Market Talk – October 28, 2020

ASIA:

Some Chinese banks have phased out the use of the “counter-cyclical” factor in the pricing mechanism of the yuan’s central parity rate against the greenback, according to the China Foreign Exchange Trade System (CFETS). Market-making banks have made the move on their own initiative based on their judgment of economic fundamentals and market situations, the country’s forex regulator said. The adjustment could help improve the transparency and effectiveness of the yuan’s existing pricing model, it added.

China on Wednesday said its border standoff with India in eastern Ladakh is a bilateral issue and asked the US to stop its Indo-Pacific strategy, terming it as an attempt to impose American hegemony in the region. The remarks by the Chinese foreign ministry came a day after Secretary of State Mike Pompeo assured India that the US stands firmly with it to confront threats to its sovereignty.

India’s Finance Ministry on Tuesday said that demand for consumer goods has picked up during the festival season, which runs from October to March, and could help revive the economy. Referring to the Nikkei Manufacturing Purchasing Manager’s Index, finance minister Nirmala Sitharaman said economic activity had picked up in the country after the easing of pandemic restrictions and helped by various government measures. India’s factory activity expanded at its fastest pace in over eight years in September, a survey compiled by His Markit showed.

On Tuesday, India’s central bank, the Reserve Bank of India (RBI), directed all lenders to pay the difference between compound interest and simple interest for six months ending August 31, 2020, to the borrowers in specified loan accounts. The central bank’s notification has come after the government set November 5 as the deadline for banks to implement the waiver of ‘interest on interest’ scheme for six months. The government on October 23 had announced the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts for the period between March 1, 2020 to August 31, 2020, by respective lending institutions. Loans like education loans, credit card dues, automobile loans, MSME loans, housing loans, personal loans, consumption loans, and professional loans are eligible under this scheme. The RBI had in March, after the outbreak of coronavirus, provided a moratorium on repayment of EMIs and credit card dues for three months. Later, the central bank extended that three-month period till August 31, 2020.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 67.29 points or -0.29% to 23,418.51
  • Shanghai increased 14.92 points or 0.46% to 3,269.24
  • Hang Seng decreased 78.39 points or -0.32% to 24,708.80
  • ASX 200 increased 6.70 points or 0.11% to 6,057.70
  • Kospi increased 14.42 points or 0.62% to 2,345.26
  • SENSEX decreased 599.64 points or -1.48% to 39,922.46
  • Nifty50 decreased 159.8 points or -1.34% to 11,729.60

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00624 or -0.88% to 0.70564
  • NZDUSD decreased 0.00528 or -0.79% to 0.66454
  • USDJPY decreased 0.32 or -0.30% to 104.21
  • USDCNY increased 0.01592 or 0.24% to 6.73384

Precious Metals:

  • Gold decreased 30.07 USD/t oz. or -1.58% to 1,876.76
  • Silver decreased 1.355 USD/t. oz or -5.52% to 23.195

Some economic news from last night:

South Korea:

Consumer Confidence (Oct) increased from 79.4 to 91.6

Australia:

CPI (QoQ) (Q3) increased from -1.9% to 1.6%

CPI (YoY) (Q3) increased from -0.3% to 0.7%

CPI Index Number (Q3) increased from 114.40 to 116.20

Trimmed Mean CPI (YoY) (Q3) remain the same at 1.2%

Trimmed Mean CPI (QoQ) (Q3) increased from -0.1% to 0.4%

Weighted mean CPI (YoY) (Q3) remain the same at 1.3%

Weighted mean CPI (QoQ) (Q3) increased from 0.1% to 0.3%

EUROPE/EMEA:

Heathrow has lost its place as Europe’s busiest airport for the first time after being overtaken by Paris’s Charles de Gaulle, the London airport said. The number of passengers passing through Charles de Gaulle surpassed Heathrow, as losses at the UK airport climbed to £1.5bn in the first nine months of 2020. Heathrow heavily criticized the government for “slow progress” relative to its rivals in instituting a coronavirus testing regime for passengers. Heathrow wants the government to commit to testing arriving passengers by December 1, as well as working with the US on an air bridge trial to allow direct travel by Thanksgiving on November 26.

The Spanish government plans to increase taxes on big corporations and the wealthy and use 27 billion euros ($31.8 billion) in European grants as it tries to reverse one of the deepest coronavirus-related slumps among developed economies. Spain’s unemployment rate grew to 16.3% – up from 15.3 % in the previous quarter – as 355,000 people lost jobs between July and September, the National Statistics Institute (INE) said Tuesday. The budget proposal for 2021 is set to be approved Tuesday by ministers in the ruling left-wing coalition and submitted to the European Commission. Then the government faces an uphill battle to obtain parliamentary approval with necessary support from rival parties.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 159.54 points or -3.37% to 4,571.12
  • FTSE 100 decreased 146.19 points or -2.55% to 5,582.80
  • DAX 30 decreased 503.06 points or -4.17% to 11,560.51

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.0047 or -0.40% to 1.17326
  • GBPUSD decreased 0.00325 or -0.25% to 1.29961
  • USDCHF increased 0.00181 or 0.20% to 0.91093

Some economic news from Europe today:

UK:

BRC Shop Price Index (YoY) increased from -1.6% to -1.2%

Germany:

German Import Price Index (MoM) (Sep) increased from 0.1% to 0.3%

German Import Price Index (YoY) (Sep) decreased from -4.0% to -4.3%

Norway:

Core Retail Sales (MoM) (Sep) increased from -4.8% to 0.3%

France:

French Consumer Confidence (Oct) decreased from 95 to 94

Spain:

Spanish Retail Sales (YoY) (Sep) decreased from -2.9% to -3.3%

Italy:

Italian Trade Balance Non-EU (Sep) increased from 3.27B to 5.32B

Italian PPI (MoM) (Sep) remain the same at 0.1%

Italian PPI (YoY) (Sep) decreased from -3.0% to -3.1%

Swiss:

ZEW Expectations (Oct) decreased from 26.2 to 2.3

US/AMERICAS:

The Dow plummeted 943.24 points this Wednesday amid growing coronavirus cases and lockdown measures across the country. Visa fell -5.02%, experiencing the most significant drop, followed by Microsoft (-5%), Nike (-4.66%), and Salesforce (-4.66%).

CEO Mike Roman of 3M announced that the company is “making more N95 respirators than ever” to meet the growing demand. As 3M masks are medical grade, they are one of the only true options to prevent the spread of COVID-19 as cloth and disposable masks clearly state on the packaging that they do not prevent the spread of the virus. The company is currently poised to produce 2 billion N95 masks this year alone with half of the orders going to the US.

Eli Lilly secured a $1.19 billion deal with the US government to develop an antibody treatment for the coronavirus. Although the treatment is experimental, under Operation Warp Speed, the company will be permitted to begin delivering 300,000 doses of the medicine worth $375 million within the next two months. The government plans to purchase an additional 650,000 orders worth $812.5 million, according to the US Department of Health and Human Services. The treatment will cost the government $1,250 per vial, but will allegedly come at no cost to the American public.

Mexican President Andres Manuel Lopez Obrador reassured his citizens that they will not face another lockdown despite seeing a rise in coronavirus cases. The president criticized Europe for reimplementing harsher restrictions that he sees as “authoritarian.” Although he is asking citizens to continue social distancing, he does not see restrictions as productive. “Curfews aren’t a sign of faith in people. It’s putting yourself above as authority and seeing citizens as children, like they don’t understand. Not even in its worst moments did Europe have these curfews and all these measures,” Lopez Obrador stated this Wednesday.

US Market Closings:

  • Dow declined 943.24 points or -3.43% to 26,519.95
  • S&P 500 declined 119.65 points or -3.53% to 3,271.03
  • Nasdaq declined 426.48 points or -3.73% to 11,004.87
  • Russell 2000 declined 47.21 points or -2.97% to 1,543.28

Canada Market Closings:

  • TSX Composite declined 434.37 points or -2.71% to 15,586.57
  • TSX 60 declined 23.91 points or -2.5% to 930.9

Brazil Market Closing:

  • Bovespa declined 4,234.45 points or -4.25% to 95,371.09

ENERGY:

The oil markets had a negative day today:

  • Crude Oil decreased 2.42 USD/BBL or -6.12% to 37.1500
  • Brent decreased 2.22 USD/BBL or -5.39% to 38.9800
  • Natural gas decreased 0.002 USD/MMBtu or -0.07% to 3.0170
  • Gasoline decreased 0.0723 USD/GAL or -6.32% to 1.0711
  • Heating oil decreased 0.0536 USD/GAL or -4.63% to 1.1041

The above data was collected around 11:40 EST on Wednesday

  • Top commodity gainers: Steel (1.66%), Live Cattle (0.74%), Rubber (3.38%), and Palm Oil (1.22%)
  • Top commodity losers: Crude Oil (-6.12%), Gasoline (-6.32%), Silver (-5.52%), and Ethanol (-7.10%)

The above data was collected around 11:47 EST on Wednesday.

BONDS:

Japan 0.03%(-1bp), US 2’s 0.15%(+0bps), US 10’s 0.77%(-1bps); US 30’s 1.55%(-2bps), Bunds -0.63% (-2bp), France -0.31% (+1bp), Italy 0.78% (+7bp), Turkey 14.17% (+11bp), Greece 1.05% (+11bp), Portugal 0.17% (+2bp); Spain 0.19% (+9bp) and UK Gilts 0.22% (-1bp).

  • Uk 10-Year Treasury Gilt Auction decreased from 0.313% to 0.244%
  • Italian 6-Month BOT Auction decreased from -0.392% to -0.478%
  • German 10-Year Bund Auction increased from -0.510% to -0.460%