesday, according to figures compiled by Bloomberg. China’s benchmark CSI 300 Index, which tracks both the Shanghai and Shenzen markets, has risen by more than 17% so far this year.

India is examining the international arbitration decision on tax dispute with Vodafone Group Plc, involving a $2 billion tax claim, but has not yet decided whether to challenge it in court, Reuters reported. An international arbitration tribunal in The Hague had ruled last month that India’s imposition of a tax liability on Vodafone, as well as interest and penalties, breached of an investment treaty agreement between India and the Netherlands.

India’s central Bank, the Reserve Bank of India, told the Supreme Court a loan moratorium exceeding six months might result in vitiating the overall credit discipline, which will have a debilitating impact on the process of credit creation in the economy. The RBI submitted that any waiver of interest on interest would also entail significant economic costs that cannot be absorbed by the banks without serious dent of their finances, and this, in turn, would have huge implications for the depositors and the broader financial stability. The RBI in its affidavit also urged the Supreme Court to vacate its September 4 interim order restraining banks from declaring any new non-performing accounts (NPAs) and said its August 6 resolution framework is only for those borrowers who were not in default for more than 30 days as on March 1, 2020, leaving out standard and NPA accounts.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 24.95 points or 0.11% to 23,626.73
Shanghai decreased 18.97 points or -0.56% to 3,340.78
Hang Seng increased 17.41 points or 0.07% to 24,667.09
ASX 200 decreased 16.50 points or -0.27% to 6,179.20
Kospi decreased 22.67 points or -0.94% to 2,380.48
SENSEX increased 169.23 points or 0.42% to 40,794.74
Nifty50 increased 36.55 points or 0.31% to 11,971.05

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00044 or -0.06% to 0.71589
NZDUSD increased 0.00051 or 0.08% to 0.66573
USDJPY decreased 0.36 or -0.34% to 105.10
USDCNY decreased 0.02639 or -0.39% to 6.71159

Precious Metals:

Gold increased 11.78 USD/t oz. or 0.62% to 1,902.60
Silver increased 0.07 USD/t. oz or 0.30% to 24.242

Some economic news from last night:

Australia:

Westpac Consumer Sentiment (Oct) decreased from 18.0% to 11.9%

Singapore:

GDP (QoQ) (Q3) increased from -13.2% to 35.4%

GDP (YoY) (Q3) increased from -13.3% to -7.0%

South Korea:

Interest Rate Decision (Oct) remain the same at 0.50%

Some economic news from today:

China:

M2 Money Stock (YoY) (Sep) increased from 10.4% to 10.9%

New Loans (Sep) increased from 1,280.0B to 1,900.0B

Outstanding Loan Growth (YoY) (Sep) remain the same at 13.0%

Chinese Total Social Financing decreased from 3,580.0B to 3,480.0B

Japan:

Capacity Utilization (MoM) (Aug) decreased from 9.6% to 2.9%

Industrial Production (MoM) (Aug) decreased from 8.7% to 1.0%

India:

WPI Food (YoY) (Sep) increased from 3.84% to 8.17%

WPI Fuel (YoY) (Sep) increased from -9.68% to -9.54%

WPI Inflation (YoY) (Sep) increased from 0.16% to 1.32%

WPI Manufacturing Inflation (YoY) (Sep) increased from 1.27% to 1.61%

EUROPE/EMEA:

Britain is facing a “nasty mix” of national security threats from hostile state activity by Russia and China to fast-growing right-wing terrorism, the new director general of MI5 has said. The Covid lockdown raised the risk of online contact between groups, and made covert surveillance harder, he added.

The new three-tier system of Covid-19 restrictions has begun in England.UK government has outlined several rules to enforce social distancing in the country ranging from Medium, High and Very High. The Labour Mayor of Greater Manchester, Andy Burnham, tweeted that he had not spoken with the government about the new restrictions since Friday, claiming pressure was being “piled on via media briefings.”

Germany’s economic prospects for 2020 are looking increasingly bleak, with the country’s leading research institutes downgrading GDP forecasts for this year and beyond. Publishing a joint economic forecast Wednesday, Germany’s prominent economists warned that the coronavirus pandemic is leaving what they called “substantial marks” on the German economy, adding that “its impact is more persistent than assumed in spring.” They revised their economic outlook downward by roughly one percentage point for both 2020 and 2021. They now expect GDP to fall by 5.4% in 2020 (lower than a previous -4.2% forecast) and to grow by 4.7% (less than a previously forecast 5.8%) in 2021, and 2.7% in 2022. The “Joint Economic Forecast” is published twice a year on behalf of the German Economy Ministry and is prepared by the German Institute for Economic Research (DIW Berlin) and the Ifo Institute in Munich, as well as several other organizations.

The major Europe stock markets had a mixed day:

CAC 40 decreased 5.95 points or -0.12% to 4,941.66
FTSE 100 decreased 34.65 points or -0.58% to 5,935.06
DAX 30 increased 9.07 points or 0.07% to 13,028.06

The major Europe currency markets had a mixed day today:

EURUSD increased 0.0004 or 0.03% to 1.17466
GBPUSD increased 0.00745 or 0.58% to 1.30094
USDCHF decreased 0.002 or -0.22% to 0.91319

Some economic news from Europe today:

Spain:

Spanish CPI (MoM) (Sep) increased from 0.0% to 0.2%

Spanish CPI (YoY) (Sep) increased from -0.5% to -0.4%

Spanish HICP (MoM) (Sep) increased from 0.0% to 0.4%

Spanish HICP (YoY) (Sep) remain the same at -0.6%

Euro Zone:

Industrial Production (YoY) (Aug) decreased from -7.1% to -7.2%

Industrial Production (MoM) (Aug) decreased from 5.0% to 0.7%

US/AMERICAS:

The World Trade Organization (WTO) granted the EU permission to impose $4 billion in tariffs on the US after the US provided Boeing with illegal aid. The ruling comes one year after the WTO sanctioned the EU for boosting Airbus. “The United States is determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to US aerospace workers and businesses,” US Trade Representative Robert Lighthizer said. The EU may be willing to negotiate trade with the US in exchange for reduced or redacted tariffs. Airbus CEO Guillaume Faury said, “It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”

The largest US banking lenders provided a less than optimistic picture of what to expect for near-term economic conditions. Executives at Bank of America, Citigroup Inc, JPMorgan Chase & Co, and Wells Fargo said that losses on various loans may not become apparent until 2021 as credit card write-offs usually do not occur until 180 days of delinquincy. Wells Fargo CEO Charles Scharf said there “remains a significant risk to recovery” despite economic conditions improving. Bank of America Chief Financial Officer Paul Donofrio depicted 2021 as a “lumpy” year for commercial lending and said the future remains largely uncertain. Citigroup Chief Financial Officer Mark Mason reminded the public that we are “still in the midst of a crisis” where risks remain hefty.

US Market Closings:

Dow declined 165.81 points or -0.58% to 28,514
S&P 500 declined 23.26 points or -0.66% to 3,488.67
Nasdaq declined 95.17 points or -0.8% to 11,768.73
Russell 2000 declined 15.2 points or -0.93% to 1,621.65

Canada Market Closings:

TSX Composite declined 55.43 points or -0.34% to 16,455.4
TSX 60 declined 3.84 points or -0.39% to 983.99

Brazil Market Closing:

Bovespa advanced 831.61 points or 0.84% to 99,334.43

ENERGY:

The oil markets had a mixed day today:

Crude Oil increased 0.69 USD/BBL or 1.72% to 40.8900
Brent increased 0.7 USD/BBL or 1.65% to 43.1500
Natural gas decreased 0.186 USD/MMBtu or -6.51% to 2.6690
Gasoline increased 0.0165 USD/GAL or 1.40% to 1.1947
Heating oil increased 0.0195 USD/GAL or 1.67% to 1.1862

The above data was collected around 12:30 EST on Wednesday

Top commodity gainers: Crude Oil (1.72%), Heating Oil (1.67%), Bitumen (6.50%), and Lumber (2.39%)
Top commodity losers: Coffee (-0.50%), Palm Oil (-0.68%), Platinum (-0.94%), and Natural Gas (-6.51%)

The above data was collected around 12:35 EST on Wednesday.

BONDS:

Japan 0.03%(+0bp), US 2’s 0.14% (-0bps), US 10’s 0.71%(-1bps); US 30’s 1.49%(-3bps), Bunds -0.56% (-1bp), France -0.30% (-1bp), Italy 0.67% (+1bp), Turkey 13.26% (+9bp), Greece 0.81% (+3bp), Portugal 0.15% (-1bp); Spain 0.14% (+6bp) and UK Gilts 0.22% (-2bp).