Market Talk – June 21, 2021

Posted Jun 21, 2021 by Martin Armstrong |

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ASIA:

Australia’s complaint to the World Trade Organization over China’s anti-dumping duties on wine exports should enable bilateral negotiations, Foreign Minister Marise Payne said on Sunday. The government filed a complaint on Saturday over duties that were applied last year and nearly wiped out exports of Australian wine to the Chinese market. The Australian government has complained frequently that China has ignored calls to ease trade tensions. Australia’s relations with China have worsened since Canberra called for an international inquiry into the origins of the coronavirus and after Australia banned Huawei from its nascent 5G broadband networking in 2018. China, Australia’s largest trading partner, responded by imposing tariffs on Australian commodities, including wine and barley and limited imports of Australian beef, coal, and grapes.

The Reserve Bank of India’s decision to accumulate foreign exchange may check the strengthening of the local currency and fuel Indian exports in the short term, experts said, with the central bank hinting those current reserves of $600 billion are sufficient to cover imports for a shorter duration than many other large economies. The Reserve Bank of India’s (RBI’s) 16 June monthly bulletin said forex reserves crossed $600 billion, making India the world’s fifth-largest reserve holding country. However, RBI said this will still cover less than 15 months of projected imports. Since the publication of the bulletin, the reserves rose further to $608.08 billion as of June 11. The rupee closed at 73.86 per dollar on June 18, strengthening after eight straight sessions of decline.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 953.15 points or -3.29% to 28,010.93
Shanghai increased 4.09 points or 0.12% to 3,529.18
Hang Seng decreased 312.27 points or -1.08% to 28,489.00
ASX 200 decreased 133.60 points or -1.81% to 7,235.30
Kospi decreased 27.14 points or -0.83% to 3,240.79
SENSEX increased 230.01 points or 0.44% to 52,574.46
Nifty50 increased 63.15 points or 0.40% to 15,746.50

The major Asian currency markets had a green day today:

AUDUSD increased 0.0063 or 0.84% to 0.75414
NZDUSD increased 0.00545 or 0.78% to 0.69975
USDJPY increased 0.04 or 0.04% to 110.26
USDCNY increased 0.01164 or 0.18% to 6.46975

Precious Metals:

Gold increased 20.23 USD/t oz. or 1.15% to 1,783.57
Silver increased 0.17 USD/t. oz or 0.64% to 25.956

Some economic news from last night:

China:

PBoC Loan Prime Rate remain the same at 3.85%

Australia:

Retail Sales (MoM) (May) decreased from 1.1% to 0.1%

EUROPE/EMEA:

The UK’s economic recovery accelerated in May as tourism and recreation firms reopened, but the delay in ending Covid-19 restrictions is putting hospitality firms at risk, research shows. Eleven out of 14 UK sectors reported faster growth in output month on month in May, up from nine in April, according to the Lloyds Bank UK Recovery Tracker, as the UK moved further out of lockdown. The tracker found that the UK tourism and recreation sector recorded the sharpest rise in output growth as British hotels, pubs and restaurants benefited from pent-up consumer demand. Jeavon Lolay, the head of economics and market insight for commercial banking at Lloyds Bank, said sectors that had been acutely affected by coronavirus restrictions were now outpacing those that operated more freely during the lockdown.

France’s economy is set to grow faster than expected as a rebound gains momentum from the second half of the year, the French central bank forecast on Monday. The economy was poised to grow 5.8% this year, well above the eurozone average of 4.6%, the Bank of France said, revising its forecast up by 0.4 percentage points from its last estimate in March. It said its monthly business surveys showed activity picking up already in the three months to the end of June, with quarterly growth expected at 0.5% from the previous quarter. The central bank also said that the economy would get back to pre-crisis levels of activity from the start of next year – earlier than previously expected – as a burst of consumer spending and business investment fuelled the recovery.

The major Europe stock markets had a green day:

CAC 40 increased 33.38 points or 0.51% to 6,602.54
FTSE 100 increased 44.82 points or 0.64% to 7,062.29
DAX 30 increased 155.20 points or 1.00% to 15,603.24

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00502 or 0.42% to 1.19126
GBPUSD increased 0.01365 or 0.99% to 1.39310
USDCHF decreased 0.00374 or -0.41% to 0.91825

US/AMERICAS:

The Dow experienced its most successful day of trading since March after advancing 580 points. American Express pushed the index higher after advancing 4.255%, followed by Boeing (3.341%), Chevron (2.931%), and Travelers (2.687%). The S&P 500 closed within 1% of its all-time high after APA Corp rose 7.31%, Hess Corp advanced 7.17%, EOG Resources advanced 7.16%, and Marathon Oil and Devon Energy both advanced by over 6.9%.

A new proposal, the Strengthening Unemployment Programs to Provide Opportunities for Recovery and Training (SUPPORT) for New Workers Act, has bipartisan support and aims to entice people back to the workforce. The proposal would pay newly employed worked a $180 weekly bonus simply for having a job. The amount marks only 60% of the current enhanced unemployment pay set to expire on September 6. Currently, around 14.8 million Americans are receiving some form of unemployment benefits.

Robert Kaplan, president of Federal Reserve Bank of Dallas, stated this Monday that the central bank should begin to taper its accommodative policy. “Purchases of treasuries and mortgage-backed securities are probably not well designed to deal with supply issues. They are much better designed to deal with demand issues,” Kaplan stated, noting that demand is no longer the main concern. Kaplan warned that waiting too long to curb the current policy could result in the Fed needing to take more drastic measures down the road.

According to a report by Zillow, housing inventory increased 3.9% from April to May but there is no shortage of willing buyers. On average, homes are going under contract in less than a week, with some markets averaging only three days. Although inventory is up on a monthly basis, it remains depressed YoY with a large 31.2% decrease in available housing across the US.

US Market Closings:

Dow advanced 586.89 points or 1.76% to 33,876.97
S&P 500 advanced 58.34 points or 1.4% to 4,224.79
Nasdaq advanced 111.1 points or 0.79% to 14,141.48
Russell 2000 advanced 48.35 points or 2.16% to 2,286.09

Canada Market Closings:

TSX Composite advanced 156.77 points or 0.78% to 20,156.36
TSX 60 advanced 8.58 points or 0.71% to 1,210.23

Brazil Market Closing:

Bovespa advanced 859.61 points or 0.67% to 129,264.96

ENERGY:

The oil markets had a mixed day today:

Crude Oil increased 1.75 USD/BBL or 2.44% to 73.3900
Brent increased 1.33 USD/BBL or 1.81% to 74.8400
Natural gas decreased 0.026 USD/MMBtu or -0.81% to 3.1890
Gasoline increased 0.0302 USD/GAL or 1.39% to 2.1985
Heating oil increased 0.0323 USD/GAL or 1.54% to 2.1255

The above data was collected around 14:51 EST on Monday

Top commodity gainers: Lumber (4.68%), Rice (2.82%), Coffee (2.70%) and Palladium (4.63%)
Top commodity losers: Lean Hogs (-1.56%), Steel (-1.00%), Oat (-2.36%), and Canola (-2.74%)

The above data was collected around 14:59 EST on Monday.

BONDS:

Japan 0.051%(-0bp), US 2’s 0.2563%(+0.00%), US 10’s 1.4870%(+4.39bps); US 30’s 2.1097%(+0.09%), Bunds -0.1720% (+2.7bp), France 0.167% (+1.2bp), Italy 0.8798% (+1bp), Turkey 17.27% (+4bp), Greece 0.8260% (+2bp), Portugal 0.435% (+0.3bp); Spain 0.4580% (+0.27bp) and UK Gilts 0.773% (+1bp).