Market Talk – July 21, 2020

Posted Jul 21, 2020 by Martin Armstrong |

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ASIA:

China has warned the UK that it will “bear the consequences” if it continues to go “down the wrong road” on Hong Kong after the UK suspended its extradition treaty with Hong Kong over a new security law that gives Beijing more power. A Chinese ambassador in London said, “China has never interfered in UK’s internal affairs. The UK should do the same to China.”

The Indian economy and customers will suffer as India plans to sanction several Chinese companies due to their “military connection,” because India can’t find an ideal replacement from other countries, said Chinese analysts. They said such moves only show that the Indian government failed to manage domestic nationalism. The Indian government has identified at least seven Chinese companies operating in India “with alleged direct or indirect links to the People’s Liberation Army (PLA) along with Chinese venture capital investments in India, including ‘big names,’ where the benefits of civilian innovation are suspected to be used for China’s defense sector,” Indian media the Economic Times reported on Monday.

India is seeking concessions for generic drugs it exports to the United States in return for opening its dairy markets and slashing tariffs on farm goods as the two sides seek to shore up a new trade deal, Reuters reported. India accounts for 40% of US generic drug imports, including the anti-malarial hydroxychloroquine, touted by President Donald Trump in the fight against the coronavirus. India, one of the world’s largest consumers of dairy products, has offered an opening to US dairy imports through a quota-based system.

Singapore’s economy plunged into recession in the last quarter as an extended lockdown hit businesses and retail spending. Economic growth in the city-state shrank by 41.2% compared to the previous quarter, the country’s biggest contraction on record. Authorities forecast it will be Singapore’s worst recession since independence from Malaysia in 1965.

The major Asian stock markets had a green day today:

NIKKEI 225 increased 166.74 points or 0.73% to 22,884.22
Shanghai increased 6.75 points or 0.20% to 3,320.89
Hang Seng increased 577.67 points or 2.31% to 25,635.66
ASX 200 increased 154.70 points or 2.58% to 6,156.30
Kospi increased 30.63 points or 1.39% to 2,228.83
SENSEX increased 511.34 points or 1.37% to 37,930.33
Nifty50 increased 140.05 points or 1.27% to 11,162.25

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.01154 or 1.64% to 0.71374
NZDUSD increased 0.00595 or 0.90% to 0.66403
USDJPY decreased 0.46 or -0.43% to 106.78
USDCNY decreased 0.01496 or -0.21% to 6.97099

Precious Metals:

Gold increased 23.06 USD/t oz. or 1.27% to 1,841.11
Silver increased 1.36 USD/t. oz or 6.82% to 21.2520

Some economic news from last night:

Japan:

CPI, n.s.a (MoM) (Jun) increased from 0.0% to 0.1%

National Core CPI (YoY) (Jun) increased from -0.2% to 0.0%

National CPI (YoY) (Jun) remain the same at 0.1%

South Korea:

PPI (MoM) (Jun) increased from 0.0% to 0.5%

PPI (YoY) (Jun) increased from -1.8% to -0.9%

New Zealand:

Credit Card Spending (YoY) increased from -20.6% to -9.2%

Some economic news from today:

Hong Kong:

CPI (YoY) (Jun) decreased from 1.50% to 0.70%

New Zealand:

GlobalDairyTrade Price Index decreased from 8.3% to -0.7%

EUROPE/EMEA:

A report by the UK Parliament Intelligence and Security Committee says the government was “slow to recognize the threat” posed by Russia, and did not take action to protect the UK from possible interference in the 2016 EU referendum. The inquiry did not seek to assess the impact of Russia’s alleged attempts to influence the 2016 EU referendum, and the report explains that it would be “difficult – if not impossible” to do so. It says: “However, it is important to establish whether a hostile state took deliberate action with the aim of influencing a UK democratic process, irrespective of whether it was successful or not.”

German Economy Minister Peter Altmaier speaking to the reporters on Tuesday said the likelihood of the German economy’s gradual economic recovery taking place in the second half of 2020 has increased. He credited European Union leaders agreeing on a huge stimulus plan for their economies hit by the coronavirus. He predicted a sustainable recovery in 2021 and 2022, adding that he expected all European countries to return to growth in 2021.

The first exchange-traded fund in the United Arab Emirates accessible to investors both in Dubai and Abu Dhabi is expected to list next month. The Chimera Umbrella Fund — Chimera S&P UAE Shariah ETF will have two different share classes that will track a Shariah-compliant index compiled from stocks listed on the main exchanges in both emirates. Abu Dhabi-based Chimera Capital LLC will manage it.

The major Europe stock markets had a green day:

CAC 40 increased 11.11 points or 0.22% to 5,104.28
FTSE 100 increased 8.21 points or 0.13% to 6,269.73
DAX 30 increased 124.91 points or 0.96% to 13,171.83

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00735 or 0.64% to 1.15280
GBPUSD increased 0.00956 or 0.76% to 1.27571
USDCHF decreased 0.00607 or -0.65% to 0.93281

Some economic news from Europe today:

UK:

Public Sector Net Borrowing (Jun) decreased from 44.47B to 34.80B

Public Sector Net Cash Requirement (Jun) decreased from 71.436B to 44.033B

Swiss:

Trade Balance (Jun) increased from 2.709B to 3.216B

US/AMERICAS:

The US Justice Department is charging two Chinese nationals for cyber espionage. Li Xiaoyu and Dong Jiazhi allegedly stole coronavirus data and pharmaceutical information. Additionally, the hackers stole proprietary source code along with weapon design blueprints. Although Beijing currently denies claims, US investigators have stated that the two men targeted hundreds of people worldwide. FBI Special Agent Raymond Duda stated that the hackers were the most advanced he had encountered and likely stole hundreds of millions worth of intellectual data.

Canada’s retail sector is on the rise, but still beneath pre-coronavirus levels, according to new data released by Statistics Canada this Tuesday. Retail sales in May jumped to C$42 billion or 18.7% from the month prior. Ten of the 11 tracked sub-sectors in retail reported gains in May, with grocery sales declining 2% as panic buying decreased and restaurants began to slowly reopen. Following the global trend, online sales are on the rise with Statistics Canada reporting that 8% of all sales in the nation occur over the web. Bank of Montreal economist Benjamin Reitzes attributed the gain to “pent up demand” and expects retail sales to rise in June. According to Reitzes’ analysis “the broader economy [will] experience a longer, more drawn out recovery as the pandemic continues to weigh on a number of sectors.”

Mexican Economy Minister Graciela Marquez is lobbying China-based companies to relocate to Mexico. There have already been talks with Posco, Ternium, Mitsubishi, and Nippon about relocating operations. Perhaps biggest of all is a lobbying effort to push Apple to relocate some of their manufacturing operations to Mexico. The USMCA trade deal combined with US imposed tariffs on China could make the move a tempting decision for various companies.

US Market Closings:

Dow advanced 159.53 points or 0.6% to 26,840.4
S&P 500 advanced 5.46 points or 0.17% to 3,257.3
Nasdaq declined 86.73 points or -0.81% to 10,680.36
Russell 2000 advanced 19.56 points or 1.33% to 1,487.51

Canada Market Closings:

TSX Composite declined 20.7 points or -0.13% to 16,162.96
TSX 60 declined 1.54 points or -0.16% to 971.5

Brazil Market Closing:

Bovespa declined 116.63 points or -0.11% to 104,309.74

ENERGY:

The oil markets had a green day today:

Crude Oil increased 1.17 USD/BBL or 2.87% to 41.9800
Brent increased 1.09 USD/BBL or 2.52% to 44.3700
Natural gas increased 0.027 USD/MMBtu or 1.64% to 1.6720
Gasoline increased 0.057 USD/GAL or 4.65% to 1.2827
Heating oil increased 0.0484 USD/GAL or 3.92% to 1.2817

The above data was collected around 15:00 EST on Tuesday.

Top commodity gainers: Silver (6.82%), Gasoline (4.65%), Palladium (4.62%), and Heating Oil (3.92%)
Top commodity losers: Palm Oil (-1.17%), Lumber (-3.57%), Cocoa (-1.94%), and Corn (-1.45%)

The above data was collected around 15:05 EST on Tuesday.

BONDS:

Japan 0.01%(-1bp), US 2’s 0.14% (-1bps), US 10’s 0.61%(-1bps); US 30’s 1.31%(-1bps), Bunds -0.46% (+1bp), France -0.16% (+1bp), Italy 1.17% (+2bp), Turkey 12.04% (-7bp), Greece 1.20% (+3bp), Portugal 0.38% (+0bp); Spain 0.38% (-1bp) and UK Gilts 0.14% (-2bp).