Market Talk – September 1, 2020

ASIA:

China’s Alibaba Group has put on hold plans to invest in Indian companies, amid souring business relations and rising political tension between the two nations after a clash on their Himalayan border, Reuters reported. Alibaba, which has fuelled the growth of several Indian start-ups, will not put in fresh funds to expand its investments in the country for at least six months, the sources said. However, there are no plans to reduce its stakes or exit investments.

India’s GDP shrank by shrank by a record 23.9% in April-June from a year earlier, official data showed on Monday, against a Reuters poll forecast for an 18.3% contraction. Krishnamurthy Subramanian, chief economist at the Ministry of Finance, said India’s economy was set for a “V-shaped” recovery and should perform better in the coming quarters as indicated by a pickup in rail freight, power consumption and tax collections.

India’s central bank, Reserve Bank of India (RBI) said in its annual report that the economy which is contracted for the first time ever, will take “quite some time to mend and regain” the pre-Covid momentum, as the “shock to consumption is severe” and the “poorest have been hit the hardest”. The RBI also cautioned about the loss of recovery momentum since June, with states imposing localized lockdowns. According to the RBI, private consumption is expected to lead the recovery when it takes hold, and government consumption is expected to continue pandemic-proofing of demand.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 1.69 points or -0.01% to 23,138.07
  • Shanghai increased 14.93 points or 0.44% to 3,410.61
  • Hang Seng increased 7.80 points or 0.03% to 25,184.85
  • ASX 200 decreased 107.10 points or -1.77% to 5,953.40
  • Kospi increased 23.38 points or 1.01% to 2,349.55
  • SENSEX increased 272.51 points or 0.71% to 38,900.80
  • Nifty50 increased 82.75 points or 0.73% to 11,470.25

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00032 or -0.04% to 0.73755
  • NZDUSD increased 0.00234 or 0.35% to 0.67579
  • USDJPY increased 0.0090 or 0.01% to 105.94
  • USDCNY decreased 0.01385 or -0.20% to 6.83582

Precious Metals:

  • Gold decreased 0.55 USD/t oz. or -0.03% to 1,969.20
  • Silver decreased 0.15 USD/t. oz or -0.53% to 28.071

Some economic news from last night:

China:

Caixin Manufacturing PMI (Aug) increased from 52.8 to 53.1

Japan:

Manufacturing PMI (Aug) increased from 46.6 to 47.2

Jobs/applications ratio (Jul) decreased from 1.11 to 1.08

Unemployment Rate (Jul) increased from 2.8% to 2.9%

Capital Spending (YoY) (Q2) decreased from 0.1% to -11.3%

South Korea:

GDP (QoQ) (Q2) decreased from -1.3% to -3.2%

GDP (YoY) (Q2) decreased from 1.4% to -2.7%

Exports (YoY) (Aug) decreased from -7.1% to -9.9%

Imports (YoY) (Aug) decreased from -11.6% to -16.3%

Trade Balance (Aug) decreased from 4.13B to 4.12B

Nikkei Manufacturing PMI (Aug) increased from 46.9 to 48.5

Australia:

AIG Manufacturing Index (Aug) decreased from 53.5 to 49.3

Manufacturing PMI decreased from 54.0 to 53.6

Building Approvals (MoM) (Jul) increased from -4.9% to 12.0%

Current Account (Q2) increased from 8.4B to 17.7B

Net Exports Contribution (Q2) increased from 0.5% to 1.0%

Private House Approvals (Jul) increased from -5.7% to 8.5%

New Zealand:

Building Consents (MoM) (Jul) decreased from 0.7% to -4.5%

Indonesia:

Nikkei Manufacturing PMI (Aug) increased from 46.9 to 50.8

Some economic news from today:

Hong Kong:

Retail Sales (YoY) (Jul) increased from -24.8% to -23.1%

India:

Nikkei Markit Manufacturing PMI (Aug) increased from 46.0 to 52.0

Indonesia:

Inflation (MoM) (Aug) increased from -0.10% to -0.05%

Inflation (YoY) (Aug) decreased from 1.54% to 1.32%

Core Inflation (YoY) (Aug) decreased from 2.07% to 2.03%

Australia:

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

Commodity Prices (YoY) increased from -13.7% to -9.2%

New Zealand:

GlobalDairyTrade Price Index increased from -1.7% to -1.0%

EUROPE/EMEA:

People in Britain have given a worse assessment of their country’s handling of the coronavirus outbreak than the electorates of 13 other leading democracies, according to international research. An international research agency Pew Centre has conducted a survey and found that only 46% of the British population believe their country has done a good job handling coronavirus. In France, which has Europe’s third-highest official death toll after the UK, and Italy, 59% think their country has done well.

The UK government’s Eat Out Help Out (EOHO) plan may cost £388 million to the government according to the Treasury departments Plans for Job updates. This is less than the forecast of the government which announced this plan on 8th July as an economic recovery measure by the UK government to support hospitality businesses as they reopen after the COVID-19 lockdown in the country.

The French government announced that it will unveil a week later than originally planned a 100-billion-euro ($118 billion) plan to nurse its coronavirus-stricken economy back to health. France is sticking to its aim of returning French GDP to the same level as before the coronavirus pandemic by 2022, government spokesman Gabriel Attal said.

The major Europe stock markets had a mixed day:

  • CAC 40 decreased 9.12 points or -0.18% to 4,938.10
  • FTSE 100 decreased 101.52 points or -1.70% to 5,862.05
  • DAX 30 increased 28.87 points or 0.22% to 12,974.25

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00253 or -0.21% to 1.19139
  • GBPUSD increased 0.00239 or 0.18% to 1.33868
  • USDCHF increased 0.00536 or 0.59% to 0.90928

Some economic news from Europe today:

Norway:

Manufacturing PMI (Aug) increased from 42.8 to 46.1

Swiss:

procure.ch PMI (Aug) increased from 49.2 to 51.8

Spain:

Spanish Manufacturing PMI (Aug) decreased from 53.5 to 49.9

Italy:

Italian Manufacturing PMI (Aug) increased from 51.9 to 53.1

Italian Monthly Unemployment Rate (Jul) increased from 9.3% to 9.7%

France:

French Car Registration (YoY) decreased from 3.9% to -19.8%

French Manufacturing PMI (Aug) decreased from 52.4 to 49.8

Germany:

German Manufacturing PMI (Aug) increased from 51.0 to 52.2

German Unemployment Change (Aug) increased from -17K to -9K

German Unemployment Rate (Aug) remain the same at 6.4%

German Unemployment (Aug) decreased from 2.924M to 2.915M

German Unemployment n.s.a. (Aug) increased from 2.910M to 2.955M

UK:

Manufacturing PMI (Aug) increased from 53.3 to 55.2

BoE Consumer Credit (Jul) increased from -0.382B to 1.200B

M4 Money Supply (MoM) (Jul) decreased from 1.1% to 0.9%

Mortgage Approvals (Jul) increased from 39.90K to 66.30K

Mortgage Lending (Jul) increased from 2.39B to 2.70B

Euro Zone:

Manufacturing PMI (Aug) decreased from 51.8 to 51.7

Core CPI (YoY) decreased from 1.2% to 0.4%

CPI (MoM) (Aug) remain the same at -0.4%

CPI (YoY) (Aug) decreased from 0.4% to -0.2%

CPI, n.s.a (Aug) decreased from 105.32 to 104.90

HICP ex Energy & Food (YoY) (Aug) decreased from 1.3% to 0.6%

HICP ex Energy and Food (MoM) decreased from -0.3% to -0.4%

Unemployment Rate (Jul) increased from 7.7% to 7.9%

US/AMERICAS:

Secretary of State Mike Pompeo announced that he is considering prohibiting Chinese students from studying abroad in the US. “Look, not every Chinese student who is here is working on behalf of or at the behest of, the direction of the Chinese Communist Party, but it’s something President Trump has taken a serious, serious look at,” Pompeo stated. The secretary continued his statement by stating that he expects more measures to be taken against Beijing in the coming months.

The US Labor Department predicts job growth will notably slowdown over the next decade. The department anticipates 6 million new positions entering the economy from 2020 to 2029 at an annual growth rate of 0.4%. That is considerably lower than the 2009-2019 period that experienced a 1.3% annual growth rate. The health care industry is expected to see the highest growth of 1.6 million new positions, largely due to the aging US population. Workforce participation is also expected to decline, also partially due to the aging workforce, with an estimated 61.2% of Americans holding position by 2029 compared to 63.1% seen in 2019.

Beginning today, employers may choose to enroll in a program that will defer Social Security taxes until the end of the year. Employees earning under $104,000 may qualify for the program, which would defer the 6.2% payroll tax. However, the government will expect workers to eventually pay back the taxes.

Canada’s manufacturing industry expanded in August at the most rapid pace seen in two years. According to the IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), the sector accelerated to 55.1 in August compared to 52.9 in July. Shreeya Patel, an economist at IHS Markit, said the data shows a “strong upturn in the Canadian manufacturing industry, continuing the recovery from the severe second quarter downturn.” Canadian manufacturing plummeted to a reading of 33 in April, and the newly released data shows that the industry is quickly recovering.

US Market Closings:

  • Dow advanced 215.61 points or 0.76% to 28,645.66
  • S&P 500 advanced 26.34 points or 0.75% to 3,526.65
  • Nasdaq advanced 164.21 points or 1.39% to 11,939.67
  • Russell 2000 advanced 16.71 points or 1.07% to 1,578.58

Canada Market Closing:

  • TSX Composite advanced 130.55 points or 0.79% to 16,644.99
  • TSX 60 advanced 7.77 points or 0.78% to 998.29

Brazil Market Closing:

  • Bovespa advanced 2,798.5 points or 2.82% to 102,167.65

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil increased 0.33 USD/BBL or 0.77% to 42.9400
  • Brent increased 0.47 USD/BBL or 1.04% to 45.7500
  • Natural gas decreased 0.123 USD/MMBtu or -4.65% to 2.5200
  • Gasoline increased 0.0111 USD/GAL or 0.91% to 1.2344
  • Heating oil increased 0.0084 USD/GAL or 0.69% to 1.2325

The above data was collected around 16:53 EST on Tuesday.

  • Top commodity gainers: Ethanol (3.25%), Aluminum (2.70%), Rubber (7.67%), and Lean Hogs (2.23%)
  • Top commodity losers: Orange Juice (-1.45%), Lumber (-1.82%), Baltic Dry (-1.14%), and Natural Gas (-4.65%)

The above data was collected around 16:57 EST on Tuesday.

BONDS:

Japan 0.05%(-0bp), US 2’s 0.13% (+0bps), US 10’s 0.67%(-2bps); US 30’s 1.42%(-3bps), Bunds -0.43% (-3bp), France -0.12% (-2bp), Italy 1.10% (-6bp), Turkey 13.19% (-37bp), Greece 1.16% (+5bp), Portugal 0.44% (-0bp); Spain 0.42% (+1bp) and UK Gilts 0.30% (-2bp).