Market Talk – July 15, 2021

Posted Jul 15, 2021 by Martin Armstrong |

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ASIA:

The Biden administration has vowed to work with Australia to push back against China’s “unfair” trade practices, as the Morrison government seeks international support to fight Beijing’s tariffs on Australian wine. With the US declaring support from Australia, the Guardian reported that the European Union is also set to join as a third party if the dispute between Australia and China moves to the next stage at the World Trade Organization. A Chinese foreign ministry spokesperson, Zhao Lijian, last week amplified claims American exporters to China had gained at the expense of Australian exporters.

India’s central bank, The Reserve Bank of India (RBI) on Wednesday indefinitely barred Mastercard Inc from issuing new debit or credit cards to domestic customers for violating data storage rules, dealing a blow to the U.S. company in a key market. In a notification, the RBI said Mastercard had not complied with data storage rules from 2018 that require foreign card networks to store Indian payments data “only in India” so the regulator can have “unfettered supervisory access”. The RBI’s decision will not impact existing customers of Mastercard, and the company should advise all card issuing banks in India to comply with the order, the RBI added.

India’s annual wholesale price inflation eased to 12.07% in June from the previous month’s record of 12.94%, despite a spike in costs of fuel and manufactured goods, government data showed on Wednesday. Fuel prices rose 32.83% in June on the year while prices of manufactured items were up 10.88%, the data showed. A low-base effect also contributed to the WPI inflation in June, since it stood at -1.81% in the corresponding month of 2020.

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 329.40 points or -1.15% to 28,279.09
Shanghai increased 36.09 points or 1.02% to 3,564.59
Hang Seng increased 208.81 or 0.75% to 27,996.27
ASX 200 decreased 18.80 points or -0.26% to 7,335.90
Kospi increased 21.41 points or 0.66% to 3,286.22
SENSEX increased 254.80 points or 0.48% to 53,158.85
Nifty50 increased 70.25 points or 0.44% to 15,924.20

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00612 or -0.82% to 0.74190
NZDUSD decreased 0.00623 or -0.89% to 0.69762
USDJPY decreased 0.07 or -0.07% to 109.94
USDCNY increased 0.00254 or 0.04% to 6.46464

Precious Metals:

Gold increased 1.27 USD/t oz. or 0.07% to 1,828.33
Silver increased 0.07 USD/t. oz or 0.25% to 26.300

Some economic news from last night:

China:

House Prices (YoY) (Jun) decreased from 4.9% to 4.7%

Fixed Asset Investment (YoY) (Jun) decreased from 15.4% to 12.6%

GDP (YoY) (Q2) decreased from 18.3% to 7.9%

GDP (QoQ) (Q2) increased from 0.6% to 1.3%

Chinese GDP YTD (YoY) (Q2) decreased from 18.3% to 12.7%

Industrial Production (YoY) (Jun) decreased from 8.8% to 8.3%

Chinese Industrial Production YTD (YoY) (Jun) decreased from 17.8% to 15.9%

Retail Sales (YoY) (Jun) decreased from 12.4% to 12.1%

Chinese Retail Sales YTD (YoY) (Jun) decreased from 25.65% to 23.02%

Chinese Unemployment Rate remain the same at 5.0%

Japan:

Foreign Bonds Buying decreased from -191.4B to -1,217.8B

Foreign Investments in Japanese Stocks increased from -310.0B to -10.5B

South Korea:

Exports (YoY) (Jun) increased from 39.7% to 39.8%

Imports (YoY) (Jun) remain the same at 40.7%

Trade Balance (Jun) increased from 4.44B to 4.45B

Interest Rate Decision (Jul) remain the same at 0.50%

Australia:

MI Inflation Expectations decreased from 4.4% to 3.7%

Employment Change (Jun) decreased from 115.2K to 29.1K

Full Employment Change (Jun) decreased from 97.5K to 51.6K

Participation Rate (Jun) remain the same at 66.2%

Unemployment Rate (Jun) decreased from 5.1% to 4.9%

Some economic news from today:

Japan:

Tertiary Industry Activity Index (MoM) decreased from -0.8% to -2.7%

India:

Exports (USD) (Jun) increased from 32.46B to 32.50B

Imports (USD) (Jun) increased from 41.86B to 41.87B

Trade Balance (Jun) increased from -9.40B to -9.37B

Indonesia:

Export Growth (YoY) (Jun) decreased from 58.76% to 54.46%

Import Growth (YoY) (Jun) decreased from 68.68% to 60.12%

Trade Balance (Jun) decreased from 2.37B to 1.32B

EUROPE/EMEA:

Britain’s Office for National Statistics (ONS) said dearer food, secondhand cars, clothing, footwear, and fuel were the main factors behind a jump in the annual inflation rate from 2.1% to 2.5% in June. The figure was the highest since the 2.7% recorded in August 2018, higher than the 2.2% expected by analysts, and above the Bank of England’s 2% target. Core inflation, which strips out food, energy, alcohol and tobacco, rose from 2% to 2.3%, also above the expert consensus. According to the ONS, part of the increase in inflation as measured by the consumer prices index was caused by the bounce back in prices after they were depressed during the lockdown.

The Russian government will allocate more than 53 bln rubles for projects to develop transport infrastructure, Russian Prime Minister Mikhail Mishustin said at a cabinet meeting on Thursday. He recalled that earlier, Russian President Vladimir Putin announced the need to create a powerful backbone road network throughout the country. More than 11 bln rubles will be allocated to 20 Russian regions for the development of regional, intermunicipal and local roads, including a section of the Yekaterinburg ring road. Another 3 bln rubles will be allocated by the Cabinet of Ministers for the implementation of the first stage of construction of a high-speed latitudinal highway in St. Petersburg.

The major Europe stock markets had a negative day:

CAC 40 decreased 65.02 points or -0.99% to 6,493.36
FTSE 100 decreased 79.17 points or -1.12% to 7,012.02
DAX 30 decreased 159.32 points or -1.01% to 15,629.66

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00302 or -0.26% to 1.18036
GBPUSD decreased 0.00473 or -0.34% to 1.38092
USDCHF increased 0.00421 or 0.46% to 0.91884

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Jul) increased from 55.7 to 56.5

Average Earnings ex Bonus (May) increased from 5.7% to 6.6%

Average Earnings Index +Bonus (May) increased from 5.7% to 7.3%

Claimant Count Change (Jun) decreased from -92.6K to -114.8K

Employment Change 3M/3M (MoM) (May) decreased from 113K to 25K

Unemployment Rate (May) increased from 4.7% to 4.8%

Italy:

Italian CPI (MoM) (Jun) remain the same at 0.1%

Italian CPI (YoY) (Jun) remain the same at 1.3%

Italian CPI Ex Tobacco (MoM) (Jun) increased from 1.3% to 1.4%

Italian HICP (MoM) (Jun) remain the same at 0.2%

Italian HICP (YoY) (Jun) remain the same at 1.3%

Italy Thomson Reuters IPSOS PCSI (Jul) increased from 46.25 to 46.93

Germany:

Germany Thomson Reuters IPSOS PCSI (Jul) increased from 57.73 to 59.08

France:

France Thomson Reuters IPSOS PCSI (Jul) increased from 47.25 to 48.04

Euro Zone:

Reserve Assets Total (Jun) decreased from 885.46B to 869.05B

US/AMERICAS:

The US workforce is recovering, as indicated by the weekly report by the Labor Department that shows new unemployment claims plummeted to a post-pandemic low. First-time filers reached 360,000, representing the lowest weekly figure since March 2020 when the pandemic began. Continuing claims declined by 126,000 to 3.24 million, which marks another new post-pandemic low. Americans collecting benefits under government programs fell by 449,642 to 14.2 million, which is much higher than pre-pandemic readings, but significantly lower than the 33.2 million who were collecting benefits last year at this time.

Johnson & Johnson (JNJ -1.2%) is experiencing yet another major recall after a number of their sunscreens were found to contain cancer-causing agents. The Environmental Protection Agency found that at least five spray sunscreens contained benzene, which is harmful to humans at a certain level. Retailers have been notified and consumers may call the company to receive a refund. This case could likely result in another class-action lawsuit for Johnson & Johnson, as it was only a year ago that their baby powder was found to contain traces of asbestos. The incident has also left many wondering about the long-term safety of the company’s one-dose COVID vaccine.

After grossing over $17.5 billion in sales last year, a group of US Senators are working to legalize marijuana at the federal level. Sales of the product in the US increased 46% from 2019 to 2020, and analysts expect the industry to reach $41.3 billion by 2026. Although it is legal to some degree in 18 states, the plant is seen as a schedule one narcotic at the federal level and has led to millions of Americans being imprisoned and labeled as felons, leaving them unable to find employment or housing. Polls show that 70% of Americans would support legalization. The product would face similar taxes to alcohol under the proposal and would take an excise tax of 10% during the first year of federal legalization followed by a higher tax rate of 25% over the following five years.

US Market Closings:

Dow advanced 53.79 points or 0.15% to 34,987.02
S&P 500 declined 14.27 points or -0.33% to 4,360.03
Nasdaq declined 101.82 points or -0.7% to 14,543.13
Russell 2000 declined 12.07 points or -0.55% to 2,190.29

Canada Market Closings:

TSX Composite advanced 36.48 points or 0.18% to 20,183.72
TSX 60 advanced 3.58 points or 0.3% to 1,213.2

Brazil Market Closing:

Bovespa declined 938.63 points or -0.73% to 127,467.88

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 0.99 USD/BBL or- 1.35% to 72.1400
Brent decreased 0.8 USD/BBL or -1.07% to 73.9600
Natural gas decreased 0.025 USD/MMBtu or -0.68% to 3.6350
Gasoline decreased 0.0331 USD/GAL or -1.44% to 2.2604
Heating oil decreased 0.0197 USD/GAL or -0.92% to 2.1238

The above data was collected around 13:51 EST on Thursday

Top commodity gainers: Palm Oil (3.38%), Methanol (3.48%), Orange Juice (2.87%) and Coffee (3.11%)
Top commodity losers: Bitumen (-5.50%), Rice (-99.00%), Canola (-5.17%), and Lumber (-6.02%)

The above data was collected around 14:20 EST on Thursday.

BONDS:

Japan 0.01%(-1bp), US 2’s 0.2211%(-0.00%), US 10’s 1.3022%(-5bps); US 30’s 1.9251%(-0.05%), Bunds -0.3330% (-2bp), France 0.0020% (-2bp), Italy 0.7242% (+1bp), Turkey 16.70% (+2bp), Greece 0.696% (-0bp), Portugal 0.281% (-1bp); Spain 0.316% (+0bp) and UK Gilts 0.655% (+3bp).