Market Talk – June 28, 2021

Posted Jun 28, 2021 by Martin Armstrong |

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ASIA:

Washington’s effort to bring manufacturing from China to the US – so-called reshoring – is nothing but “empty talk” and the US will become increasingly dependent on the world’s second-largest economy for the foreseeable future, according to a top former Chinese economic official. Wei Jianguo, a former vice commerce minister said “The US will become increasingly dependent on China in economic and trade terms in the next five years, as the declining presence of the US manufacturing sector in the American economy would be hard to reverse.”

China’s trade surplus with the US rose to US$31.78 billion in May from US$28.11 billion the previous month, with imports from the US rising by 40.53 percent from a year earlier to US$13.11 billion and exports increasing by 20.6 percent over the same period to US$44.89 billion, according to Chinese customs data.

Bank of Japan policymakers hoped that accelerating coronavirus vaccinations would prop up the economy, but saw any inflationary pressures as subdued given the fragile recovery. At the June meeting, the BOJ kept monetary policy steady and unveiled a plan to boost funding for fighting climate change to be rolled out by the end of this year. Some policymakers saw signs of a rebound in inflation with one voicing hope that pent-up demand will help accelerate inflation in the latter half of this year, the summary showed. Japan’s economy shrank an annualized 3.9% in the first quarter and analysts expect any rebound in April to June quarter to be modest as COVID-19 movement restrictions limit consumption. Core consumer prices rose just 0.1% in May from a year earlier, as weak spending discouraged firms from passing on higher raw material costs to households.

The major Asian stock markets had a negative day today:

NIKKEI 225 decreased 18.16 points or -0.06% to 29,048.02
Shanghai decreased 1.19 points or -0.03% to 3,606.37
Hang Seng decreased 19.92 points or -0.07% to 29,268.30
ASX 200 decreased 0.70 points or -0.01% to 7,307.30
Kospi decreased 0.95 points or -0.03% to 3,301.89
SENSEX decreased 189.45 points or -0.36% to 52,735.59
Nifty50 decreased 45.65 points or -0.29% to 15,814.70

The major Asian currency markets had a negative day today:

AUDUSD decreased 0.00070 or -0.09% to 0.75653
NZDUSD decreased 0.00250 or -0.35% to 0.70444
USDJPY decreased 0.24500 or -0.22% to 110.54
USDCNY decreased 0.00080 or -0.01% to 6.46020

Precious Metals:

Gold decreased 0.95 USD/t oz. or -0.05% to 1,779.39
Silver increased 0.04 USD/t. oz or 0.17% to 26.118

Some economic news from today:

Hong Kong:

Exports (MoM) (May) decreased from 24.4% to 24.0%

Imports (MoM) (May) increased from 25.2% to 26.5%

Trade Balance increased from -31.8B to -25.5B

EUROPE/EMEA:

Britain’s financial regulator has said Binance, one of the world’s largest cryptocurrency exchanges, cannot conduct any regulated activity and issued a warning to consumers about the platform, which is coming under growing scrutiny globally. Financial Conduct Authority in a notice dated June 25, 2021 said Binance Markets Ltd, Binance’s only regulated UK entity, “must not, without the prior written consent of the FCA, carry out any regulated activities… with immediate effect”. It also issued a warning to consumers about Binance Markets and the wider Binance group. Binance said in a statement that Binance Markets, which it acquired in 2020, was not yet using its regulatory permissions, and that the FCA’s move would not impact services offered on its Binance.com website.

The market for coronavirus testing is growing exponentially, by the estimation of Allied Market Research, it is likely to grow by almost 9% per annum until 2023, swelling to USD 39.1 billion. XPhyto Therapeutics has demonstrated the German-made technological knowhow to innovate a PCR test kit that could become highly disruptive due to its fast speed, convenience and PCR accuracy. As Germany reopens, government health agencies insist that they will continue to rely on mass testing to ensure that anyone not yet vaccinated against the coronavirus is also not infectious, especially in the case of those who carry COVID asymptomatically.

The major Europe stock markets had a negative day:

CAC 40 decreased 64.85 points or -0.98% to 6,558.02
FTSE 100 decreased 63.10 points or -0.88% to 7,072.97
DAX 30 decreased 53.79 points or -0.34% to 15,554.18

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00110 or -0.09% to 1.19245
GBPUSD increased 0.00210 or 0.15% to 1.38856
USDCHF increased 0.00270 or 0.29% to 0.91940

Some economic news from Europe today:

Germany:

German Import Price Index (MoM) (May) increased from 1.4% to 1.7%

German Import Price Index (YoY) (May) increased from 10.3% to 11.8%

Norway:

Core Retail Sales (MoM) (May) increased from 0.4% to 5.8%

US/AMERICAS:

The Federal Trade Commission (FTC) dismissed the antitrust lawsuit against Facebook this Monday, resulting in the stock advancing 4.18%. The FTC had been analyzing whether Facebook had been running a monopoly, especially after acquiring WhatsApp and Instagram. Attorney Generals from 48 states, along with the FTC, filed complaints against the social media giant last year after claiming they were cornering the social media market and buying out competitors. Although the FTC dismissed the case, they did acknowledge that Facebook has an unknown amount of influence in the US and the case may come to light again if they find concrete proof that the company is breaking antitrust laws.

While many households suffered significant financial losses during the pandemic, not everyone ended 2020 in the rest. According to the Federal Reserve, US households added $13.5 trillion in wealth in 2020. This is notably different from the 2008 crash where households lost $8 trillion. Over the pandemic, many refinanced mortgages at artificially low rates and paid off debts. The wealth was mainly centered at the top, with 70% of household increases reaching the top 20% of earners and one-third going to the top 1%.

Under Biden’s new tax proposals, wealthy Americans could face some of the highest taxes in the world. Millionaires would pay 39.6% on capital gains compared to the current 20%, and combined with other taxes this would bring the rate for the wealthiest Americans to 43.4%. The only nation to impose higher taxes is Ireland with a 51% tax on dividends. The average tax rate among the 38-member Organization for Economic Cooperation and Development currently sits at 24.4%.

As travel resumes, United Airlines announced plans to purchase an additional $30 billion in jets. The airliner plans to purchase 200 Boeing 737 MAX jets from Boeing and 70 Airbus A321neo jets. This spells good news for Boeing as Southwest recently placed an order for 100 737 MAX jets. According to Reuters, United Airlines’ jet purchases often set the “tone for decades” as to the industry’s airline purchases.

US Market Closings:

Dow declined 150.57 points or -0.44% to 34,283.27
S&P 500 advanced 9.91 points or 0.23% to 4,290.61
Nasdaq advanced 140.12 points or 0.98% to 14,500.51
Russell 2000 declined 12.06 points or -0.52% to 2,322.34

Canada Market Closings:

TSX Composite declined 85.01 points or -0.42% to 20,145.25
TSX 60 declined 5.38 points or -0.44% to 1,208.12

Brazil Market Closing:

Bovespa advanced 151.89 points or 0.12% to 127,407.5

ENERGY:

OPEC’s forecasts point to an oil supply deficit in August and in the rest of 2021 as economies recover from the pandemic, suggesting the group and its allies have room to raise output at a meeting this week. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, is returning 2.1 million barrels per day (bpd), about 2% of world output, to the market from May through July as part of a plan to ease last year’s record output curbs. With oil at its highest since 2018, sources say a further boost in August will be discussed, but some producers are wary about new demand setbacks and higher Iranian supply.

The oil markets had a mixed day today:

Crude Oil decreased 1.38 USD/BBL or -1.86% to 72.6600
Brent decreased 1.61 USD/BBL or -2.11% to 74.5700
Natural gas increased 0.10 USD/MMBtu or 2.75% to 3.5920
Gasoline decreased 0.04 USD/GAL or -1.84% to 2.2222
Heating oil decreased 0.03 USD/GAL or -1.32% to 2.1209

The above data was collected around 13:53 EST on Monday

Top commodity gainers: Coffee (3.78%), Rice (2.78%), Corn (4.91%) and Lean Hogs (2.87%)
Top commodity losers: Orange Juice (-1.97%), Lumber (-6.08%), Brent (-2.11%), and Gasoline (-1.84%)

The above data was collected around 13:59 EST on Monday.

BONDS:

Japan 0.058%(+1bp), US 2’s 0.26%(-0.012%), US 10’s 1.4714%(-5bps); US 30’s 2.0946%(-0.06%), Bunds -0.1890% (-3bp), France 0.157% (-4bp), Italy 0.8752% (-5bp), Turkey 16.63% (+12bp), Greece 0.8450% (+0bp), Portugal 0.445% (-2bp); Spain 0.4480% (-4bp) and UK Gilts 0.731% (-5bp).