Market Talk – January 12, 2021

Posted Jan 12, 2021 by Martin Armstrong |

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ASIA:

Wall Street firms in Hong Kong including Goldman Sachs and JPMorgan on Monday moved to reduce exposure to Chinese telecom companies named in a U.S. ban on investments in companies Washington considers linked to China’s military. Goldman Sachs, JPMorgan and Morgan Stanley said in filings to the Stock Exchange of Hong Kong that they were beginning steps to terminate 500 Hong Kong-listed structured products they issued to investors with links to values of telecom companies China Mobile, China Telecom and China Unicom or local indexes including the Hang Seng Index – whose components include the telecom companies. US custodian bank State Street said that information published by the U.S. Office of Foreign Assets Control (OFAC) mention that an exchange traded fund which State Street manages was no longer appropriate for U.S. individuals or companies to invest in.

Indian banks may see bad loans double despite signs of an improvement in the economic impact of the COVID-19 pandemic, a report from the Financial Stability and Development Council said on Monday. The gross Non-Performing Assets of banks may increase from 7.5% in September 2020 to 14.8% under a severe stress scenario. Even under a baseline scenario it may rise to 13.5% by September 2021, the council said. The council is an umbrella group of regulators and releases the FSR report twice yearly to give a detailed overview on the health of the Indian financial system.

Japan’s economy is expected to make its sharpest rebound in decades this year, with consumption set to pick up toward the end of 2021 as the impact of the COVID-19 pandemic on the broader economy eases. The world’s third largest economy is projected to grow 3.42% in the next fiscal year, which will run to March 2022, after shrinking 5.37% this fiscal year, according to an average of forecasts by 35 economists polled by the Japan Center for Economic Research.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 25.31 points or 0.09% to 28,164.34
Shanghai increased 76.84 points or 2.18% to 3,608.34
Hang Seng increased 368.53 points or 1.32% to 28,276.75
ASX 200 decreased 18.10 points or -0.27% to 6,679.10
Kospi decreased 22.50 points or -0.71% to 3,125.95
SENSEX increased 247.79 points or 0.50% to 49,517.11
Nifty50 increased 78.70 points or 0.54% to 14,563.45

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00183 or 0.24% to 0.77274
NZDUSD increased 0.00132 or 0.18% to 0.71865
USDJPY decreased 0.05 or -0.05% to 104.09
USDCNY decreased 0.01485 or -0.23% to 6.45937

Precious Metals:

Gold decreased 5.33 USD/t oz. or -0.29% to 1,839.33
Silver increased 0.35 USD/t. oz or 1.40% to 25.270

Some economic news from last night:

Japan:

Adjusted Current Account increased from 1.98T to 2.34T

Bank Lending (YoY) (Dec) decreased from 6.3% to 6.2%

Current Account n.s.a. (Nov) decreased from 2.145T to 1.878T

Indonesia：

Retail Sales (YoY) (Nov) decreased from -14.9% to -16.3%

Some economic news from today:

China:

M2 Money Stock (YoY) (Dec) decreased from 10.7% to 10.1%

New Loans (Dec) decreased from 1,430.0B to 1,260.0B

Outstanding Loan Growth (YoY) (Dec) remain the same at 12.8%

Japan:

Economy Watchers Current Index (Dec) decreased from 45.6 to 35.5

India:

CPI (YoY) (Dec) decreased from 6.93% to 4.59%

Cumulative Industrial Production (Nov) increased from -17.50% to -15.50%

Industrial Production (YoY) (Nov) decreased from 3.6% to -1.9%

Manufacturing Output (MoM) (Nov) decreased from 3.5% to -1.7%

EUROPE/EMEA:

British Prime Minister Boris Johnson announced on Tuesday that they will kick off discussions with the European Union on the memorandum of understanding (MoU) on financial services cooperation this week, Reuters reported.

Bank of England Governor Andrew Bailey said on Tuesday that Britain’s economy was facing its “darkest hour,” and played down suggestions that cutting interest rates below zero would be a straightforward way to boost growth. He said a resurgence in COVID-19 cases meant there would be a difficult few months ahead — although a recovery was within sight once COVID-19 vaccines were rolled out. He declined to say if this pointed towards more stimulus at the BoE’s Feb. 4 policy decision, stressing that officials would have a lot more data to review before then.

The United States government says it will begin collecting new duties on aircraft parts and other products from France and Germany from Tuesday after failing to resolve a 16-year dispute over aircraft subsidies with the European Union. In a notice to shippers late on Monday, US Customs

and Border Protection said the new duties would apply as part of the long-running battle over government subsidies to Europe’s Airbus SE and its US rival, Boeing Co.

The major European stock markets had a negative day:

CAC 40 decreased 11.46 points or -0.20% to 5,650.97
FTSE 100 decreased 44.37 points or -0.65% to 6,754.11
DAX 30 decreased 11.60 points or -0.08% to 13,925.06

The major European currency markets had a mixed day today:

EURUSD increased 0.00113 or 0.09% to 1.21721
GBPUSD increased 0.01025 or 0.76% to 1.36270
USDCHF decreased 0.00038 or -0.04% to 0.88938

Some economic news from Europe today:

Italy:

Italian Retail Sales (MoM) (Nov) decreased from 0.5% to -6.9%

Italian Retail Sales (YoY) (Nov) decreased from 2.8% to -8.1%

UK:

BRC Retail Sales Monitor (YoY) (Dec) decreased from 7.7% to 4.8%

US/AMERICAS:

President-elect Joe Biden announced that he plans to heed advice from the nation’s top economists and central bank employees to focus on the coronavirus pandemic rather than the growing US deficit. “Every major economist thinks we should be investing in deficit spending in order to generate economic growth,” Biden told reporters. The future president said that he does not believe the recent $900 billion stimulus package will be enough. Self-proclaimed Socialist Bernie Sanders has been selected as the Senate Budget Committee chairman, which means that it is highly likely that a third stimulus package will reach the floor.

Biden’s transition to power is not expected to go without incident. President Trump declared an emergency for Washington, D.C., that will last until January 24. At least 10,000 National Guard troops will be deployed to D.C. by the weekend to prepare for potential security threats. The FBI has even issued a nationwide warning of potential armed protests in the coming weeks. The D.C. mayor has released a statement asking people not to attend Biden’s inauguration on January 20.

Boeing revealed that it experienced its worst year on record in 2020 after delivering only 157 plans. The pandemic, in addition to the FAA ground the 737 MAX, caused the company to cancel around 650 orders last year. The company only received 184 new orders in 2020, 80 of which came in December after the 737 MAX ban was lifted. Airbus, Boeing’s only sizeable rival, also suffered a significant loss in 2020 after selling only 268 aircrafts.

Brazil’s President Jair Bolsonaro suggests that Ford’s decision to abandon its operations in Brazil is due to the country ceasing to provide multi-million dollar subsidiaries. Ford announced yesterday that it would close its plants in Brazil in 2021, costing a pretax charge of $4.1 billion, and eliminating 5,000 jobs. Although Ford maintains that the decision is due to a company-wide restructuring policy, Bolsonaro does not believe the automaker. “What does Ford want? Ford has yet to tell the truth, right? They want subsidies,” the president declared this Tuesday.

US Market Closings:

Dow advanced 60 points or 0.19% to 31,068.69
S&P 500 advanced 1.58 points or 0.04% to 3,801.19
Nasdaq advanced 36 points or 0.28% to 13,072.43
Russell 2000 advanced 36.95 points or 1.44% to 2,127.96

Canada Market Closings:

TSX Composite advanced 51.35 points or 0.29% to 17,985.8
TSX 60 advanced 2.98 points or 0.28% to 1,069.98

Brazil Market Closing:

Bovespa advanced 742.87 points or 0.6% to 123,998

ENERGY:

The oil markets had a green day today:

Crude Oil increased 0.76 USD/BBL or 1.45% to 53.0100
Brent increased 0.86 USD/BBL or 1.55% to 56.5100
Natural gas increased 0.077 USD/MMBtu or 2.80% to 2.8240
Gasoline increased 0.036 USD/GAL or 2.37% to 1.5568
Heating oil increased 0.0242 USD/GAL or 1.54% to 1.5977

Top commodity gainers: Platinum (3.00%), Soybeans (3.88%), Corn (5.08%) and Wheat (4.81%)
Top commodity losers: Palm Oil (-2.50%), Feeder Cattle (-1.34%), Lumber (-2.90%), and Orange Juice (-0.82%)

The above data was collected around 12:50 EST on Tuesday.

BONDS:

Japan 0.04%(+0bp), US 2’s 0.15%(+0.006%), US 10’s 1.17%(+4bps); US 30’s 1.90%(+0.026%), Bunds -0.49% (+3bp), France -0.29% (+0bp), Italy 0.62% (+8bp), Turkey 12.78% (-6bp), Greece 0.70% (+5bp), Portugal 0.03% (+3bp); Spain 0.12% (+6bp) and UK Gilts 0.35% (+4bp).