Market Talk – September 4, 2020

ASIA:

China may gradually cut its holdings of US Treasury bonds and notes, in light of rising tensions between Beijing and Washington, the Global Times reported. With China-US relations deteriorating over various issues including coronavirus, trade and technology, global financial markets are increasingly worried if China would sell the US government debt it holds as a weapon to counter rising US pressure. China, the second-largest non-U.S. holder of Treasuries, held $1.074 trillion in June, down from $1.083 trillion the previous month, according to the latest official data.

India’s services activity contracted for the sixth consecutive month in August. However, the pace of decline slowed as some firms gradually resumed operations with easing lockdown restrictions, a private survey showed on Thursday. The IHS Markit Services Purchasing Managers’ Index increased to 41.8 in August from July’s 34.2 but remained below the 50-mark that separates growth from contraction. The fall in output was linked to a further weakening of demand conditions during August, while some businesses remained closed as a result of ongoing lockdown restrictions. The rate of contraction in output was solid overall, despite easing from before as some firms gradually resumed operations.

Private equity firm Silver Lake Partners is in talks to invest $1 billion in the retail arm of India’s Reliance Industries Ltd (RELI.NS), the Financial Times reported on Thursday. The investment, which would value Reliance Retail at about $57 billion, comes as the company is aiming to sell about 10% in new shares, the report added.

The major Asian stock markets had a negative day today:

  • NIKKEI 225 decreased 260.10 points or -1.11% to 23,205.43
  • Shanghai decreased 29.61 points or -0.87% to 3,355.37
  • Hang Seng decreased 312.15 points or -1.25% to 24,695.45
  • ASX 200 decreased 187.10 points or -3.06% to 5,925.50
  • Kospi decreased 27.65 points or -1.15% to 2,368.25
  • SENSEX decreased 633.76 points or -1.63% to 38,357.18
  • Nifty50 decreased 193.6 points or -1.68% to 11,333.85

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00088 or 0.12% to 0.72650
  • NZDUSD increased 0.00122 or 0.18% to 0.67035
  • USDJPY increased 0.26 or 0.24% to 106.35
  • USDCNY decreased 0.00353 or -0.05% to 6.84325

Precious Metals:

  • Gold decreased 10.22 USD/t oz. or -0.53% to 1,920.30
  • Silver decreased 0.21 USD/t. oz or -0.77% to 26.420

Some economic news from last night:

South Korea:

Current Account (Jul) increased from 6.88B to 7.45B

Australia:

Retail Sales (MoM) (Jul) increased from 2.7% to 3.2%

Some economic news from today:

India:

FX Reserves, USD increased from 537.55B to 541.43B

Singapore:

Retail Sales (MoM) (Jul) decreased from 50.7% to 27.4%

Retail Sales (YoY) (Jul) increased from -27.7% to -8.5%

EUROPE/EMEA:

The German government expects the economic fallout this year from the coronavirus will be smaller than previously predicted, Bloomberg reported. Chancellor Angela Merkel’s ruling coalition predicted in April that the economy would contract by 6.3% in 2020, its worst recession since the nation began a recovery after World War II, before rebounding with growth of 5.2% next year. Economy Minister Peter Altmaier is due to present the new forecasts at 11 a.m. in Berlin.

Apple Inc. has asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year’s launch, in a sign that demand for the company’s most important product is holding up in the midst of the global pandemic. The technology giant anticipates shipments of these next-generation iPhones may reach as high as 80 million units in 2020, according to people familiar with the situation. Apple plans to launch four new models in October with fifth-generation wireless speeds, a different design and a wider choice of screen sizes, sources reported.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 44.45 points or -0.89% to 4,965.07
  • FTSE 100 decreased 51.78 points or -0.88% to 5,799.08
  • DAX 30 decreased 215.11 points or -1.65% to 12,842.66

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00232 or -0.20% to 1.18191
  • GBPUSD decreased 0.00372 or -0.28% to 1.32284
  • USDCHF increased 0.00485 or 0.53% to 0.91486

Some economic news from Europe today:

France:

French Government Budget Balance (Jul) decreased from -124.9B to -151.0B

Germany:

German Factory Orders (MoM) (Jul) decreased from 28.8% to 2.8%

IHS Markit Construction PMI (Aug) increased from 47.1 to 48.0

UK:

Construction PMI (Aug) decreased from 58.1 to 54.6

Car Registration (MoM) decreased from 20.3% to -50.1%

Car Registration (YoY) decreased from 11.3% to -5.8%

US/AMERICAS:

The US trade deficit peaked to $63.6 billion, the highest level in a dozen years, according to data by the US Department of Commerce. In July, imports increased 10.9% ($231.7 billion) and exports rose 8.1% ($168.1 billion). Overall, the trade deficit rose 18.9% compared to June’s gap of $53.5. The Trump administration has previously accused other companies of shipping off products to the US but not doing their part to make purchases in return. Trade with China alone, the US’ former top trade partner, reached 11.5% ($31.6 billion) in July.

The highly anticipated payrolls data from August was released today, showing an improvement in the US economy. The US added 1.371 million jobs last month compared to the expected advancement of 1.32 million positions. Unemployment dropped to 8.4% compared to analysts’ expectations of 9.8%. This is the first time since March, when the coronavirus panic began, that unemployment in the US dipped beneath 10%.

The Canadian economy incorporated an additional 245,800 jobs in August, according to a report released this Friday by Statistics Canada. Analysts at Reuters had expected a better performance of 275,000 new positions. The unemployment rate fell to 10.2%, shy of analysts’ expectations of 10.1%. “The number of Canadians who were employed but worked less than half their usual hours for reasons likely related to COVID-19 fell by 259,000 (-14.6%) in August. Combined with declines in May, June and July, this left COVID-related absences from work at 713,000 (+88.3%) above February levels,” Statistics Canada stated in their official report.

Roberto Campos Neto, Brazil’s central bank chief, expects the Brazilian economy to contract by -5% this year before rebounding by 4% in 2021. Emergency relief measures that were enacted during the beginning of the virus outbreak are set to expire at the end of the year, however, Campos Neto does not believe those measures should be extended. “If we don’t take care of the fiscal limitations we will lose credibility … and that would probably force us to have higher interest rates, and expected inflation would go higher. We don’t want to go back (to the past),” he stated.

US Market Closings:

  • Dow declined 159.42 points or -0.56% to 28,133.31
  • S&P 500 declined 28.1 points or -0.81% to 3,426.96
  • Nasdaq declined 144.97 points or -1.27% to 11,313.13
  • Russell 2000 declined 9.38 points or -0.61% to 1,535.3

Canada Market Closings:

  • TSX Composite declined 230.88 points or -1.4% to 16,218.01
  • TSX 60 declined 14.57 points or -1.48% to 972.5

Brazil Market Closing:

  • Bovespa advanced 520.37 points or 0.52% to 101,241.73

ENERGY:

The oil markets had a negative day today:

  • Crude Oil decreased 1.52 USD/BBL or -3.67% to 39.8500
  • Brent decreased 1.4 USD/BBL or -3.18% to 42.6700
  • Natural gas decreased 0.006 USD/MMBtu or -0.24% to 2.4720
  • Gasoline decreased 0.0349 USD/GAL or -2.91% to 1.1646
  • Heating oil decreased 0.0106 USD/GAL or -0.91% to 1.1480

The above data was collected around 12:15 EST on Friday.

  • Top commodity gainers: Coffee (1.18%), Copper (2.47%), Aluminum (2.17%), and Platinum (0.94%)
  • Top commodity losers: Crude Oil (-3.67%), Rubber (-3.44%), Ethanol (-14.65%), and Cocoa (-16.39%)

The above data was collected around 12:23 EST on Friday.

BONDS:

Japan 0.04%(+1bp), US 2’s 0.14% (+1bps), US 10’s 0.68%(+6bps); US 30’s 1.42%(+8bps), Bunds -0.48% (+1bp), France -0.17% (+3bp), Italy 1.08% (+2bp), Turkey 13.43% (+0bp), Greece 1.16% (+3bp), Portugal 0.39% (+4bp); Spain 0.35% (+9bp) and UK Gilts 0.26% (+2bp).