Market Talk – July 20, 2020

Posted Jul 20, 2020 by Martin Armstrong |

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ASIA:

China is considering retaliating against the Chinese operations of two major European telecommunication-equipment manufacturers, Nokia Corp. and Ericsson AB, should European Union members follow the lead of the US and UK in barring China’s Huawei Technologies Co. from 5G networks, a major online news agency reported. China’s Ministry of Commerce is mulling export controls that would prevent Nokia and Ericsson from sending products it makes in China to other countries, sources told.

The United States and India signed a preliminary agreement on Friday on cooperating on emergency crude oil reserves, including the possibility of India storing oil in the US emergency stockpile, officials said. US Energy Secretary Dan Brouillette told reporters officials would discuss details of the emergency reserves in the next months.

Indian state refiners’ petrol and diesel sales declined in the first half of July from the same period last month, according to preliminary data, as a renewed lockdown in parts of the country and rising retail prices hit demand. State-refiners’ diesel sales, which account for two-fifth of overall refined fuel sales in India, fell by 18% to 2.2 million tonnes in the first half of July from the same period in June, and by about 21% from a year earlier, according to data compiled by Indian Oil Corp.

Japan’s government will start subsidizing some companies to invest in factories in Japan and South-East Asia as part of efforts to reduce reliance on manufacturing in China, Bloomberg reported. Fifty-seven companies including privately-held facemask-maker Iris Ohyama Inc. or Sharp Corp. will receive a total of 57.4 billion yen ($536 million) in subsidies from the government to invest in production in Japan, the Ministry of Economy, Trade and Industry said on Friday. Another 30 firms will receive money for investments in Vietnam, Myanmar, Thailand and other Southeast Asian nations.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 21.06 points or 0.09% to 22,717.48
Shanghai increased 100.02 points or 3.11% to 3,314.15
Hang Seng decreased 31.18 points or -0.12% to 25,057.99
ASX 200 decreased 32.00 points or -0.53% to 6,001.60
Kospi decreased 2.99 points or -0.14% to 2,198.20
SENSEX increased 398.85 points or 1.08% to 37,418.99
Nifty50 increased 120.50 points or 1.11% to 11,022.20

The major Asian currency markets had a green day today:

AUDUSD increased 0.0022 or 0.31% to 0.70159
NZDUSD increased 0.00221 or 0.34% to 0.65755
USDJPY increased 0.27 or 0.25% to 107.30
USDCNY increased 0.00057 or 0.01% to 6.98863

Precious Metals:

Gold increased 8.81 USD/t oz. or 0.49% to 1,818.51
Silver increased 0.581 USD/t. oz or 3.01% to 19.8900

Some economic news from last night:

China:

PBoC Loan Prime Rate remain the same at 3.85%

Japan:

Adjusted Trade Balance increased from -0.59T to -0.42T

Exports (YoY) (Jun) increased from -28.3% to -26.2%

Imports (YoY) (Jun) increased from -26.2% to -14.4%

Trade Balance (Jun) increased from -838.2B to -268.8B

Some economic news from today:

Hong Kong:

Unemployment Rate (Jun) increased from 5.9% to 6.2%

EUROPE/EMEA:

The UK economy has “clawed back” about half the fall in output it saw during the peak of the coronavirus lockdown in March and April, according to the Bank of England’s chief economist Andy Haldane. Last month, Mr Haldane said the economy was “on track for a quick recovery” – the so-called “V” shape. However, other economists have expressed doubts about the potential for such a swift recovery in activity.

The European Union’s 27 heads of state and government met in Brussels on Monday for the fourth day in a row as they try to unite behind a controversial post-coronavirus relief fund and the EU’s multiannual budget. Despite a long night of negotiations, German Chancellor Angela Merkel sounded somewhat more confident than she did the first three days of the summit as she arrived yet again at the Europa building, the seat of the Council of the European Union (EU), ahead of Monday’s round of talks.

France has instituted a nationwide mask mandate that includes fines for individuals who fail to wear a face covering in public indoor settings, according to reports. The French government announced that starting Monday, people can be fined 135 euros, or $154, if they are cited for not wearing a face mask in settings such as supermarkets, banks and other shops, France 24 reported.

The Pakistani rupee slumped to an all-time low of 168.3 against the US dollar or 45.85 versus the UAE dirham on Monday after the demand for the dollar by importers increased. Data showed that Pakistan’s imports rose 30 percent to $3.7 billion in June 2020 compared to the previous month.

The major Europe stock markets had a mixed day:

CAC 40 increased 23.76 points or 0.47% to 5,093.18
FTSE 100 decreased 28.78 points or -0.46% to 6,261.52
DAX 30 increased 127.31 points or 0.99% to 13,046.92

The major Europe currency markets had a green day today:

EURUSD increased 0.00164 or 0.14% to 1.14444
GBPUSD increased 0.0089 or 0.71% to 1.26570
USDCHF increased 0.00049 or 0.05% to 0.93909

Some economic news from Europe today:

Germany:

German PPI (YoY) (Jun) increased from -2.2% to -1.8%

German PPI (MoM) (Jun) increased from -0.4% to 0.0%

German WPI (YoY) (Jun) increased from -4.3% to -3.3%

German WPI (MoM) (Jun) increased from -0.6% to 0.6%

Euro Zone:

Current Account (May) decreased from 14.4B to 8.0B

Current Account n.s.a. (May) decreased from 10.2B to -10.5B

US/AMERICAS:

The $600-a-week bonus unemployment benefit that was implemented under the CARES act in April is set to expire this Saturday. President Donald Trump will consider implementing another bill, but only if it includes a payroll tax cut and liability limits. “We’re going to see, but we do need protections because businesses are going to get sued just because — you don’t know where this virus comes from, they’ll sit down at a restaurant, they’ll sue the restaurant, the guy’s out of business,” Trump told reporters at Fox News this Sunday as he pushed for liability limits to protect businesses. Trump believes a reduction in the payroll tax would greatly benefit Americans currently employed. Currently, the payroll tax cuts into 15.3% of an individual’s earnings on the first $137,7000; 7.65% is paid by employees and another 7.65% is paid by employers.

President Donald Trump reiterated his stance this Sunday by saying he does not believe a mask mandate is appropriate at the federal level. “I don’t agree with the statement that if everybody wear a mask everything disappears,” the president told reporters at Fox. He went on to say that top health officials originally did not recommend masks. To clarify his comments, President Trump posted an image of himself online wearing a mask this Monday, claiming the act is “patriotic” to defeat the common enemy of the “Invisible China Virus.”

In a statement made to Reuters, China warned the US to “stop flexing its military muscles around China.” The Pentagon announced plans to arm the US military with long-range missiles around the Asia-Pacific region in what many feel is reminiscent of the Cold War.

The coronavirus is spreading through the Bolsonaro administration after the minister of citizenship, Onyx Lorenzoni, tested positive for the virus. This is the third minister in Bolsonaro’s cabinet who tested positive. President Bolsonaro is current being treated for coronavirus. As of Sunday, the country reported 2,098,389 cases with a death toll near 80,000.

US Market Closings:

Dow advanced 8.92 points or 0.03% to 26,680.87
S&P 500 advanced 27.11 points or 0.84% to 3,251.84
Nasdaq advanced 263.9 points or 2.51% to 10,767.09
Russell 2000 declined 5.36 points or -0.36% to 1,467.95

Canada Market Closings:

TSX Composite advanced 60.18 points or 0.37% to 16,183.66
TSX 60 advanced 2.97 points or 0.31% to 973.04

Brazil Market Closing:

Bovespa advanced 1,538.12 points or 1.49% to 104,426.37

ENERGY:

The oil markets had a mixed day today:

Crude Oil increased 0.11 USD/BBL or 0.27% to 40.7000
Brent increased 0.07 USD/BBL or 0.16% to 43.2100
Natural gas decreased 0.064 USD/MMBtu or -3.75% to 1.6420
Gasoline increased 0.0083 USD/GAL or 0.68% to 1.2297
Heating oil increased 0.0185 USD/GAL or 1.52% to 1.2372

The above data was collected around 16:05 EST on Monday.

Top commodity gainers: Silver (3.01%), Heating Oil (1.52%), Cocoa (2.87%), and Cotton (1.53%)
Top commodity losers: Coffee (-3.96%), Natural Gas (-3.75%), Orange Juice (-3.38%), and Lean Hogs (-4.50%)

The above data was collected around 16:20 EST on Monday.

BONDS:

Japan 0.03%(+1bp), US 2’s 0.14% (-0bps), US 10’s 0.61%(-2bps); US 30’s 1.31%(-2bps), Bunds -0.46% (-1bp), France -0.16% (-2bp), Italy 1.15% (-8bp), Turkey 12.11% (-8bp), Greece 1.17% (-4bp), Portugal 0.38% (-5bp); Spain 0.36% (-7bp) and UK Gilts 0.15% (-1bp).