Market Talk – August 6, 2020

Posted Aug 6, 2020 by Martin Armstrong |

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ASIA:

China’s economic growth indicators are lopsided, pointing to possible downside risks for the country in the second half of 2020 as it tries to recover from the coronavirus pandemic, an analyst said Thursday. Recent data showed China’s June retail sales fell 1.8% from a year ago, much worse than the 0.3% growth analysts forecast in a Reuters poll. That came after a 2.8% drop in May.

The Monetary Policy Committee (MPC) of India’s central bank, the Reserve Bank of India (RBI), has decided to keep the repo rate unchanged at 4%, Governor Shaktikanta Das announced on Thursday. The central bank also allowed lenders to restructure corporate and MSME loans as well as raised the limit of loans that can be availed against gold ornaments and jewelry. “Taking into consideration all factors, the GDP growth in the first half of the year is estimated to remain in the contraction zone. For the year 2020-21 as a whole, real GDP growth is also estimated to be negative,” the RBI Governor said.

India’s dominant services industry, a key driver of economic growth, shrank for a fifth straight month in July as restraining measures to stop the spread of the coronavirus hurt business activity and led to record job cuts, a survey showed. The Nikkei/IHS Services Purchasing Managers’ Index increased to 34.2 in July from 33.7 in June; however, it was still well below the 50-mark separating growth from contraction. July was the fifth straight month the index was sub-50, the longest such stretch since a 10-month run to April 2014.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 96.70 points or -0.43% to 22,418.15
Shanghai increased 8.90 points or 0.26% to 3,386.46
Hang Seng decreased 171.96 points or -0.69% to 24,930.58
ASX 200 increased 40.90 points or 0.68% to 6,042.20
Kospi increased 30.75 points or 1.33% to 2,342.61
SENSEX increased 362.12 points or 0.96% to 38,025.45
Nifty50 increased 98.50 points or 0.89% to 11,200.15

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00074 or -0.10% to 0.71930
NZDUSD decreased 0.00062 or -0.09% to 0.66440
USDJPY decreased 0.01 or 0.00% to 105.58
USDCNY increased 0.01123 or 0.16% to 6.95173

Precious Metals:

Gold increased 22.5 USD/t oz. or 1.10% to 2,059.20
Silver increased 1.657 USD/t. oz or 6.16% to 28.557

Some economic news from last night:

Japan:

Foreign Bonds Buying increased from -524.3B to 1,146.4B

Foreign Investments in Japanese Stocks decreased from 109.5B to -578.6B

South Korea:

Current Account (Jun) increased from 2.29B to 6.88B

New Zealand:

Inflation Expectations (QoQ) increased from 1.2% to 1.4%

Indonesia:

Consumer Confidence (Jul) increased from 83.8 to 86.2

Some economic news from today:

India:

Cash Reserve Ratio remain the same at 3.00%

Interest Rate Decision remain the same at 4.00%

Reverse REPO Rate remain the same at 3.35%

EUROPE/EMEA:

The Bank of England said on Thursday that policymakers do not expect a swift economic rebound to pre-pandemic levels anytime soon, and held interest rates unchanged. Members of the bank’s Monetary Policy Committee (MPC) voted unanimously to maintain the bank rate at 0.1%, and held its target for asset purchases at £745 billion ($980 billion). Bank said it would “continue to review the appropriateness of a negative policy rate as a policy tool” alongside the MPC’s broader toolkit.

The European Commission announced to expand Google-Fitbit acquisition probe into a full-scale investigation. It’s been about nine months since Google officially announced plans to acquire Fitbit. The deal was expected to close in Q2 2020, but antitrust concerns from US and EU regulators have so far stalled the purchase. That delay will likely run a fair bit longer with the European Commission’s announcement that its preliminary probe of the purchase will now expand into a full-scale investigation slated to conclude by December 9.

The major Europe stock markets had a negative day:

CAC 40 decreased 48.21 points or -0.98% to 4,885.13
FTSE 100 decreased 77.78 points or -1.27% to 6,026.94
DAX 30 decreased 68.57 points or -0.54% to 12,591.68

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00019 or -0.02% to 1.18722
GBPUSD increased 0.00177 or 0.13% to 1.31437
USDCHF increased 0.00243 or 0.27% to 0.91045

Some economic news from Europe today:

UK:

BoE MPC vote cut (Jul) remain the same at 0

BoE MPC vote hike (Jul) remain the same at 0

BoE MPC vote unchanged (Jul) remain the same at 9

BoE QE Total (Jul) decreased from 745B to 725B

BoE Interest Rate Decision (Jul) remain the same at 0.10%

Construction PMI (Jul) increased from 55.3 to 58.1

Germany:

German Factory Orders (MoM) (Jun) increased from 10.4% to 27.9%

IHS Markit Construction PMI (Jul) increased from 41.3 to 47.1

Italy:

Italian Industrial Production (YoY) (Jun) increased from -20.5% to -13.7%

Italian Industrial Production (MoM) (Jun) decreased from 41.6% to 8.2%

US/AMERICAS:

The Nasdaq breached the 11,000 level at close for the first time this Thursday as tech shares continue to soar. Facebook shares led the Nasdaq’s historical performance after rising 6.44%, followed by Fiserv (4.20%), Marriott (3.49%), Apple (3.26%), and Adobe (3.05%).

President Donald Trump boldly states that a COVID-19 vaccine could be made available before the US presidential election on November 3. “I think in some cases, yes possible before, but right around that time,” the president answered a reporter who questioned if the vaccine would be available before election day.

Nearly 1.2 million Americans filed for initial unemployment benefits last week, according to a report issued by the Labor Department today. Initial jobless claims peaked to 6.9 million at the last week of March amid the quarantine and began to show signs of improvement until mid-July when certain states reimplemented quarantine measures. Republicans and Democrats are still at odds over how to handle the unemployment wage subsidy that expired last week.

Americans are now free to travel globally, so long as countries are willing to accept them as tourists. The Trump administration initially implemented a ban in march prohibiting US citizens from international travel to prevent the spread od the coronavirus. “With health and safety conditions improving in some countries and potentially deteriorating in others, the department is returning to our previous system of country-specific levels of travel advice,” the State Department noted in an official statement.

US Market Closings:

Dow advanced 185.46 points or 0.68% to 27,386.98
S&P 500 advanced 21.39 points or 0.64% to 3,349.16
Nasdaq advanced 109.67 points or 1% to 11,108.07
Russell 2000 declined 1.61 points or -0.1% to 1,544.62

Canada Market Closings:

TSX Composite advanced 77.49 points or 0.47% to 16,579.1
TSX 60 advanced 4.21 points or 0.43% to 992.83

Brazil Market Closing:

Bovespa advanced 1,323.88 points or 1.29% to 104,125.64

ENERGY:

The oil markets had a mixed day today:

Crude Oil decreased 0.12 USD/BBL or -0.28% to 42.0700
Brent increased 0.04 USD/BBL or 0.09% to 45.2100
Natural gas decreased 0.061 USD/MMBtu or -2.75% to 2.1570
Gasoline increased 0.0094 USD/GAL or 0.77% to 1.2360
Heating oil decreased 0.0128 USD/GAL or -1.01% to 1.2546

The above data was collected around 15:08 EST on Thursday.

Top commodity gainers: Silver (6.16%), Ethanol (3.17%), Sugar (1.67%), and Platinum (1.96%)
Top commodity losers: Natural Gas (-2.75%), Coffee (-1.52%), Coal (-1.68%), and Orange Juice (-1.65%)

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

BONDS:

Japan 0.02%(+1bp), US 2’s 0.11% (-1bps), US 10’s 0.51%(-3bps); US 30’s 1.18%(-4bps), Bunds -0.55% (-4bp), France -0.24% (-4bp), Italy 1.00% (-4bp), Turkey 13.91% (+49bp), Greece 1.02% (-4bp), Portugal 0.30% (-4bp); Spain 0.27% (+3bp) and UK Gilts 0.09% (-4bp).