Market Talk – May 26, 2021

Posted May 26, 2021 by Martin Armstrong |

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ASIA:

As the trade deal between the U.S. and China runs into its second year, Chinese purchases are still running short of the agreed amount, according to the U.S.-based Peterson Institute for International Economics. The deal stipulated that relative to imports from the U.S. in 2017, China needed to buy at least $200 billion more in U.S. goods and services over the next two years to stay on track with the agreement, China would have needed buy $64.5 billion worth of U.S. goods during the first four months of this year, Peterson Institute senior fellow Chad P. Bown estimated in a report Tuesday, citing Chinese customs data. However, the data showed China’s purchases of U.S. goods reached only 73% of the year-to-date target as of April, the report said. The institute also said the level of progress falls to 60% based on the U.S. data.

Barclays on Tuesday cut its full-year 2021-22 economic growth forecast for India by 80 basis points to 9.2%, saying the toll from stringent lockdowns imposed to curb rising COVID-19 infections appeared to be bigger than its earlier expectation. The brokerage cut its baseline full-year 2021-22 gross domestic product growth forecast, lowering it to 9.2% year-on-year from 10% earlier and 11% before the outbreak of the second wave. Barclays warned that India’s slow vaccination drive might pose medium-term risks to economic growth, especially if the country experienced a third wave of COVID-19 cases.

Japan’s government on Wednesday downgraded its key assessment of Japan’s economy for the first time in three months as consumption was further dampened under the extended state of emergency over the coronavirus pandemic. The Japanese economy shows “further” weakness in some components and remains in a severe situation due to the coronavirus pandemic, the Cabinet Office said in its monthly report for May describing the overall situation for the Japanese economy, but added there are continued signs that it is picking up momentum. The monthly report also downgraded its view on corporate business assessments for the first time in four months, saying they “appear to be pausing” in recovery, while “some severe aspects still remain.” Assessments on other major components were unchanged, with the latest report saying that business investment and industrial production are “picking up.”

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 88.21 points or 0.31% to 28,642.19
Shanghai increased 12.02 points or 0.34% to 3,593.36
Hang Seng increased 255.15 points or 0.88% to 29,166.01
ASX 200 decreased 22.70 points or -0.32% to 7,092.50
Kospi decreased 2.89 points or -0.09% to 3,168.43
SENSEX increased 379.99 points or 0.75% to 51,017.52
Nifty50 increased 93.00 points or 0.61% to 15,301.45

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00050 or -0.07% to 0.77437
NZDUSD increased 0.00640 or 0.89% to 0.72889
USDJPY increased 0.26800 or 0.25% to 109.07
USDCNY decreased 0.02530 or -0.39% to 6.38473

Precious Metals:

Gold decreased 5.73 USD/t oz. or -0.30% to 1,893.53

Silver decreased 0.29 USD/t. oz or -1.04% to 27.689

Some economic news from last night:

Japan:

Corporate Services Price Index (CSPI) (YoY) increased from 0.7% to 1.0%

South Korea:

Manufacturing BSI Index (Jun) increased from 95 to 98

Australia:

MI Leading Index (MoM) decreased from 0.5% to 0.2%

Construction Work Done (QoQ) (Q1) increased from -0.9% to 2.4%

New Zealand:

RBNZ Interest Rate Decision remain the same at 0.25%

Exports (Apr) decreased from 5.69B to 5.37B

Imports (Apr) decreased from 5.66B to 4.98B

Trade Balance (MoM) (Apr) increased from 39M to 388M

Trade Balance (YoY) (Apr) decreased from 1,700M to 730M

Indonesia:

Loans (YoY) (Apr) increased from -3.80% to -2.28%

Some economic news from today:

Japan:

Leading Index increased from 98.9 to 102.8

EUROPE/EMEA:

London accounts for almost a quarter of the UK’s total economic activity, according to new figures from the Office of National Statistics. The capital accounted for 22.7% of total UK Gross Domestic Product in 2019, and 23.8% of total Gross Value Added. When the south east is added, that figure rises to 37.5% and 38.4%. London business leaders said the figures demonstrated the need for “concerted action” to ensure the capital continues to power the country’s economy in the aftermath of Covid-19.

Germany’s gross domestic product (GDP) fell by 1.8% in the first quarter of 2021 compared to the last three months of 2020 according to the announcement made by Destatis, the German statistics office, on Tuesday. The decline was sharper than the expected rate of -1.7% announced at the end of April. Compared to the first quarter of 2020, the German economy was down by 3.4%. Germany is Europe’s biggest economy, and its GDP contraction in the first quarter dragged down the overall economic growth in the Euro zone and EU to -0.6% and -0.4% respectively, according to data released by Eurostat on May 18. Despite poor first-quarter growth, Germany’s government recently upgraded its economic expectations for this year. At the end of April, economy minister Peter Altmaier said that the German government now expected a 3.5% GDP increase this year, compared with a previous forecast of 3%.

The major Europe stock markets had a mixed day:

CAC 40 increased 1.33 points or 0.02% to 6,391.60
FTSE 100 decreased 2.86 points or -0.04% to 7,026.93
DAX 30 decreased 14.37 points or -0.09% to 15,450.72

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00460 or -0.38% to 1.22015
GBPUSD decreased 0.00180 or -0.13% to 1.41235
USDCHF increased 0.00180 or 0.20% to 0.89741

Some economic news from Europe today:

France:

French Business Survey (May) increased from 104 to 107

French Consumer Confidence (May) increased from 95 to 97

Swiss:

ZEW Expectations (May) increased from 68.3 to 72.2

US/AMERICAS:

Amazon confirmed the rumors today after announcing plans to purchase MGM Studios for $8.45 billion. The deal will boost Amazon’s streaming competitiveness with stiff competition like Disney+, Hulu, and Netflix. MGM owns the rights to over 17,000 TV shows and 4,000 films. Prime members, who receive some Prime video content as part of their membership, have reached over 200 million globally. This is Amazon’s second-largest purchase behind Whole Foods ($13.7 billion).

California Governor Gavin Newsom was found guilty of implementing discriminatory practices during his state’s lockdown now faces a $1.35 million fine. Newsom first permitted churches to operate at 25% capacity with no more than 100 attendees. However, the governor reversed his order during the second lockdown and singled out a ban on Bible studies and even outdoor church gatherings until the ruling was overturned by the Supreme Court. While over 3,000 churches were impacted, Harvest Rock brought about the lawsuit against Newsom. “Gov. Newsom’s COVID restrictions intentionally discriminated against churches while providing preferential treatment to many secular businesses and gatherings,” a spokesman said. The case could spark a string of new lawsuits against governors who may have abused their powers during lockdown.

JP Morgan CEO Jamie Dimon is concerned about US inflation. Dimon pointed to the 4% YoY increase in consumer prices, marking “a level we haven’t seen in over a decade.” While he sees the US economy fully recovering, he has questioned the Fed’s intervention. While he would not be concerned with inflation rising an additional 1.6%, he expects it to push higher and hopes it “won’t be out of whack and the Federal Reserve will be able to tamp it down.” Dimon said it is only a matter of time before the Fed discusses their buy-back program as well.

US Market Closings:

Dow advanced 10.59 points or 0.03% to 34,323.05
S&P 500 advanced 7.86 points or 0.19% to 4,195.99
Nasdaq advanced 80.82 points or 0.59% to 13,738
Russell 2000 advanced 43.52 points or 1.97% to 2,249.27

Canada Market Closings:

TSX Composite advanced 181.35 points or 0.93% to 19,745.47
TSX 60 advanced 11.19 points or 0.95% to 1,183.65

Brazil Market Closing:

Bovespa advanced 1,001.46 points or 0.81% to 123,989.17

ENERGY:

The oil markets had a green day today:

Crude Oil increased 0.10 USD/BBL or 0.15% to 66.1700
Brent increased 0.17 USD/BBL or 0.25% to 68.8200
Natural gas increased 0.05 USD/MMBtu or 1.82% to 2.9660
Gasoline increased 0.02 USD/GAL or 1.06% to 2.1398
Heating oil increased 0.01 USD/GAL or 0.51% to 2.0456
Top commodity gainers: Natural Gas (1.82%), Cocoa (1.81%), Coffee (3.62%) and Aluminum (1.68%)
Top commodity losers: Canola (-1.44%), Sugar (-1.29%), Lumber (-4.44%), and Silver (-1.04%)

The above data was collected around 14:10 EST on Wednesday.

BONDS:

Japan 0.0770%(+0bp), US 2’s 0.1466%(+0.00%), US 10’s 1.5774%(+1.34bps); US 30’s 2.2696%(+0.01%), Bunds -0.2030% (-3.9bp), France 0.160% (-4.3bp), Italy 0.9209% (-4bp), Turkey 17.61% (-1bp), Greece 0.8600% (-5bp), Portugal 0.472% (-3bp); Spain 0.454% (-4.72bp) and UK Gilts 0.748% (-4bp).