Market Talk – February 18, 2021

Posted Feb 18, 2021 by Martin Armstrong |

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ASIA:

American companies would lose hundreds of billions of dollars if they slashed investment in China or the nation’s increased tariffs, the US Chamber of Commerce said in a report highlighting the cost of a full decoupling of the world’s largest economies. US Chamber of Commerce, along with a New York-based data and analytics firm Rhodium Group conducted a joint study, and the report says American gross domestic product would see a one-time loss of as much as $500 billion should US companies reduce foreign direct investment in China by half and Applying a 25% tariff on all two-way trade would trim US GDP by $190 billion annually by 2025. The US and China fought a trade war under President Donald Trump that continues to see tariffs applied on about $335 billion of Chinese goods annually, according to the calculations by Chad Bown at the Peterson Institute for International Economics. That’s despite a phase-one agreement reached in 2020, where China promised to purchase more American products.

India’s federal cabinet on Wednesday approved a USD 1.68 billion plan to promote local manufacturing and export of telecoms and networking gear, Reuters reported. The scheme will offer gear makers annual cash incentives of between 4% and 7% on any increase in sales of locally-made equipment over the next five years, compared with 2019-20 levels. The plan is part of Prime Minister Narendra Modi’s efforts to make India an electronics production hub and to create jobs. It is also aimed at cutting imports, especially from China. Last year, India launched a $6.65 billion incentive plan to deepen smartphone manufacturing in the country.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 56.10 points or -0.19% to 30,236.09
Shanghai increased 20.27 points or 0.55% to 3,675.36
Hang Seng decreased 489.67 points or -1.58% to 30,595.27
ASX 200 increased 0.70 points or 0.01% to 6,885.90
Kospi decreased 47.07 points or -1.50% to 3,086.66
SENSEX decreased 379.14 points or -0.73% to 51,324.69
Nifty50 decreased 89.95 points or -0.59% to 15,118.95

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00006 or -0.01% to 0.77518
NZDUSD increased 0.00123 or 0.17% to 0.72016
USDJPY decreased 0.17 or -0.16% to 105.70
USDCNY increased 0.0324 or 0.50% to 6.46830

Precious Metals:

Gold increased 0.41 USD/t oz. or 0.02% to 1,776.67
Silver decreased 0.27 USD/t. oz or -0.97% to 27.081

Some economic news from last night:

Japan:

Foreign Bonds Buying decreased from 1,028.6B to 477.1B

Foreign Investments in Japanese Stocks decreased from 463.2B to 330.1B

Australia:

Employment Change (Jan) decreased from 50.0K to 29.1K

Full Employment Change (Jan) increased from 35.7K to 59.0K

Participation Rate (Jan) decreased from 66.2% to 66.1%

Unemployment Rate (Jan) decreased from 6.6% to 6.4%

Some economic news from today:

Hong Kong:

Unemployment Rate (Jan) increased from 6.6% to 7.0%

Indonesia:

Deposit Facility Rate (Feb) decreased from 3.00% to 2.75%

Lending Facility Rate (Feb) decreased from 4.50% to 4.25%

Loans (YoY) (Jan) increased from -2.41% to -1.92%

Interest Rate Decision decreased from 3.75% to 3.50%

EUROPE/EMEA:

According to the Office for National Statistics (ONS), the United Kingdom’s gross domestic product (GDP) increased by 1.2 percent in December 2020, following a revised 2.3-percent decline in November, when more extensive restrictions to activities were implemented. “During December, a period of eased restrictions early in the month was followed by tighter restrictions to activity across all four nations of the UK later in the month,” the ONS stated. The BoE has forecast a GDP contraction of 4 percent for Q1 due to the new lockdown as well as disruption stemming from Brexit. It has also predicted a return to pre-COVID-19 GDP levels in early 2022, assuming the vaccination program continues to run smoothly.

The major Europe stock markets had a negative day:

CAC 40 decreased 37.51 points or -0.65% to 5,728.33
FTSE 100 decreased 93.75 points or -1.40% to 6,617.15
DAX 30 decreased 22.34 points or -0.16% to 13,886.93

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00404 or 0.34% to 1.20839
GBPUSD increased 0.00976 or 0.70% to 1.39608
USDCHF decreased 0.00225 or -0.25% to 0.89634

Some economic news from Europe today:

Swiss:

Trade Balance (Jan) increased from 2.890B to 5.054B

US/AMERICAS:

Unemployment in the US unexpectedly spiked last week to 861,000 v 793,000 (revised to 848,000) the week prior, the Department of Labor announced this Thursday. Experts had anticipated a loss of 773,000. Continuing claims calculated from the week of February 6 came in at 4.494 million while the prior week’s figures were revised upward to 4.558 million.

Federal Reserve Governor Lael Brainard stated that the central bank is “very focused” on determining how climate change initiatives will impact medium and long-term economic growth. “The focus on investments in a sustainable economy that are pro-growth, that are pro-jobs, those are the kinds of priorities that square very well with our overall framework, which is to ensure the economy is at maximum employment in a sustainable way,” Brainard stated. Still, many are concerned that transitioning away from fossil fuels and other initiatives will have a negative impact on various sectors.

Lawmakers are scrambling to pass a new coronavirus relief bill before key programs expire on March 14. Speaker Pelosi stated that Democrats are aiming to pass their $1.9 trillion package before the end of the month. However, the $15 minimum wage hike that was linked to the package has some party members split on the proposal. With a split 50-50 Senate, one vote could destroy the relief bill from passing.

US Market Closings:

Dow declined 119.68 points or -0.38% to 31,493.34
S&P 500 declined 17.36 points or -0.44% to 3,913.97
Nasdaq declined 100.14 points or -0.72% to 13,865.36
Russell 2000 declined 37.72 points or -1.67% to 2,218.39

Canada Market Closings:

TSX Composite declined 100.71 points or -0.55% to 18,274.07
TSX 60 declined 4.96 points or -0.45% to 1,086.72

Brazil Market Closing:

Bovespa declined 1,156.82 points or -0.96% to 119,198.97

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 0.31 USD/BBL or -0.51% to 60.8300
Brent decreased 0.32 USD/BBL or -0.50% to 64.0200
Natural gas decreased 0.114 USD/MMBtu or -3.54% to 3.1050
Gasoline decreased 0.0222 USD/GAL or -1.23% to 1.7883
Heating oil decreased 0.0094 USD/GAL or -0.51% to 1.8283

Top commodity gainers: Cocoa (4.54%), Sugar (2.95%), Bitumen (6.78%) and Aluminum (2.75%)
Top commodity losers: Palm Oil (-1.79%), Orange Juice (-1.39%), Natural Gas (-3.54%), and Gasoline (-1.23%)

The above data was collected around 13:00 EST on Thursday.

BONDS:

Japan 0.10%(-0bp), US 2’s 0.11%(-0.004%), US 10’s 1.29%(-1bps); US 30’s 2.07%(-0.001%), Bunds -0.37% (+3bp), France -0.13% (+0bp), Italy 0.65% (+6bp), Turkey 12.65% (-6bp), Greece 0.87% (+6bp), Portugal 0.26% (+7bp); Spain 0.34% (+12bp) and UK Gilts 0.62% (+5bp).