Market Talk – September 3, 2020

ASIA:

China’s population is projected to drop by half by 2100, calling into question the country’s future economic growth in the face of a sharp decline in its labor force. In contrast, America’s population and labor force is likely to be sustained if the Trump administration’s policy of reducing US immigration level is reversed. The population of China is projected to decline from 1.4 billion in 2017 to 732 million by 2100, a drop of 48%, according to a new report published in the medical journal The Lancet and authored by University of Washington School of Medicine Professor Stein Emil Vollset and 23 coauthors.

India on Wednesday banned another 118 mobile apps including Tencent Holdings’ popular videogame PUBG, as it stepped up the pressure on Chinese technology companies following a standoff with China at the border. The list of 118 mostly Chinese apps also includes applications from Baidu and Xiaomi’s ShareSave.

India’s central bank, the Reserve Bank of India, announced new measures on Monday to maintain stability in the financial system during the coronavirus pandemic, including two more tranches of special open market bond operations in its ‘Operation Twist’. RBI said it will conduct two more tranches of 100 billion rupees ($1.36 billion) each of simultaneous sale and purchase of bonds in September, or ‘Operation Twist’ as it is popularly known. The central bank also said it would also raise the ratio of securities that banks can hold until maturity within their statutory liquidity ratio (SLR) or mandatory bond holding requirement, which would help limit losses due to market volatility.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 218.38 points or 0.94% to 23,465.53
  • Shanghai decreased 19.82 points or -0.58% to 3,384.98
  • Hang Seng decreased 112.49 points or -0.45% to 25,007.60
  • ASX 200 increased 49.40 points or 0.81% to 6,112.60
  • Kospi increased 31.53 points or 1.33% to 2,395.90
  • SENSEX decreased 95.09 points or -0.24% to 38,990.94
  • Nifty50 decreased 7.55 points or -0.07% to 11,527.45

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00659 or -0.90% to 0.72683
  • NZDUSD decreased 0.00725 or -1.07% to 0.66980
  • USDJPY decreased 0.15 or -0.14% to 106.07
  • USDCNY increased 0.01745 or 0.26% to 6.84931

Precious Metals:

  • Gold decreased 8.52 USD/t oz. or -0.44% to 1,934.10
  • Silver decreased 0.71 USD/t. oz or -2.57% to 26.788

Some economic news from last night:

China:

Caixin Services PMI (Aug) decreased from 54.1 to 54.0

Chinese Composite PMI (Aug) increased from 54.5 to 55.1

Japan:

Foreign Bonds Buying decreased from 958.6B to -115.1B

Foreign Investments in Japanese Stocks decreased from -169.3B to -590.5B

Services PMI (Aug) decreased from 45.4 to 45.0

South Korea:

FX Reserves – USD (Aug) increased from 416.53B to 418.95B

Australia:

AIG Construction Index (Aug) decreased from 42.7 to 37.9

Services PMI decreased from 58.2 to 49.0

Exports (MoM) (Jul) decreased from 3% to -4%

Imports (MoM) (Jul) increased from 1% to 7%

Trade Balance (Jul) decreased from 8.202B to 4.607B

New Zealand:

ANZ Commodity Price Index (MoM) decreased from 2.9% to -0.9%

Hong Kong:

Manufacturing PMI (Aug) decreased from 44.5 to 44.0

Some economic news from today:

India:

Nikkei Services PMI (Aug) increased from 34.2 to 41.8

Singapore:

Manufacturing PMI (Aug) decreased from 50.2 to 50.1

EUROPE/EMEA:

Prof Julian Peto, a leading epidemiologist and statistician said a rapid COVID mass testing regime introduced by Britain could help a recovery from global recession. In an interview with The National today he said if used globally mass testing could revive the world economy and stop the second wave currently gripping a number of countries.

Tesla boss Elon Musk has been told by Germany’s economy minister that he can have whatever he needs for his new electric vehicle manufacturing plant in Berlin. Musk and Germany economy minister Peter Altmaier had an hour-long meeting in Berlin on Wednesday. “The main topics were Tesla’s billions of euros worth of investment in Germany,” the source said. The duo, who first met six years ago, also spoke about Musk’s projects in areas like space flight and autonomous driving.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 22.22 points or -0.44% to 5,009.52
  • FTSE 100 decreased 90.09 points or -1.52% to 5,850.86
  • DAX 30 decreased 185.66 points or -1.40% to 13,057.77

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00063 or 0.05% to 1.18574
  • GBPUSD decreased 0.00764 or -0.57% to 1.32770
  • USDCHF decreased 0.00241 or -0.26% to 0.90870

Some economic news from Europe today:

Norway:

House Price Index (YoY) (Aug) decreased from 5.00% to 4.30%

Swiss:

CPI (YoY) (Aug) remain the same at -0.9%

CPI (MoM) (Aug) increased from -0.2% to 0.0%

Spain:

Spanish Services PMI (Aug) decreased from 51.9 to 47.7

Italy:

Italian Composite PMI (Aug) decreased from 52.5 to 49.5

Italian Services PMI (Aug) decreased from 51.6 to 47.1

France:

French Markit Composite PMI (Aug) decreased from 57.3 to 51.6

French Services PMI (Aug) decreased from 57.3 to 51.5

Germany:

German Composite PMI (Aug) decreased from 55.3 to 54.4

German Services PMI (Aug) decreased from 55.6 to 52.5

Euro Zone:

Markit Composite PMI (Aug) decreased from 54.9 to 51.9

Services PMI (Aug) decreased from 54.7 to 50.5

Retail Sales (MoM) (Jul) decreased from 5.3% to -1.3%

Retail Sales (YoY) (Jul) decreased from 1.3% to 0.4%

UK:

Composite PMI (Aug) increased from 57.0 to 59.1

Services PMI (Aug) increased from 56.5 to 58.8

US/AMERICAS:

The US markets reversed course this Thursday after the Dow declined over 800 points and the Nasdaq slipped beneath the 12,000 level after making a new high on Wednesday. The S&P 500 and Russell 2000 closed in the red as well. The tech sector experienced notable losses today with Apple declining -7.85%, Microsoft declining -6.11%, and Netflix falling -4.9%.

Weekly jobsless claims in the US came in at 881,000 last week, according to the Labor Department, which is better than analysts’ expectations of 950,000. Continuing claims steeply declined to 1.24 million compared to 13.254 million. Although a positive sign, the Labor Department has since changed their methodology for calculating jobless claims and now factors in seasonal changes that do not include pandemic-related losses. August’s nonfarm payroll numbers are to be released this Friday, with analysts anticipating a gain of 1.32 million jobs and an unemployment rate of 9.8%.

Senate Democrats are turning to the Congressional Review Act to undo the Trump administration’s payroll tax deferral program. Senator Schumer (D-NY) and Ron Wyden (D-Oregon) called upon the Government Accountability Office to assess whether the act could allow Congress to overrule the legislation issued by a federal agency. The payroll tax deferral could allow employees to delay paying the 6.2% tax to Social Security. Congress could potentially forgive the outstanding tax in the future, but at the moment the government expects the money to be returned in 2021. President Trump stated that he will “terminate” the payroll tax entirely at the beginning of the new year if reelected.

Poverty levels in Brazil are sharply declining thanks to the $10 billion monthly coronavirus payout program. In April, the Bolsonaro administration began issuing $100 per month to millions of people across the nation which was more than some families were earning before the pandemic. Bolsonaro’s approval rating continues to reach new highs, with a recent poll by Datafolha showing a 32% increase in his approval rating from the same time last year.

US Market Closings:

  • Dow declined 807.77 points or -2.78% to 28,292.73
  • S&P 500 declined 125.78 points or -3.51% to 3,455.06
  • Nasdaq declined 598.34 points or -4.96% to 11,458.1
  • Russell 2000 declined 47.61 points or -2.99% to 1,544.68

Canada Market Closings:

  • TSX Composite declined 249.07 points or -1.49% to 16,448.9
  • TSX 60 declined 15.1 points or -1.51% to 987.07

Brazil Market Closings:

  • Bovespa declined 1,189.77 points or -1.17% to 100,721.36

ENERGY

The oil markets had a negative day today:

  • Crude Oil decreased 0.23 USD/BBL or -0.55% to 41.2800
  • Brent decreased 0.46 USD/BBL or -1.04% to 43.9700
  • Natural gas decreased 0.005 USD/MMBtu or -0.20% to 2.4780
  • Gasoline decreased 0.0009 USD/GAL or -0.07% to 1.2038
  • Heating oil decreased 0.0227 USD/GAL or -1.91% to 1.1649

The above data was collected around 15:00 EST on Thursday.

  • Top commodity gainers: Orange Juice (4.85%), Cheese (2.67%), Ethanol (17.70%), and Lean Hogs (5.21%)
  • Top commodity losers: Silver (-2.57%), Rubber (-6.15%), Lumber (-7.76%), and Sugar (-2.97%)

The above data was collected around 15:06 EST on Thursday.

BONDS:

Japan 0.04%(-0bp), US 2’s 0.13% (-1bps), US 10’s 0.63%(-3bps); US 30’s 1.34%(-3bps), Bunds -0.49% (-1bp), France -0.19% (-1bp), Italy 1.05% (+1bp), Turkey 13.43% (+24bp), Greece 1.13% (+0bp), Portugal 0.36% (+0bp); Spain 0.35% (+8bp) and UK Gilts 0.24% (+1bp).

 

  • US 4-Week Bill Auction increased from 0.080% to 0.090%
  • US 8-Week Bill Auction increased from 0.090% to 0.100%
  • Spanish 5-Year Bonos Auction decreased from -0.194% to -0.276%
  • French 10-Year OAT Auction increased from -0.27% to -0.19%
  • Japan 30-Year JGB Auction decreased from 0.617% to 0.610%