Market Talk – October 20, 2020

Posted Oct 20, 2020 by Martin Armstrong |

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ASIA:

China on Tuesday asked India to approach ties with Taiwan “prudently and properly,” and said it would “firmly oppose” any official exchanges between New Delhi and Taipei. The statement from China’s Foreign Ministry came in response to reports that India and Taiwan were considering going forward with talks on a trade deal. India and Taiwan in 2018 already signed a bilateral investment agreement. India-Taiwan trade ties have expanded since and Taiwanese firms are prominent investors in India, although India and Taiwan do not maintain formal diplomatic relations.

The Indian government has asked at least eight state-run companies to consider share buybacks in the fiscal year that runs through March 2021, as the Indian government is looking for ways of raising funds to rein in its fiscal deficit, Reuters reported. The firms asked include miner Coal India, power utility NTPC, minerals producer NMDC and Engineers India Ltd, said one of the government sources. India is unlikely to be anywhere near its fiscal deficit target of 3.5% of GDP for 2020/21 as coronavirus curbs hit tax collections and delayed efforts to privatize energy firm Bharat Petroleum Corp and flag carrier Air India.

At least half of India’s 1.3 billion people are likely to have been infected with the new coronavirus by next February, helping slow the spread of the disease, a member of a federal government committee tasked with providing projections said on Monday. India has so far reported 7.55 million cases of the coronavirus and is second only to the United States in terms of total infections. “Our mathematical model estimates that around 30% of the population is currently infected and it could go up to 50% by February,” Manindra Agrawal, a professor at the Indian Institute for Technology in Kanpur and a committee member, told Reuters. The committee’s estimate for the current spread of the virus is much higher than the federal government’s serological surveys, which showed that only around 14% of the population had been infected as of September.

Intel Corp has agreed to sell its NAND memory chip business to SK Hynix Inc for $9 billion in an all-cash deal that would propel the South Korean chipmaker to second in the global rankings. The move marks the latest effort by the U.S. chip giant to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining Optane memory business, which is smaller but more lucrative because it taps more advanced technology. It is the biggest acquisition to date for SK Hynix and follows its $3.7 billion investment in Japanese rival Kioxia in 2017, as the Korean firm tries to boost its capacity to build NAND chips – used to store data in smartphones and data center servers – and beef up its pricing power.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 104.09 points or -0.44% to 23,567.04
Shanghai increased 15.44 points or 0.47% to 3,328.10
Hang Seng increased 27.28 points or 0.11% to 24,569.54
ASX 200 decreased 44.80 points or -0.72% to 6,184.60
Kospi increased 11.67 points or 0.50% to 2,358.41
SENSEX increased 112.77 points or 0.28% to 40,544.37
Nifty50 increased 23.75 points or 0.20% to 11,896.80

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00093 or -0.13% to 0.70690
NZDUSD decreased 0.00137 or -0.21% to 0.65908
USDJPY increased 0.12 or 0.11% to 105.52
USDCNY decreased 0.03846 or -0.57% to 6.65685

Precious Metals:

Gold increased 7.93 USD/t oz. or 0.42% to 1,912.20
Silver increased 0.36 USD/t. oz or 1.46% to 24.857

Some economic news from last night:

China:

House Prices (YoY) (Sep) decreased from 4.8% to 4.6%

PBoC Loan Prime Rate remain the same at 3.85%

New Zealand:

NZIER Business Confidence (Q3) increased from -63% to -40%

NZIER QSBO Capacity Utilization (Q3) decreased from 92.8% to 92.6%

Some economic news from today:

Hong Kong:

Unemployment Rate (Sep) increased from 6.1% to 6.4%

New Zealand:

GlobalDairyTrade Price Index decreased from 2.2% to 0.4%

EUROPE/EMEA:

The UK Junior Business Minister Nadhim Zahawi said there is no hope of fresh talks until the European Union (EU) considers further concessions in an interview with Sky News on Tuesday. His comments come after the Kingdom’s Brexit Chief David Frost rebuffed an offer of fresh negotiations with Brussels on Monday. Frost said that said there was “no point” in intensified Brexit talks unless the EU agrees to compromise on its stance. UK negotiator Lord Frost said his call with the EU’s Michel Barnier on Tuesday had been “constructive,” but in-person negotiations could not resume. Mr. Barnier said the EU’s door “remains open” following the call.

A prominent European Jewish organization slammed a Munich auction house’s decision to sell several of Adolf Hitler’s handwritten speech notes, saying Tuesday it “defies logic, decency and humanity” to put them on the market. Rabbi Menachem Margolin, the head of the Brussels-based European Jewish Association, said the upcoming sale of the manuscripts is particularly worrisome amid recent figures showing rising anti-Semitism in Germany, and could encourage neo-Nazis.

Fresh virus restrictions imposed in Spain’s two regional economic powerhouses, Catalonia and Madrid, have darkened the country’s already bleak growth forecasts and angered business leaders. The two regions together account for around 40% of Spain’s economic output and are home to most of the country’s big firms, as well as the pillars of its economy such as tourism and the manufacturing sector. If the restrictions are maintained for long in the two regions, it will have “a very negative impact” on the economy, Inigo Fernandez de Mesa, the deputy chief of business lobby group CEOE, told AFP.

The major Europe stock markets had a mixed day:

CAC 40 decreased 13.34 points or -0.27% to 4,929.28
FTSE 100 increased 4.57 points or 0.08% to 5,889.22
DAX 30 decreased 117.71 points or -0.92% to 12,736.95

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00635 or 0.54% to 1.18331
GBPUSD decreased 0.00052 or -0.04% to 1.29433
USDCHF decreased 0.004 or -0.44% to 0.90650

Some economic news from Europe today:

Swiss:

Trade Balance (Sep) decreased from 3.543B to 3.279B

Germany:

German PPI (MoM) (Sep) increased from 0.0% to 0.4%

German PPI (YoY) (Sep) increased from -1.2% to -1.0%

Euro Zone:

Current Account (Aug) increased from 16.6B to 19.9B

Current Account n.s.a. (Aug) decreased from 25.5B to 21.8B

US/AMERICAS:

The US Department of Justice (DOJ) filed charges against Google this Tuesday for allegedly violating antitrust laws. According to the lawsuit, Google violated Section 2 of the Sherman Act by acting as a monopoly and preventing any competitors from entering the search engine sector. Of all internet searches in the US, an overwhelming 88% of searches occur over Google. “Google is the gateway to the internet and a search advertising behemoth,” US Deputy Attorney General Jeffrey Rosen stated, as he is backed by ten other Republican Attorney Generals acting as plaintiffs. A legal representative for Google denied the claims made today by stating, “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives. This lawsuit would do nothing to help consumers.”

Sudan has agreed to pay $335 million to Washington in exchange for being removed from the terrorism blacklist. Sudan was initially placed on this list in 1998 after al-Qaida terrorists bombed two US embassies in East Africa. President Trump called the move a “big step” for Sudan. Prime Minister Abdalla Hamdok thanked President Trump over social media, stating that the blacklist status has cost his nation “too much” over the years. Syria, Iran, and North Korea remain on the US’ state-sponsored terrorism list.

Secretary of State Mike Pompeo is urging the US and Brazil to reduce their reliance on Chinese imports. “Each of our two peoples will be more secure, and each of our two nations will be far more prosperous, whether that’s two or five or 10 years from now,” Pompeo stated during a virtual summit. President Bolsonaro still remains undecided on whether to implement Huawei 5G technology in Brazil.

US Market Closings:

Dow advanced 113.37 points or 0.4% to 28,308.79
S&P 500 advanced 16.2 points or 0.47% to 3,443.12
Nasdaq advanced 37.51 points or 0.33% to 11,516.49
Russell 2000 advanced 4.08 points or 0.25% to 1,617.71

Canada Market Closings:

TSX Composite declined -0.81 of a point or 0% to 16,273.26
TSX 60 declined -0.69 of a point or -0.07% to 971.53

Brazil Market Closing:

Bovespa advanced 1,882.18 points or 1.91% to 100,539.83

ENERGY:

The oil markets had a green day today:

Crude Oil increased 0.73 USD/BBL or 1.79% to 41.5600
Brent increased 0.57 USD/BBL or 1.34% to 43.1900
Natural gas increased 0.128 USD/MMBtu or 4.58% to 2.9230
Gasoline increased 0.0323 USD/GAL or 2.79% to 1.1908
Heating oil increased 0.0001 USD/GAL or 0.01% to 1.1758

The above data was collected around 14:23 EST on Tuesday

Top commodity gainers: Natural Gas (4.58%), Gasoline (2.79%), Copper (2.81%), and Palladium (2.50%)
Top commodity losers: Rice (-1.77%), Sugar (-1.43%), Lean Hogs (-3.54%), and Feeder Cattle (-1.63%)

The above data was collected around 14:30 EST on Tuesday.

BONDS:

Japan 0.03%(+1bp), US 2’s 0.15% (+0bps), US 10’s 0.79%(+3bps); US 30’s 1.60%(+5bps), Bunds -0.62% (+1bp), France -0.32% (+2bp), Italy 0.75% (+3bp), Turkey 12.99% (-7bp), Greece 0.94% (+12bp), Portugal 0.18% (+4bp); Spain 0.20% (+10bp) and UK Gilts 0.19% (+2bp).