Market Talk – August 26, 2020

Posted Aug 26, 2020 by Martin Armstrong |

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ASIA:

Chinese financial technology group Ant has unveiled plans for a stock market debut that may raise a record $30bn. The company, affiliated with online retail giant Alibaba, says it will sell shares in Hong Kong and Shanghai. Ant, best known in China for the mobile payments powerhouse Alipay, was launched in 2004 by e-commerce giant Alibaba and its founder Jack Ma.

US asset manager Vanguard Group will close its Hong Kong and Japan operations and cut jobs across both locations as it shifts its Asian headquarters to Shanghai, it said on Wednesday. The move comes as U.S.-China relations are strained over issues including trade, territorial disputes and individual freedoms in Hong Kong.

Facebook Inc said on Tuesday it plans to launch its news service in the United Kingdom, Germany, France, India, and Brazil in the coming months, after having introduced the feature in the United States last year. The social media giant’s news service currently pays US publishers for content and has original reporting from more than 200 outlets, including thousands of local news organizations.

India’s fourth-largest private lender by assets, ICICI Bank has begun using satellite images of farmland to help assess farmers’ credit-worthiness, a move the bank says is helping cut travel costs and make faster lending decisions in a world hit by the COVID-19 pandemic. The bank is using pictures taken from space and analyzed by a third-party firm, for farm loans in 500 northern Indian villages, with plans to take the technology to 63,000 villages, it said on Tuesday.

India plans to significantly reduce its thermal coal imports in “the next few years” to save foreign exchange and create jobs through the development of existing and new coal blocks, India’s federal coal ministry said on Tuesday. Coal is among the top five commodities imported by India, the world’s largest consumer, importer and producer of the fuel after China.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 5.91 points or -0.03% to 23,290.86
Shanghai decreased 43.84 points or -1.30% to 3,329.74
Hang Seng increased 5.57 points or 0.02% to 25,491.79
ASX 200 decreased 45.00 points or -0.73% to 6,116.40
Kospi increased 2.59 points or 0.11% to 2,369.32
SENSEX increased 230.04 points or 0.59% to 39,073.92
Nifty50 increased 77.35 points or 0.67% to 11,549.60

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00348 or 0.48% to 0.72377
NZDUSD increased 0.00575 or 0.88% to 0.66111
USDJPY decreased 0.36 or -0.34% to 106.00
USDCNY decreased 0.02221 or -0.32% to 6.88089

Precious Metals:

Gold increased 19.96 USD/t oz. or 1.04% to 1,947.90
Silver increased 0.929 USD/t. oz or 3.51% to 27.359

Some economic news from last night:

Japan:

Corporate Services Price Index (CSPI) (YoY) increased from 0.9% to 1.2%

South Korea:

Manufacturing BSI Index (Sep) increased from 60 to 68

Australia：

Construction Work Done (QoQ) (Q2) increased from -1.0% to -0.7%

New Zealand:

Exports (Jul) decreased from 5.08B to 4.91B

Imports (Jul) increased from 4.61B to 4.63B

Trade Balance (YoY) (Jul) increased from -1,130M to -120M

Trade Balance (MoM) (Jul) decreased from 475M to 282M

Some economic news from today:

Japan:

Leading Index increased from 78.3 to 84.4

Hong Kong:

Exports (MoM) (Jul) decreased from -1.3% to -3.0%

Imports (MoM) (Jul) increased from -7.1% to -3.4%

Trade Balance increased from -33.3B to -29.8B

Singapore:

Industrial Production (MoM) (Jul) increased from 0.6% to 1.6%

Industrial Production (YoY) (Jul) decreased from -6.5% to -8.4%

Indonesia:

Motorbike Sales (YoY) increased from -56.40% to -44.50%

EUROPE/EMEA:

COVID-19 hit the UK the hardest among major economies from April to June, the Organization for Economic Co-operation and Development has said. Its 20.4% contraction was well above the 9.8% drop for the 37 OECD nations as a whole, the think tank said. Spain was the next worst hit, with a decline of 18.5%. At the same time, the G7 group of industrialized nations suffered a contraction of 10.9%, while the eurozone saw a 12.1% fall.

World Travel & Tourism Council (WTTC) said the UK is set to lose £700 per second during 2020 from the absence of visitors due to the coronavirus pandemic and associated travel bans. They said in their report that the UK may lose approx. £22bn at the cost of missing tourists and business travelers this year is partly due to “continuing uncertainty around travel restrictions.” The WTTC says that in its “worst-case scenario” nearly three million jobs in the UK supported by travel and tourism are at risk. The organization says that during 2019, the sector employed almost four million people, accounting for one in nine UK jobs.

The major Europe stock markets had a green day:

CAC 40 increased 40.16 points or 0.80% to 5,048.43
FTSE 100 increased 8.59 points or 0.14% to 6,045.60
DAX 30 increased 128.53 points or 0.98% to 13,190.15

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00105 or -0.09% to 1.18271
GBPUSD increased 0.00551 or 0.42% to 1.32097
USDCHF increased 0.00007 or 0.01% to 0.90797

Some economic news from Europe today:

Norway:

Unemployment Rate (Jun) increased from 4.6% to 5.2%

France:

French Consumer Confidence (Aug) remain the same at 94

France Jobseekers Total decreased from 3,964.7K to 3,792.5K

Swiss:

ZEW Expectations (Aug) increased from 42.4 to 45.6

US/AMERICAS:

The S&P 500 continued it’s bullish performance today after closing at a new record high of 3,478.73. Salesforce rallied 25.65% this Wednesday, leading the index’s performance, followed by Netflix (11.56%), Adobe (8.54%), and Facebook (7.89%). The Nasdaq also closed at a record high today after reaching 11,665.06. Netflix, Adobe, and Facebook also helped to contribute to the Nasdaq’s historical day of trading as did Workda a (10.10%), Tesla (6.42%), and Amazon (2.85%).

Federal Reserve Governor Michelle Bowman stated this Wednesday that the US economy is progressing although the coronavirus pandemic “continues to weigh heavily” on domestic and international economic conditions. “Progress toward a full recovery in economic activity may well be slow and uneven,” Bowman admitted. The Federal Reserve will continue to monitor conditions and “respond promptly and flexibly to support the recovery.”

Federal Reserve Chairman Jerome Powell is expected to discuss potential upcoming changes in monetary policy tomorrow at the Kansas City Federal Reserve’s economic symposium. Analysts anticipate Powell redirecting the Fed’s inflation target based on the minutes report that hinted the central bank was willing to adapt in the face of a slow economic recovery. In an interview with Reuters, St. Louis Fed President James Bullard stated, “There is a growing realization that a 2% inflation target as originally put in place in the US and around the world is not quite enough.” The Federal Open Market Committee (FOMC) is expected to meet again next month where they will vote on changes to the bank’s monetary policy.

The Centers for Disease Control and Prevention (CDC) admitted that people without coronavirus symptoms “do not necessarily need a test.” Previously, the agency recommended testing for everyone but now only recommends tests for at-risk individuals who have come into contact with an infected person for more than 15 minutes. Assistant Secretary for Health Adm. Brett Giroir also noted that negative test results often provide a “false sense of security.” New York Governor Anthony Cuomo stated that his state will not follow the new CDC guidelines and called the change “political propaganda” to “…focus on the economy. And that’s his [President Trump’s] reelection strategy. So he’s using the CDC as a campaign rhetorical device.”

Mexico’s inflation surpassed analysts’ expectations, tapering room for a possible rate cut. Prices increased 3.99% YoY and is up 0.24% since the end of July, the National Statistics Institute stated. The core consumer price index increased 0.18% in the beginning of August, and has increased 3.93% YoY. The Bank of Mexico reduced its target rate in mid-August to 4.5% from 5%, but noted further cuts were possible depending on inflation.

US Market Closings:

Dow advanced 83.48 points or 0.3% to 28,331.92
S&P 500 advanced 35.11 points or 1.02% to 3,478.73
Nasdaq advanced 198.59 points or 1.73% to 11,665.06
Russell 2000 declined 11.02 points or -0.7% to 1,560.19

Canada Market Closings:

TSX Composite advanced 172.49 points or 1.04% to 16,789.97
TSX 60 advanced 10.96 points or 1.1% to 1,009.3

Brazil Market Closing:

Bovespa declined 1,490.31 points or 1.46% to 100,627.33

ENERGY:

The oil markets had a mixed day today:

Crude Oil increased 0.16 USD/BBL or 0.37% to 43.5100
Brent decreased 0.09 USD/BBL or -0.20% to 45.7700
Natural gas decreased 0.001 USD/MMBtu or -0.04% to 2.4760
Gasoline decreased 0.0376 USD/GAL or -2.69% to 1.3598
Heating oil decreased 0.0152 USD/GAL or -1.21% to 1.2462

The above data was collected around 13:33 EST on Wednesday.

Top commodity gainers: Silver (3.51%), Soda Ash (2.82%), Lumber (3.50%), and Rubber (4.86%)
Top commodity losers: Live Cattle (-1.47%), Sugar (-1.49%), Oat (-3.31%), and Gasoline (-2.69%)

The above data was collected around 13:39 EST on Wednesday.

BONDS:

Japan 0.05%(+2bp), US 2’s 0.16% (+1bps), US 10’s 0.71%(+3bps); US 30’s 1.43%(+4bps), Bunds -0.42% (+4bp), France -0.12% (+1bp), Italy 1.10% (+0bp), Turkey 13.99% (-9bp), Greece 1.13% (+2bp), Portugal 0.40% (-3bp); Spain 0.39% (+7bp) and UK Gilts 0.30% (+4bp).