Market Talk – September 8, 2020

ASIA:

The Trump administration is considering imposing export restrictions on China’s largest chip manufacturer Semiconductor Manufacturing International Corporation (SMIC). On Monday, SMIC Hong Kong listed shares plunged more than 20%.

President Donald Trump said he intends to curb the US economic relationship with China, contrasting himself with Joe Biden by threatening to punish any American companies that create jobs overseas and to forbid those that do business in China from winning federal contracts. Trump has also recently entertained the idea of “decoupling” the US economy from China. A private survey reported by Bloomberg suggests that China’s growth rate could fall by 3.5% in 2030 if complete decoupling between the two largest global economies will take place.

Fitch Ratings on Tuesday slashed India’s FY21 growth projection to (-) 10.5 percent, from (-) 5 percent estimated earlier, saying the continued spread of the virus and imposition of sporadic shutdowns across the country has disrupted economic activity. In the first quarter of the current fiscal India’s gross domestic product (GDP) contracted by a massive 23.9 percent. Fitch said India recorded one of the sharpest GDP contractions in the world in the April-June quarter, but noted that growth should rebound strongly in the July-September period amid re-opening of the economy.

Japan’s economy sank deeper into its worst postwar contraction in the second quarter as the coronavirus jolted businesses more than initially thought. The world’s third-largest economy shrank an annualized 28.1% in April-June, more than a preliminary reading of a 27.8% contraction, revised gross domestic product (GDP) data showed on Tuesday, suffering its worst postwar contraction. The main cause for the economic contraction was a drop in the capital expenditure by 4.7%, much biggest than a preliminary 1.5% fall, suggesting the COVID-19 pandemic was hitting broader sectors of the economy.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 184.18 points or 0.80% to 23,274.13
  • Shanghai increased 23.83 points or 0.72% to 3,316.42
  • Hang Seng increased 34.69 points or 0.14% to 24,624.34
  • ASX 200 increased 63.00 points or 1.06% to 6,007.80
  • Kospi increased 17.69 points or 0.74% to 2,401.91
  • SENSEX decreased 51.88 points or -0.14% to 38,365.35
  • Nifty50 decreased 37.7 points or -0.33% to 11,317.35

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00429 or -0.59% to 0.72372
  • NZDUSD decreased 0.00596 or -0.89% to 0.66310
  • USDJPY decreased 0.27 or -0.25% to 106.02
  • USDCNY increased 0.01931 or 0.28% to 6.85165

Precious Metals:

  • Gold increased 8.12 USD/t oz. or 0.42% to 1,938.85
  • Silver decreased 0.00 USD/t. oz or -0.01% to 26.877

Some economic news from last night:

Japan:

Average Cash Earnings (YoY) increased from -2.0% to -1.3%

Household Spending (YoY) (Jul) decreased from -1.2% to -7.6%

Household Spending (MoM) (Jul) decreased from 13,0% to -6.5%

Overall wage income of employees (Jul) increased from -2.0% to -1.3%

Overtime Pay (YoY) (Jul) increased from -24.5% to -16.60%

Adjusted Current Account decreased from 1.05T to 0.96T

Bank Lending (YoY) (Aug) increased from 6.3% to 6.7%

Current Account n.s.a. (Jul) increased from 0.168T to 1.468T

GDP (QoQ) (Q2) decreased from -0.6% to -7.9%

GDP (YoY) (Q2) decreased from -2.2% to -28.1%

GDP Capital Expenditure (QoQ) (Q2) decreased from -1.5% to -4.7%

GDP External Demand (QoQ) (Q2) remain the same at -3.0%

GDP Price Index (YoY) increased from 0.9% to 1.3%

GDP Private Consumption (QoQ) (Q2) increased from -8.2% to -7.9%

Australia:

NAB Business Confidence (Aug) increased from -14 to -8

NAB Business Survey (Aug) decreased from 0 to -6

Indonesia:

Consumer Confidence (Aug) increased from 86.2 to 86.9

Some economic news from today:

Japan:

Economy Watchers Current Index (Aug) increased from 41.1 to 43.9

 

EUROPE/EMEA:

The UK is preparing legislation that will “break international law in a very specific and limited way,” a cabinet minister has said in the House of Commons. Brandon Lewis, the Secretary of State for Northern Ireland, made the comment Tuesday in response to a question concerning legislation to be published on Wednesday, which critics fear would alter the contents of the Brexit deal that Prime Minister Boris Johnson agreed with the European Union last autumn.

France is on the verge of closing the economic divide with Germany that has opened up due to differences in how countries have measured the impact of the coronavirus lockdown on their public sectors, economists say. The French economy shrank by almost 19% in the first six months of the year, driven by the sharp decline in activity in its large public sector, while that of Germany contracted by 11.5% over the same period. During France’s six-week lockdown, many of its millions of public sector employees were unable to go to work or do their jobs remotely from home. The French public sector represents more than a fifth of its economy, one of the largest proportions in Europe.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 80.20 points or -1.59% to 4,973.52
  • FTSE 100 decreased 7.10 points or -0.12% to 5,930.30
  • DAX 30 decreased 131.95 points or -1.01% to 12,968.33

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00344 or -0.29% to 1.17825
  • GBPUSD decreased 0.01584 or -1.20% to 1.30053
  • USDCHF increased 0.00033 or 0.04% to 0.91670

Some economic news from Europe today:

France:

French Non-Farm Payrolls (QoQ) (Q2) increased from -2.0% to -0.9%

French Current Account (Jul) increased from -8.60B to -6.20B

French Exports (Jul) increased from 32.4B to 35.5B

French Imports (Jul) increased from 40.5B to 42.5B

French Trade Balance (Jul) increased from -8.1B to -7.0B

Germany:

Gemran Current Account Balance n.s.a (Jul) decreased from 22.4B to 20.0B

German Exports (MoM) (Jul) decreased from 14.9% to 4.7%

German Imports (MoM) (Jul) decreased from 7.0% to 1.1%

German Trade Balance (Jul) increased from 14.5B to 18.0B

Italy:

Italian Retail Sales (MoM) (Jul) decreased from 10.2% to -2.2%

Italian Retail Sales (YoY) (Jul) decreased from -2.4% to -7.2%

UK:

BRC Retail Sales Monitor (YoY) (Aug) increased from 4.3% to 4.7%

Euro Zone:

Employment Change (YoY) (Q2) decreased from 0.4% to -3.1%

Employment Change (QoQ) (Q2) decreased from -0.2% to -2.9%

Employment Overall (Q2) decreased from 155,894.7K to 155,596.5K

GDP (YoY) (Q2) increased from -15.0% to -14.7%

GDP (QoQ) (Q2) increased from -12.1% to -11.8%

US/AMERICAS:

Young adults in the US are moving back to live with their parents at a rapid pace not seen since the Great Depression, the Pew Research Center reported. The center found that an alarming 52% of young adults aged 18-29 currently live with one parent. In comparison, 48% of young adults reported living back home during the end of the Great Depression. The figures are expected to cause disruptions to the rental real estate, with Zillow noting that 75% of “Generation Z” tends to rent prior to the coronavirus. The number of young adults moving home has increased by 9% or 3 million year-on-year, and the trend is expected to continue if the economy continues a downward path.

School closures and delays across the US may have long-lasting results that impact the economy for the next century, the Organization for Economic Cooperation and Development (OCED) reported. The organization believes that a lack of proper education will result in a future workforce that is less prepared or productive. The OECD expects a -1.5% decrease in economic growth for the next 100 years. Declining GDP could lead to a net loss of $15.3 trillion for the US. “The present value of the total cost would amount to 69% of current GDP for the typical country. These estimates assume that only the cohort currently in school are affected by the closures and that all subsequent cohorts resume normal schooling. If schools are slow to return to prior levels of performance, the growth losses will be proportionately higher,” they stated in their official report.

The US Senate returned from their extended vacation today, and Majority Leader Mitch McConnell (R) stated that they may be ready to vote on a coronavirus relief bill as soon as this week. The Republicans and Democrats have been at odds over the next bill, with a $1 trillion difference between proposals. McConnell said the next bill will be “targeted” to address “some of the very most urgent healthcare, education, and economic issues.”

US Market Closings:

  • Dow declined 632.42 points or -2.25% to 27,500.89
  • S&P 500 declined 95.12 points or -2.78% to 3,331.84
  • Nasdaq declined 465.44 points or -4.11% to 10,847.69
  • Russell 2000 declined 30.71 points or -2% to 30.71

Canada Market Closings:

  • TSX Composite declined 118.49 points or -0.73% to 16,099.52
  • TSX 60 declined 6.93 points or -0.71% to 965.57

Brazil Market Closing:

  • Bovespa declined 1,191.3 points or -1.18% to 100,050.43

ENERGY:

The oil markets had a negative day today:

  • Crude Oil decreased 3.21 USD/BBL or -8.07% to 36.5600
  • Brent decreased 3.05 USD/BBL or -7.15% to 39.6100
  • Natural gas decreased 0.171 USD/MMBtu or -6.63% to 2.4070
  • Gasoline decreased 0.067 USD/GAL or -5.76% to 1.0966
  • Heating oil decreased 0.0597 USD/GAL or -5.28% to 1.0706

The above data was collected around 14:25 EST on Tuesday.

  • Top commodity gainers: Ethanol (18.35%), Canola (1.69%), Corn (2.57%), and Live Cattle (1.37%)
  • Top commodity losers: Crude Oil (-8.07%), Brent (-7.15%), Natural Gas (-6.63%), and Cocoa (-13.66%)

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

BONDS:

Japan 0.02%(-1bp), US 2’s 0.14% (-1bps), US 10’s 0.68%(-5bps); US 30’s 1.41%(-6bps), Bunds -0.50% (-4bp), France -0.20% (-4bp), Italy 1.07% (-1bp), Turkey 13.48% (+6bp), Greece 1.15% (-2bp), Portugal 0.33% (-4bp); Spain 0.31% (+2bp) and UK Gilts 0.18% (-7bp).

 

  • Spanish 12-Month Letras Auction increased from -0.455% to -0.448%
  • Spanish 6-Month letras Auction increased from -0.480% to -0.466%
  • US 3-Month Bill Auction increased from 0.105% to 0.115%
  • US 6-Month Bill Auction increased from 0.115% to 0.125%
  • US 3-Year Note Auction decreased from 0.179% to 0.170%
  • US 52-Week Bill Auction remain the same at 0.140%