Market Talk – June 9, 2021

Posted Jun 9, 2021 by Martin Armstrong |

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ASIA:

China has denounced a US Senate bill worth approximately $250bn that aims to boost American technology and manufacturing prowess as an example of the US hyping up “the so-called China threat,” and accused Washington of attempting to hinder its development. The Senate on Tuesday overwhelmingly approved the Innovation and Competition Act. The expansive legislation, passed by 68-32 votes, combines various China-related measures into what analysts have called the biggest piece of US industrial policy legislation in decades. Analysts said the passage of the bill reflected the reality of the US-China bilateral relationship, which has been in a downward trend since Joe Biden’s predecessor, Donald Trump, took power in 2017.

A report by Japanese brokerage firm Nomura reported the Indian government may miss its budgeted fiscal deficit target after Prime Minister Narendra Modi’s review of the vaccination policy and the food scheme extension till November. The tab of vaccination for all the adults, coupled with the extension of the free food scheme till November, will entail an expenditure of up to 800 billion INR (USD 100 billion) or 0.5 percent of the GDP, Nomura said. It added that this can result in the government slipping on the 6.8 percent fiscal deficit target. Such an eventuality could also weigh on the country’s sovereign ratings, which are due for review by the year-end or early next year, it said.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 102.76 points or -0.35% to 28,860.80
Shanghai increased 11.29 points or 0.32% to 3,591.40
Hang Seng decreased 38.75 points or -0.13% to 28,742.63
ASX 200 decreased 22.40 points or -0.31% to 7,270.20
Kospi decreased 31.65 points or -0.97% to 3,216.18
SENSEX decreased 333.93 points or -0.64% to 51,941.64
Nifty50 decreased 104.75 points or -0.67% to 15,635.35

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00102 or -0.13% to 0.77265
NZDUSD decreased 0.00185 or -0.26% to 0.71736
USDJPY increased 0.16 or 0.15% to 109.63
USDCNY decreased 0.01171 or -0.18% to 6.38801

Precious Metals:

Gold decreased 1.12 USD/t oz. or -0.06% to 1,891.70
Silver increased 0.234 USD/t. oz or 0.85% to 27.869

Some economic news from last night:

China:

CPI (MoM) (May) increased from -0.3% to -0.2%

CPI (YoY) (May) increased from 0.9% to 1.3%

PPI (YoY) (May) increased from 6.8% to 9.0%

Japan:

M2 Money Stock (YoY) decreased from 9.2% to 7.9%

M3 Money Supply (May) increased from 1,969.5T to 1,989.3T

South Korea:

GDP (QoQ) (Q1) increased from 1.2% to 1.7%

GDP (YoY) (Q1) increased from -1.2% to 1.9%

Unemployment Rate (May) increased from 3.7% to 3.8%

Australia:

Westpac Consumer Sentiment (Jun) decreased from -4.8% to -5.2%

New Zealand:

ANZ Business Confidence decreased from 1.8 to -0.4

Manufacturing Sales Volume (QoQ) (Q1) decreased from 0.5% to 0.4%

Some economic news from today:

Japan:

Machine Tool Orders (YoY) increased from 120.8% to 140.7%

Indonesia:

Consumer Confidence (May) increased from 101.5 to 104.4

EUROPE/EMEA:

The UK has reaffirmed its trade ties with China stating that the UK has “no alternative” but to enhance its economic relationship with China in spite of its many human rights abuses. Trade Minister Graham Stuart told a House of Lords committee today that “China offers more opportunity to the UK economy than any other market” and that a more comprehensive economic relationship should be forged, despite the fact “they are a fundamentally authoritarian regime; therefore, we will never see eye to eye.” The UK has had a frosty relationship with China over the past year after Boris Johnson hit Beijing with a series of sanctions over its democracy crackdown in Hong Kong and its ethnic cleansing campaign against Uyghur Muslims. Chinese telecoms giant Huawei was last year banned from contributing to the UK’s 5G network beyond 2027 due to concerns the Chinese state would use it for espionage – a claim Huawei denies.

Germany will extend economic aid for companies hit by the coronavirus pandemic until the end of September to help them get back on their feet once the crisis is over, the government said on Wednesday. The aid, which companies in Europe’s biggest economy can claim if they can prove their revenues have collapsed due to the crisis, had been due to expire at the end of June. More than 105 billion euros ($128.03 billion) has been made available to firms since the beginning of the coronavirus crisis, according to the ministry. Some 32 billion euros have been made available for the short-time work initiative.

The major Europe stock markets had a mixed day:

CAC 40 increased 12.44 points or 0.19% to 6,563.45
FTSE 100 decreased 14.08 points or -0.20% to 7,081.01
DAX 30 decreased 59.46 points or -0.38% to 15,581.14

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00062 or 0.05% to 1.21790
GBPUSD decreased 0.00316 or -0.22% to 1.41164
USDCHF decreased 0.00089 or -0.10% to 0.89603

Some economic news from Europe today:

Germany:

Gemran Current Account Balance n.s.a (Apr) decreased from 30.0B to 21.3B

German Exports (MoM) (Apr) decreased from 1.3% to 0.3%

German Imports (MoM) (Apr) decreased from 7.1% to -1.7%

German Trade Balance (Apr) increased from 14.0B to 15.9B

US/AMERICAS:

The Senate passed the US Innovation and Competition Act to the tune of $250 billion. The US Senate agreed to invest over $50 billion of those funds in AI and chip technology. The bill passed on Tuesday in a 68-32 vote, a rare show of bipartisanship for US politicians. Policymakers said that they do not want to rely on China for chip production, which has been low in supply as of late. America’s semiconductor manufacturing has slowed over the years from 37% in 1990 to about 12% in 2021. “As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth,” President Biden stated.

The Bank of Canada voted to hold firm on interest rates at a historic low of 0.25%. The central bank will also steady its weekly C$3 billion in bond purchases. Despite ongoing lockdowns, the economy grew 5.6% during Q1, but unemployment remains high at 8.2%. “While this was lower than the bank had projected, the underlying details indicate rising confidence and resilient demand. Household spending was stronger than expected, while businesses drew down inventories and increased imports more than anticipated,” the central bank stated this Wednesday.

Fully vaccinated Canadian citizens will soon be able to travel to and from their home country without being subjected to a mandatory 14-day hotel quarantine. Patty Hajdu, Canada’s health minister, said that the government is aiming to ease restrictions in July, but will be “watching carefully…around the world as cases change and as vaccination rates rise.” The government implemented the mandatory 14-day quarantine at the end of February, where all travelers, including citizens, were forced to pay upwards of C$2,000 to quarantine at a government-approved hotel upon arrival.

US Market Closings:

Dow declined 152.68 points or -0.44% to 34,447.14
S&P 500 declined 7.71 points or -0.18% to 4,219.55
Nasdaq declined 13.16 points or -0.09% to 13,911.75
Russell 2000 declined 16.63 points or -0.71% to 2,327.13

Canada Market Closings:

TSX Composite declined 63.65 points or -0.32% to 20,002.27
TSX 60 declined 4.97 points or -0.41% to 1,195.15

Brazil Market Closing:

Bovespa advanced 119,69 points or 0.09% to 129,906.8

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 0.42 USD/BBL or -0.60% to 69.6200
Brent decreased 0.26 USD/BBL or -0.36% to 71.9600
Natural gas decreased 0.002 USD/MMBtu or -0.06% to 3.1260
Gasoline decreased 0.0261 USD/GAL or -1.18% to 2.1929
Heating oil decreased 0.0127 USD/GAL or -0.59% to 2.1223

The above data was collected around 12:20 EST on Wednesday

Top commodity gainers: Lumber (1.97%), Orange Juice (1.26%), Cotton (1.35%) and Coal (1.52%)
Top commodity losers: Canola (-3.37%), Oat (-1.78%), Soybeans (-1.63%), and Wheat (-1.42%)

The above data was collected around 12:47 EST on Wednesday.

BONDS:

Japan 0.0720%(-0bp), US 2’s 0.1548%(+0.00%), US 10’s 1.5059%(-2.21bps); US 30’s 2.1823%(-0.03%), Bunds -0.2400% (-1.7bp), France 0.125% (-2.1bp), Italy 0.8306% (-3.48bp), Turkey 17.90% (-7bp), Greece 0.8350% (-3.8bp), Portugal 0.425% (-0.9bp); Spain 0.415% (-2.17bp) and UK Gilts 0.735% (-3.7bp).