Market Talk – July 14, 2020

Posted Jul 14, 2020 by Martin Armstrong |

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ASIA:

The United States is sending two aircraft carriers into the South China Sea at the same time as China is conducting military exercises in the contested waterway, the Wall Street Journal reported. The USS Ronald Reagan and USS Nimitz would be in the South China Sea from Saturday, the US news outlet quoted the strike group commander as saying.

China’s trade improved in June in a fresh sign the world’s second-largest economy is recovering from the coronavirus pandemic. Chinese imports rose 3 percent over a year earlier to $167.2 billion, rebounding from May’s 3.3 percent decline, customs data showed Tuesday. Exports edged up 0.4 percent to $213.6 billion, an improvement over the previous month’s 16.7 percent contraction.

India’s retail inflation picked up in June, pushed by price increases for some food and fuel items, but economists said the central bank could still ease rates because of concerns about economic slowdown caused by the lockdown. Annual retail inflation rose to 6.09% in June, compared to 5.84% in March, and 5.30% forecast in a Reuters poll of economists. June’s inflation remained above the mid-point of the Reserve Bank of India’s 2-6% target range; the Ministry of Statistics data showed on Monday.

India’s exports of gems and jewelry fell a record 55% in June quarter from a year ago to $2.75 billion as processing units were affected by a lockdown to curb the spread of the novel coronavirus, a leading trade body said on Monday. The country’s cut and polished diamond exports in the quarter fell 50% from a year ago to $1.8 billion, the Gems and Jewellery Export Promotion Council (GJEPC) said in a statement.

The major Asian stock markets had a negative day today:

NIKKEI 225 decreased 197.73 points or -0.87% to 22,587.01
Shanghai decreased 28.67 points or -0.83% to 3,414.62
Hang Seng decreased 294.23 points or -1.14% to 25,477.89
ASX 200 decreased 36.40 points or -0.61% to 5,941.10
Kospi decreased 2.45 points or -0.11% to 2,183.61
SENSEX decreased 660.63 points or -1.80% to 36,033.06
Nifty50 decreased 195.35 points or -1.81% to 10,607.35

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00266 or 0.38% to 0.69709
NZDUSD decreased 0.00136 or -0.21% to 0.65276
USDJPY decreased 0.08 or -0.08% to 107.19
USDCNY increased 0.00646 or 0.09% to 7.00800

Precious Metals:

Gold increased 8.15 USD/t oz. or 0.45% to 1,809.70
Silver increased 0.04 USD/t. oz or 0.23% to 19.1520

Some economic news from last night:

China:

Exports (YoY) (Jun) increased from -3.3% to 0.5%

Imports (YoY) (Jun) increased from -16.7% to 2.7%

Trade Balance (USD) (Jun) decreased from 62.93B to 46.42B

Australia:

NAB Business Confidence (Jun) increased from -20 to 1

NAB Business Survey (Jun) increased from -24 to -7

Singapore:

GDP (QoQ) (Q2) decreased from -3.3% to -41.2%

GDP (YoY) (Q2) decreased from -0.3% to -12.6%

Some economic news from today:

Japan:

Capacity Utilization (MoM) (May) increased from -13.3% to -11.6%

Industrial Production (MoM) (May) increased from -9.8% to -8.9%

India:

WPI Food (YoY) (Jun) increased from 1.13% to 2.04%

WPI Fuel (YoY) (Jun) increased from -19.83% to -13.60%

WPI Inflation (YoY) (Jun) increased from -3.21% to -1.81%

WPI Manufacturing Inflation (YoY) (Jun) increased from -0.42% to 0.08%

EUROPE/EMEA:

The U.K. announced on Tuesday it will ban Huawei from its 5G networks, in a significant U-turn by the government that could significantly dent relations with China while appeasing the U.S. Speaking in Parliament, U.K. Culture Secretary Oliver Dowden said mobile network operators in the country would be forced to stop buying equipment from Huawei by the end of the year. They will also be required to strip out Huawei gear from their infrastructure by 2027.

Face coverings are to be mandatory in shops and supermarkets in England from July 24, Matt Hancock confirmed. The health and social care secretary said a store could refuse someone entry if they aren’t wearing one and to call the police if there’s a problem. People who don’t wear one will face fines of up to £100. Children under 11 and those with disabilities will be exempt from the new rule.

The major Europe stock markets had a mixed day:

CAC 40 decreased 48.77 points or -0.97% to 5,007.46
FTSE 100 increased 3.56 points or 0.06% to 6,179.75
DAX 30 decreased 102.61 points or -0.80% to 12,697.36

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00496 or 0.44% to 1.13989
GBPUSD decreased 0.00054 or -0.04% to 1.25555
USDCHF decreased 0.00284 or -0.30% to 0.93881

Some economic news from Europe today:

UK:

U.K. Construction Output (YoY) (May) increased from -44.2% to -39.7%

Construction Output (MoM) (May) increased from -40.2% to 8.2%

GDP (MoM) increased from -20.4% to 1.8%

Index of Services decreased from -10.7% to -18.9%

Industrial Production (YoY) (May) increased from -23.8% to -20.0%

Industrial Production (MoM) (May) increased from -20.2% to 6.0%

Manufacturing Production (MoM) (May) increased from -24.4% to 8.4%

Manufacturing Production (YoY) (May) increased from -28.2% to -22.8%

Monthly GDP 3M/3M Change decreased from -10.4% to -19.1%

Trade Balance (May) increased from -4.80B to -2.81B

Trade Balance Non-EU (May) increased from -0.94B to 0.65B

NIESR GDP Estimate decreased from -19.1% to -21.2%

Germany:

German ZEW Current Conditions (Jul) increased from -83.1 to -80.9

German ZEW Economic Sentiment (Jul) decreased from 63.4 to 59.3

German CPI (YoY) (Jun) increased from 0.6% to 0.9%

German CPI (MoM) (Jun) increased from -0.1% to 0.6%

German HICP (YoY) (Jun) increased from 0.5% to 0.8%

German HICP (MoM) (Jun) increased from 0.0% to 0.7%

Swiss:

PPI (YoY) (Jun) increased from -4.5% to -3.5%

PPI (MoM) (Jun) increased from -0.5% to 0.5%

Spain:

Spanish CPI (MoM) (Jun) increased from 0.0% to 0.5%

Spanish CPI (YoY) (Jun) increased from -0.9% to -0.3%

Spanish HICP (YoY) (Jun) increased from -0.9% to -0.3%

Spanish HICP (MoM) (Jun) increased from 0.1% to 0.4%

Euro Zone:

Industrial Production (YoY) (May) increased from -28.7% to -20.9%

Industrial Production (MoM) (May) increased from -18.2% to 12.4%

ZEW Economic Sentiment (Jul) increased from 58.6 to 59.6

US/AMERICAS:

The US budget deficit topped $867 billion in June, the Treasury reported, which brings this fiscal year’s federal deficit to $2.7 trillion. Around $240 billion worth of taxes were collected in June; however, federal spending totaled $1.1 trillion. Last June, the deficit was only $8 billion and $984 billion for the duration of the year.

White House economic advisor Larry Kudlow confirmed that it is “increasingly clear” that a fourth round of stimulus payments will be provided to Americans. “We will try to make it targeted, we will try to incentivize not just work, although work is crucial, and going back to work. We want to incentivize investments, we want a pro-growth package,” Kudlow stated. Senate Majority Leader Mitch McConnell said he forsees the next package as being the last government handout.

Crime in the US is on the rise as cities continue to defund their police forces. “Shootings up 358%, over 300 people shot last month and NYPD retirements have quadrupled,” President Trump retweeted this Tuesday. “Under this administration, we are going to defend the police,” Vice President Mike Pence stated today. Over this past weekend alone, New York City reported 28 shooting victims. According to CBSN Chicago, “at least” 64 people were shot in Chicago over the weekend with 11 reported fatalities.

Transportation Canada announced that all travelers destined for Canada will be subject to a temperature screening. The new measure will begin in September 2020 at the busiest airports in the country (St. John’s, Halifax, Québec City, Ottawa, Toronto – Billy Bishop, Winnipeg, Regina, Saskatoon, Edmonton, Kelowna, Victoria). Travelers displaying a fever will not be permitted to enter the country for at least fourteen days.

US Market Closings:

Dow advanced 556.79 points or 2.13% to 26,642.59
S&P 500 advanced 42.3 points or 1.34% to 3,197.52
Nasdaq advanced 0.94% or 97.73 points to 10,488.58
Russell 2000 advanced 24.69 points or 1.76% to 1,428.26

Canada Market Closings:

TSX Composite advanced 269.04 points or 1.72% to 15,908.45
TSX 60 advanced 16.59 points or 1.76% to 958.31

Brazil Market Closing:

Bovespa advanced 1,743.17 points or 1.77% to 100,440.23

ENERGY:

The oil markets had a green day today:

Crude Oil increased 0.21 USD/BBL or 0.52% to 40.3100
Brent increased 0.19 USD/BBL or 0.44% to 42.9100
Natural gas increased 0.03 USD/MMBtu or 1.74% to 1.7530
Gasoline increased 0.0031 USD/GAL or 0.25% to 1.2492
Heating oil increased 0.0052 USD/GAL or 0.43% to 1.2204

The above data was collected around 13:53 EST on Tuesday.

Top commodity gainers: Natural Gas (1.74%), Palm Oil (1.48%), Orange Juice (1.12%), and Lumber (9.30%)
Top commodity losers: Sugar (-1.99%), Corn (-1.96%), Oat (-10.18%), and Ethanol (-7.34%)

The above data was collected around 14:00 EST on Tuesday.

BONDS:

Japan 0.03%(-0bp), US 2’s 0.15% (-1bps), US 10’s 0.61%(-3bps); US 30’s 1.29%(-5bps), Bunds -0.44% (-4bp), France -0.13% (-3bp), Italy 1.29% (-2bp), Turkey 12.34% (+3bp), Greece 1.30% (+7bp), Portugal 0.44% (-3bp); Spain 0.44% (-1bp) and UK Gilts 0.15% (-4bp).