Market Talk – August 19, 2020

Posted Aug 19, 2020 by Martin Armstrong |

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ASIA:

US President Donald Trump on Tuesday said he postponed trade talks with China, adding that he does not want to talk to China right now. Representatives from the United States and China had been scheduled to discuss the implementation of their so-called Phase 1 trade deal on Saturday, but those talks were canceled.

India’s Commerce Ministry has asked automakers to find ways to reduce royalty payments to foreign parent companies for use of technology or brand names, in an effort to boost local investment and reduce outflows, Reuters reported. In India’s competitive auto market, top-selling carmakers Maruti Suzuki and Hyundai Motor’s local unit pay millions of dollars in royalties to parent companies in Japan and South Korea for using their technology and brand to build and sell cars.

Globally, automakers are taking a heavy hit from the coronavirus, which has shuttered vehicle factories and kept customers out of car dealerships. Suzuki Motor Corp said this month its operating profit nearly wiped out during the June quarter because of plunging car sales in India, its biggest market.

Japan’s exports extended their double-digit slump into a fifth month in July as the coronavirus pandemic took a heavy toll on auto shipments to the United States, dashing hopes for a trade-led recovery from the deep recession. The grim data suggests the depressed conditions seen in the world’s third-largest economy in the second quarter showed no signs of rapid improvement in the current quarter, compounding challenges for policymakers as they look to prop up activity. Total exports fell 19.2% in July from a year earlier, roughly in line with market expectations for a 21.0% decrease, government data showed on Wednesday.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 59.53 points or 0.26% to 23,110.61
Shanghai decreased 42.96 points or -1.24% to 3,408.13
Hang Seng decreased 188.47 points or -0.74% to 25,178.91
ASX 200 increased 44.20 points or 0.72% to 6,167.60
Kospi increased 12.30 points or 0.52% to 2,360.54
SENSEX increased 86.47 points or 0.22% to 38,614.79
Nifty50 increased 23.05 points or 0.20% to 11,408.40

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00522 or -0.72% to 0.71979
NZDUSD decreased 0.00271 or -0.41% to 0.65808
USDJPY increased 0.62 or 0.59% to 105.94
USDCNY increased 0.01483 or 0.21% to 6.92083

Precious Metals:

Gold decreased 62.75 USD/t oz. or -3.13% to 1,941.75
Silver decreased 1.18 USD/t. oz or -4.23% to 26.724

Some economic news from last night:

Japan:

Adjusted Trade Balance increased from -0.42T to -0.03T
Core Machinery Orders (YoY) (Jun) decreased from -16.3% to -22.5%
Core Machinery Orders (MoM) (Jun) decreased from 1.7% to -7.6%
Exports (YoY) (Jul) increased from -26.2% to -19.2%
Imports (YoY) (Jul) decreased from -14.4% to -22.3%
Trade Balance (Jul) increased from -269.3B to 11.6B

New Zealand:

GlobalDairyTrade Price Index increased from -5.1% to -1.7%
PPI Input (QoQ) (Q2) decreased from -0.3% to -1.0%
PPI Output (QoQ) (Q2) decreased from 0.1% to -0.3%

Australia:

MI Leading Index (MoM) decreased from 0.5% to 0.1%

Some economic news from today:

Indonesia:

Interest Rate Decision remain the same at 4.00%
Deposit Facility Rate (Aug) remain the same at 3.25%
Lending Facility Rate (Aug) remain the same at 4.75%

Hong Kong:

Unemployment Rate (Jul) decreased from 6.2% to 6.1%

EUROPE/EMEA:

Boris Johnson has warned that the UK has a “long, long way to go” before the economy improves after official figures showed the largest drop in employment in over a decade. However, he said parts of the economy were “showing great resilience”. Between April and June, the number of people in work fell by 220,000, the Office for National Statistics said.

The UK has ruled out extending the December deadline to reach an agreement. The PM’s spokesman said UK negotiators would “continue to plug the gaps” when talks enter their seventh round in Brussels on Wednesday. This week’s talks are the last scheduled negotiating round ahead of the autumn, although both sides have previously said talks would continue in September.

European Central Bank Executive Board members said The European Central Bank’s efforts to keep euros flowing through the global financial system helps monetary stimulus reach the euro zone’s real economy as well as strengthening the currency’s international role. Since the pandemic struck, the ECB has spun a web of support lines for countries outside the currency area to prevent any market turbulence stemming from a sudden surge in demand for euros.

The major Europe stock markets had a green day:

CAC 40 increased 39.17 points or 0.79% to 4,977.23
FTSE 100 increased 35.36 points or 0.58% to 6,111.98
DAX 30 increased 95.57 points or 0.74% to 12,977.33

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.0090 or -0.75% to 1.18552
GBPUSD decreased 0.0138 or -1.04% to 1.31108
USDCHF increased 0.01048 or 1.16% to 0.91344

Some economic news from Europe today:

UK:

Core CPI (YoY) (Jul) increased from 1.4% to 1.8%
Core CPI MoM (MoM) (Jul) increased from 0.2% to 0.4%
Core PPI Output (MoM) (Jul) decreased from 3.0% to -0.1%
Core PPI Output (YoY) (Jul) decreased from 0.5% to 0.1%
Core RPI (YoY) (Jul) increased from 1.3% to 1.9%
Core RPI (MoM) (Jul) increased from 0.2% to 0.5%
CPI (YoY) (Jul) increased from 0.6% to 1.0%
CPI (MoM) (Jul) increased from 0.1% to 0.4%
CPI, n.s.a (Jul) increased from 108.60 to 109.10
PPI Input (YoY) (Jul) increased from -6.7% to -5.7%
PPI Input (MoM) (Jul) decreased from 2.4% to 1.8%
PPI Output (MoM) (Jul) remain the same at 0.3%
PPI Output (YoY) (Jul) remain the same at -0.9%
RPI (MoM) (Jul) increased from 0.2% to 0.5%
RPI (YoY) (Jul) increased from 1.1% to 1.6%
House Price Index (YoY) decreased from 3.5% to 2.6%

Euro Zone:

Current Account (Jun) increased from 8.0B to 20.7B
Current Account n.s.a. (Jun) increased from -10.5B to 17.3B
Core CPI (MoM) (Jul) decreased from -0.2% to -0.3%
Core CPI (YoY) (Jul) increased from 0.8% to 1.2%
CPI (YoY) (Jul) increased from 0.3% to 0.4%
CPI (MoM) (Jul) decreased from 0.3% to -0.4%
CPI ex Tobacco (MoM) (Jul) decreased from 0.3% to -0.4%
CPI ex Tobacco (YoY) (Jul) increased from 0.1% to 0.2%
CPI, n.s.a (Aug) decreased from 105.69 to 105.32
HICP ex Energy & Food (YoY) (Jul) remain the same at 1.3%
HICP ex Energy and Food (MoM) (Jul) decreased from 0.3% to -0.3%

US/AMERICAS:

The Federal Open Market Committee (FOMC) released the minutes report from their July 28-29 session, in which they discussed ongoing concerns for America’s economic future due to the pandemic. The FOMC voted last month to maintain rates at near-zero levels and will not raise rates until they are “confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals.” After the US’ GDP plummeted -32.9% in Q2, it will likely take time for the Fed to regain confidence in the economy. The report noted that the coronavirus crisis would “weigh heavily” on employment, inflation, and economic activity in the near-term and poses “considerable risks” to the medium-term outlook.

The Bank of Nova Scotia was ordered to pay $127 million USD after traders were caught attempting to manipulate the price of precious metals. US Attorney Craig Carpenito described the practice as “spoofing,” whereby traders placed thousands of futures orders but canceled the trades before they could be executed. “In this way, they sought to illegally manipulate the market to their own advantage and to the disadvantage of other traders,” Carpenito stated. The US Justice Department claims three Bank of Nova Scotia employees had information on the illegal bidding between August 2013 and February 2016 “but failed to prevent further unlawful conduct.” The bank released the following statement: “At Scotiabank, we understand that in order to maintain the trust of our stakeholders, we must adhere to trading-related regulatory requirements and compliance policies,” the bank said in a statement Wednesday. “We are committed to adhering to these standards.”

US Market Closings:

Dow declined 85.19 points or -0.31% to 27,692.88
S&P 500 declined 14.93 points or -0.44% to 3,374.85
Nasdaq declined 64.38 points or -0.57% to 11,146.46
Russell 2000 advanced 2.29 points or 0.15% to 1,572.07

Canada Market Closings:

TSX Composite declined 48.68 points or -0.29% to 16,577.38
TSX 60 declined 2.44 points or -0.24% to 994.06

Brazil Market Closing:

Bovespa declined 1,211.63 points or -1.19% to 100,853.72

ENERGY:

The oil markets had a mixed day today:

Crude Oil decreased 0.09 USD/BBL or -0.21% to 42.8000
Brent decreased 0.22 USD/BBL or -0.48% to 45.2400
Natural gas increased 0.007 USD/MMBtu or 0.29% to 2.4350
Gasoline increased 0.0222 USD/GAL or 1.76% to 1.2853
Heating oil decreased 0.0067 USD/GAL or -0.53% to 1.2489

The above data was collected around 15:24 EST on Wednesday.

Top commodity gainers: Lumber (3.62%), Sugar (2.79%), Lean Hogs (2.53%), and Orange Juice (2.00%)
Top commodity losers: Ethanol (-6.98%), Platinum (-1.94%), Gold (-3.13%), and Silver (-4.23%)

The above data was collected around 15:30 EST on Wednesday.

BONDS:

Japan 0.03%(-0bp), US 2’s 0.15% (+0bps), US 10’s 0.66%(-1bps); US 30’s 1.38%(-2bps), Bunds -0.47% (+1bp), France -0.19% (-2bp), Italy 1.00% (+0bp), Turkey 13.58% (-52bp), Greece 1.10% (+1bp), Portugal 0.35% (-1bp); Spain 0.30% (+5bp) and UK Gilts 0.24% (+2bp).