Market Talk – October 1, 2020

Posted Oct 1, 2020 by Martin Armstrong |

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ASIA:

Chinese state-owned utility Huanghe Hydropower Development has finished building the world’s largest solar power project in a desert in the northwestern Chinese province of Qinghai. Chinese inverter manufacturer Sungrow, which supplied the inverters, said that the 2.2 GW solar plant was built in five phases. It involved an investment of RMB15.04 billion ($2.2 billion) and includes 202.8 MW/MWh of storage capacity.

India’s current account surplus rose to a record $19.8 billion in April-June as its trade deficit narrowed sharply, the Reserve Bank of India said on Wednesday. The surplus stood at 3.9% of gross domestic product (GDP) in the latest quarter, compared with a deficit of $15 billion or 2.1% in the same period a year ago, RBI data showed.

India will stick to its borrowing plan of 12 trillion rupees for the current fiscal year, economic affairs official said on Wednesday, even as the government expects to fall short of its revenue targets. India will borrow 4.34 trillion rupees via bonds in the second half of the year ending in March 2021, in 16 weekly tranches of 270-280 billion rupees concluding in the last week of January. It borrowed the rest in the April-September period.

Japanese business sentiment improved in July-September from a 11-year low hit three months ago, a key central bank survey showed, in a sign the economy is gradually emerging from the devastating hit from the coronavirus pandemic. The headline index for big manufacturers’ sentiment improved to minus 27 in September versus minus 34 in June, which was the lowest level since June 2009, the Bank of Japan’s closely watched “tankan” quarterly survey showed on Thursday. Manufacturers and non-manufacturers expect business conditions to improve three months ahead, the tankan showed

The major Asian stock markets had a green day today:

NIKKEI 225 closed
Shanghai closed
Hang Seng closed
ASX 200 increased 57.00 points or 0.98% to 5,872.90
Kospi closed
SENSEX increased 629.12 points or 1.65% to 38,697.05
Nifty50 increased 169.40 points or 1.51% to 11,416.95

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00186 or 0.26% to 0.71854
NZDUSD increased 0.00265 or 0.40% to 0.66466
USDJPY increased 0.12 or 0.12% to 105.55
USDCNY decreased 0.03796 or -0.56% to 6.74655

Precious Metals:

Gold increased 21.16 USD/t oz. or 1.12% to 1,906.60
Silver increased 0.73 USD/t. oz or 3.15% to 23.942

Some economic news from last night:

Japan:

Manufacturing PMI (Sep) increased from 47.3 to 47.7

Foreign Bonds Buying decreased from 281.5B to -64.4B

Foreign Investments in Japanese Stocks increased from -897.0B to -274.3B

Tankan All Big Industry CAPEX (Q3) decreased from 3.2% to 1.4%

Tankan All Small Industry CAPEX (Q3) increased from -16.5% to -16.1%

Tankan Big Manufacturing Outlook Index (Q3) increased from -27 to -17

Tankan Large Manufacturers Index (Q3) increased from -34 to -27

Tankan Large Non-Manufacturers Diffusion Index (Q3) increased from -14 to -11

Tankan Large Non-Manufacturers Index (Q3) increased from -17 to -12

Tankan Small Manufacturers Diffusion Index (Q3) increased from -47 to -38

Tankan Small Manufacturing Index (Q3) increased from -45 to -44

Tankan Small Non-Manufacturers Diffusion Index (Q3) increased from -33 to -27

Tankan Small Non-Manufacturing Index (Q3) increased from -26 to -22

South Korea:

Exports (YoY) (Sep) increased from -10.1% to 7.7%

Imports (YoY) (Sep) increased from -15.8% to 1.1%

Trade Balance (Sep) increased from 3.84B to 8.88B

Australia:

AIG Manufacturing Index (Sep) decreased from 49.3 to 46.7

Manufacturing PMI increased from 53.6 to 55.4

Singapore:

URA Property Index (QoQ) (Q3) remain the Same at 0.80%

Indonesia:

Nikkei Manufacturing PMI (Sep) decreased from 50.8 to 47.2

Some economic news from today:

India:

Nikkei Markit Manufacturing PMI (Sep) increased from 52.0 to 56.8

Indonesia:

Core Inflation (YoY) (Sep) decreased from 2.03% to 1.86%

Inflation (YoY) (Sep) increased from 1.32% to 1.42%

Inflation (MoM) (Sep) remain the same at -0.05%

Motorbike Sales (YoY) (Aug) decreased from -44.50% to -46.90%

Australia：

Commodity Prices (YoY) increased from -10.2% to -5.8%

EUROPE/EMEA:

Financial services firms operating in the UK have shifted about 7,500 employees and more than 1.2 trillion pounds ($1.6 trillion) of assets to the European Union ahead of Brexit — with more likely to follow in coming weeks, EY reported. About 400 relocations were announced in the past month alone, the consulting firm said in a report on Thursday that tracks 222 of the largest financial firms with significant operations in the UK. From next year, firms in Europe’s financial capital will lose their passport to offer services across the EU. They will have to rely on the bloc granting the UK so-called equivalence for them to do business with customers in the region, who account for up to a quarter of all revenue in London. With the EU far from certain to grant that access, firms are having to beef up their continental presence.

The recovery in eurozone manufacturing activity gathered pace last month, but it was largely driven by strength in Germany, and rising coronavirus cases across the region may yet reverse the upturn, a survey showed. While the manufacturing sector is enjoying something of a revival, most market watchers and policymakers will focus on a survey for the bloc’s dominant service industry, which accounts for around two-thirds of GDP, due on Monday.

The major Europe stock markets had a mixed day:

CAC 40 increased 20.60 points or 0.43% to 4,824.04

FTSE 100 increased 13.35 points or 0.23% to 5,879.45

DAX 30 decreased 29.96 points or -0.23% to 12,730.77

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00221 or 0.19% to 1.17468

GBPUSD decreased 0.00229 or -0.18% to 1.28958

USDCHF decreased 0.00228 or -0.25% to 0.91862

Some economic news from Europe today:

Swiss:

Retail Sales (YoY) (Aug) decreased from 3.6% to 2.5%

CPI (MoM) (Sep) remain the same at 0.0%

CPI (YoY) (Sep) increased from -0.9% to -0.8%

PMI (Sep) increased from 51.8 to 53.1

Spain:

Spanish Manufacturing PMI (Sep) increased from 49.9 to 50.8

Italy:

Italian Manufacturing PMI (Sep) increased from 53.1 to 53.2

Italian Monthly Unemployment Rate (Aug) decreased from 9.8% to 9.7%

France:

French Manufacturing PMI (Sep) increased from 49.8 to 51.2

French Car Registration (YoY) (Sep) increased from -19.8% to -3.0%

Germany:

German Manufacturing PMI (Sep) increased from 52.2 to 56.4

Norway:

Manufacturing PMI (Sep) increased from 46.9 to 50.3

Euro Zone:

Manufacturing PMI (Sep) increased from 51.7 to 53.7

PPI (YoY) (Aug) increased from -3.1% to -2.5%

PPI (MoM) (Aug) decreased from 0.7% to 0.1%

Unemployment Rate (Aug) increased from 8.0% to 8.1%

UK:

Manufacturing PMI (Sep) decreased from 55.2 to 54.1

US/AMERICAS:

Treasury Secretary Steven Mnuchin and House Speaker Pelosi are said to be in the eleventh hour of negotiations for a new coronavirus relief bill. The bill would cost $2.2 trillion bill would include direct stimulus payments, extended unemployment benefits, as well as additional funding for PPP. Mnuchin offered a $1.6 trillion proposal on Wednesday, which was slightly above the Republican’s offer of $1.6 trillion. Even if the House passes the Democrat’s $2.2 trillion proposal, it is unlikely that the bill will pass the Republican-led Senate. Senate Majority Leader Mitch McConnel noted that both parties were still “very far apart” in reaching a deal.

Prime Minister Justin Trudeau’s Liberal Party received support from the left-winged New Democratic Party (NDP). The Liberal Party had been seeking the support of at least one of the three opposition groups, but two had previously waivered their support.

President Jair Bolsonaro of Brazil was offended by US presidential candidate Joe Biden’s remarks during Tuesday’s debate regarding the Amazon wildfires. Biden declared that under his administration, he would re-enter the US in the Paris Climate Agreement, and pointed to Brazil’s fires as his reasoning. “The greed of some countries towards the Amazon is a well-known fact,” the Brazilian leader wrote. However, the explicit demonstration of this greed by someone who is running for the presidency of his country is a clear sign of contempt for cordial and fruitful coexistence between two sovereign nations,” Bolsonaro stated.

US Market Closings:

Dow advanced 35.2 points or 0.13% to 27,816.9
S&P 500 advanced 17.8 points or 0.53% to 3,380.8
Nasdaq advanced 159 points or 1.42% to 11,326.51
Russell 2000 advanced 23.51 points or 1.56% to 1,531.2

Canada Market Closings:

TSX Composite advanced 63.16 points or 0.39% to 16,184.54
TSX 60 advanced 2.22 points or 0.23% to 969.49

Brazil Market Closing:

Bovespa advanced 875.14 points or 0.93% to 95,478.52

ENERGY:

The oil markets had a negative day today

Crude Oil decreased 1.96 USD/BBL or -4.87% to 38.2600

Brent decreased 0.43 USD/BBL or -1.05% to 40.5200
Natural gas decreased 0.097 USD/MMBtu or -3.79% to 2.4590
Gasoline decreased 0.0655 USD/GAL or -5.43% to 1.1408
Heating oil decreased 0.0426 USD/GAL or -3.71% to 1.1063

The above data was collected around 12:50 EST on Thursday

Top commodity gainers: Palm Oil (2.75%), Lean Hogs (1.68%), Silver (3.15%), and Sugar (3.90%)

Top commodity losers: Gasoline (-5.43%), Copper (-4.91%), Crude Oil (-4.87%), and Natural Gas (-3.79%)

The above data was collected around 12:56 EST on Thursday.

BONDS:

Japan 0.02%(+0bp), US 2’s 0.13% (+0bps), US 10’s 0.68%(+1bps); US 30’s 1.47%(+1bps), Bunds -0.51% (+1bp), France -0.23% (+1bp), Italy 0.84% (-3bp), Turkey 12.64% (-29bp), Greece 1.04% (+2bp), Portugal 0.28% (+1bp); Spain 0.24% (+5bp) and UK Gilts 0.25% (+2bp).