Market Talk – August 2, 2021

Posted Aug 2, 2021 by Martin Armstrong |

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ASIA:

China’s government issued new procurement guidelines in May that require up to 100% local content on hundreds of items, including x-ray machines and magnetic resonance imaging equipment, erecting fresh barriers for foreign suppliers, Reuters reported. Document 551 was issued on May 14 by the Chinese Ministry of Finance and the Ministry of Industry and Information Technology (MIIT) with the title, “Auditing guidelines for government procurement of imported products.” The new changes may affect $124 billion in goods from the United States purchased last year in 2020 by vast state-owned and government-associated companies that control the education, health, transportation, agriculture and energy sectors.

Japan’s factory output growth picked up in July due to a stronger expansion of output and new orders, as manufacturers benefited from a continuing recovery of the coronavirus pandemic-hit global economy. The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) in July rose to 53.0 on a seasonally adjusted basis from 52.4 in the previous month. The PMI survey showed that overall output and new orders rose at a faster pace due to strong output in the electronics and auto sectors and solid demand for semiconductors. Firms’ expectations for the year ahead remained firm.

The major Asian stock markets had a green day today:

NIKKEI 225 increased 497.43 points or 1.82% to 27,781.02
Shanghai increased 66.93 points or 1.97% to 3,464.29
Hang Seng increased 274.77 or 1.06% to 26,235.80
ASX 200 increased 98.80 points or 1.34% to 7,491.40
Kospi increased 20.72 points or 0.65% to 3,223.04
SENSEX increased 363.79 points or 0.69% to 52,950.63
Nifty50 increased 122.10 points or 0.77% to 15,885.15

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00205 or 0.28% to 0.73629
NZDUSD increased 0.00058 or 0.08% to 0.69722
USDJPY decreased 0.42 or -0.38% to 109.27
USDCNY increased 0.00031 or 0.00% to 6.46548

Precious Metals:

Gold increased 1.72 USD/t oz. or 0.09% to 1,815.30
Silver increased 0.02 USD/t. oz or 0.08% to 25.480

Some economic news from last night:

China:

Caixin Manufacturing PMI (Jul) decreased from 51.3 to 50.3

Japan:

Manufacturing PMI (Jul) increased from 52.2 to 53.0

South Korea:

Nikkei Manufacturing PMI (Jul) decreased from 53.9 to 53.0

Australia:

AIG Manufacturing Index (Jul) decreased from 63.2 to 60.8

Manufacturing PMI decreased from 58.6 to 56.9

MI Inflation Gauge (MoM) increased from 0.4% to 0.5%

ANZ Job Advertisements (MoM) decreased from 1.5% to -0.5%

Indonesia:

Nikkei Manufacturing PMI (Jul) decreased from 53.5 to 40.1

Some economic news from today:

India:

Nikkei Markit Manufacturing PMI (Jul) increased from 48.1 to 55.3

Exports (USD) increased from 32.50B to 35.17B

Imports (USD) increased from 41.87B to 46.40B

Trade Balance (Jul) decreased from -9.37B to -11.23B

Hong Kong:

Retail Sales (YoY) (Jun) decreased from 10.5% to 5.8%

Japan:

Household Confidence (Jul) increased from 37.4 to 37.5

Singapore:

Manufacturing PMI (Jul) increased from 50.8 to 51.0

Indonesia:

Core Inflation (YoY) (Jul) decreased from 1.49% to 1.40%

Inflation (YoY) (Jul) increased from 1.33% to 1.52%

Inflation (MoM) (Jul) increased from -0.16% to 0.08%

EUROPE/EMEA:

UK Chancellor Rishi Sunak wrote to Boris Johnson urging the prime minister to ease travel restrictions because he said they were hurting the country’s economy and tourism, The Sunday Times reported. Sunak continued to say in the letter that the country’s border policy was out of step with international competitors, according to the newspaper. The chancellor is concerned that the restrictions in place were harming UK companies competing with European counterparts in conducting business with US companies.

The major Europe stock markets had a green day:

CAC 40 increased 63.14 points or 0.96% to 6,675.90
FTSE 100 increased 49.42 points or 0.70% to 7,081.72
DAX 30 increased 24.34 points or 0.16% to 15,568.73

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00018 or 0.02% to 1.18699
GBPUSD decreased 0.00138 or -0.10% to 1.38915
USDCHF decreased 0.00034 or -0.04% to 0.90546

Some economic news from Europe today:

Germany:

German Retail Sales (MoM) (Jun) decreased from 4.6% to 4.2%

German Retail Sales (YoY) (Jun) increased from -1.8% to 6.2

German Manufacturing PMI (Jul) increased from 65.1 to 65.9

Swiss:

Retail Sales (YoY) (Jun) decreased from 2.8% to 0.1%

CPI (MoM) (Jul) decreased from 0.1% to -0.1%

CPI (YoY) (Jul) increased from 0.6% to 0.7%

procure.ch PMI (Jul) increased from 66.7 to 71.1

Spain:

Spanish Manufacturing PMI (Jul) decreased from 60.4 to 59.0

Italy:

Italian Manufacturing PMI (Jul) decreased from 62.2 to 60.3

France:

French Manufacturing PMI (Jul) decreased from 59.0 to 58.0

Norway:

Manufacturing PMI (Jul) increased from 61.3 to 63.3

UK:

Manufacturing PMI (Jul) decreased from 63.9 to 60.4

Euro Zone:

Manufacturing PMI (Jul) decreased from 63.4 to 62.8

US/AMERICAS:

The US Senate released a bipartisan infrastructure bill to the tune of $1 trillion. The Infrastructure Investment and Jobs Act will allocate $550 billion to improving roads, piping, and building electric vehicle stations over the next five years. Senate Democrats said that they plan to push through additional spending measures to target unemployment and climate change. Biden originally wanted over $2 trillion for the infrastructure package, but Republicans and Democrats were able to meet at $1 trillion, for now.

The Treasury is beginning an emergency cash conversion process to avoid defaulting after failing to raise the debt ceiling before the deadline. The Treasury is currently suspended from issuing new bonds as it surpassed the allocated limit. The Congressional Budget Office estimates that the country is currently behind on $28.5 trillion in borrowed funds. Congress now must take action to avoid a devastating default. However, Congress is focused on passing new legislation that will put the US further into debt.

Numerous businesses are reimplementing mask mandates across the US, which may spell trouble for brick and mortar locations. Apple, Walmart, Target, Publix, and Kroger are among the businesses reimplementing mask mandate. Disneyland and Disney World will both require anyone over the age of two to wear a mask, which may curtail business as many are unwilling to comply.

US Market Closings:

Dow declined 97.11 points or -0.28% to 34,838.36
S&P 500 declined 8.11 points or -0.18% to 4,387.15
Nasdaq advanced 8.39 points or 0.06% to 14,681.07
Russell 2000 declined 10.75 points or -0.48% to 2,215.5

Canada Market Closings:

TSX Composite declined 23.98 points or -0.12% to 20,287.8
TSX 60 declined 1.98 points or -0.16% to 1,215.51

Brazil Market Closing:

Bovespa advanced 714.95 points or 0.59% to 122,515.74

ENERGY:

The oil markets had a mixed day today:

Crude Oil decreased 2.78 USD/BBL or -3.76% to 71.1700
Brent decreased 2.58 USD/BBL or -3.42% to 72.8300
Natural gas increased 0.021 USD/MMBtu or 0.54% to 3.9350
Gasoline decreased 0.0609 USD/GAL or -2.61% to 2.2737
Heating oil decreased 0.0606 USD/GAL or -2.76% to 2.1350

The above data was collected around 14:31 EST on Monday

Top commodity gainers: Wheat (3.87%), Lumber (2.50%), Corn (2.01%) and Lean Hogs (1.11%)
Top commodity losers: Coffee (-3.56%), Palm Oil (-5.77%), Orange Juice (-3.91%), and Crude Oil (-3.76%)

The above data was collected around 14:38 EST on Monday.

BONDS:

Japan 0.016%(-0bp), US 2’s 0.1761%(-0.01%), US 10’s 1.1756%(-5bps); US 30’s 1.8530%(-0.04%), Bunds -0.4770% (-1.9bp), France -0.1270% (-2.4bp), Italy 0.5808% (-4.59bp), Turkey 16.60% (+3bp), Greece 0.5880% (-2bp), Portugal 0.159% (-2bp); Spain 0.252% (+4.81bp) and UK Gilts 0.533% (-3.4bp).