Market Talk – July 21, 2021

Posted Jul 21, 2021 by Martin Armstrong |

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ASIA:

China has scrapped its population control policy. Families in China can have as many children as they like without facing fines or other consequences. The announcement ended, in practice, decades of restrictions on the number of children each household could have, as authorities attempt to encourage births in the face of a rapidly aging population. Births dropped 15% last year, a fourth-straight year of decline. China began loosening its strict one-child policy about six years ago after imposing it in the 1980s.

Suntory CEO Takeshi Niinami said the Olympics are losing their commercial value. He said that his company decided against being a sponsor of the upcoming Tokyo Games, saying it was “too expensive.”

Takahide Kiuchi, an economist at the Nomura Research Institute said according to an estimate having no domestic spectators could cost Japan’s economy 146.8 billion yen ($1.3 billion), The Tokyo Games have been hugely controversial, with countless protests to cancel the event and thousands of volunteers pulling out.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 159.84 points or 0.58% to 27,548.00
Shanghai decreased 25.87 points or 0.73% to 3,562.66
Hang Seng decreased 34.67 or -0.13% to 27,224.58
ASX 200 increased 56.50 points or 0.78% to 7,308.70
Kospi decreased 16.79 points or -0.52% to 3,215.91
SENSEX closed
Nifty50 closed

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00235 or 0.32% to 0.73574
NZDUSD increased 0.0054 or 0.78% to 0.69707
USDJPY increased 0.35700 or 0.32% to 110.28
USDCNY decreased 0.02355 or -0.36% to 6.46323

Precious Metals:

Gold decreased 5.24 USD/t oz. or -0.29% to 1,804.79
Silver increased 0.39 USD/t. oz or -1.56% to 25.297

Some economic news from last night:

Japan:

Adjusted Trade Balance decreased from 0.04T to -0.09T

Exports (YoY) (Jun) decreased from 49.6% to 48.6%

Imports (YoY) (Jun) increased from 27.9% to 32.7%

Trade Balance (Jun) increased from -189.4B to 383.2B

South Korea:

PPI (MoM) (Jun) decreased from 0.5% to 0.4%

PPI (YoY) (Jun) decreased from 6.6% to 6.4%

Australia:

MI Leading Index (MoM) decreased from 0.1% to -0.1%

Retail Sales (MoM) decreased from 0.4% to -1.8%

New Zealand:

Credit Card Spending (YoY) decreased from 27.2% to 6.3%

EUROPE/EMEA:

The UK has called for a complete overhaul of the Northern Ireland Protocol, a key tenet of the Brexit agreements that Prime Minister Boris Johnson agreed with the European Union in 2019. The British government’s Brexit minister, Lord Frost, told Parliament on Wednesday that the agreement needs drastic changes and urged the EU to renegotiate, arguing that “we cannot go on as we are” given the “febrile political climate” in the region. The U.K. is seeking to eliminate most checks on goods traveling between Great Britain and Northern Ireland.

Capital Economics’ group chief economist, Neil Shearing, said that European economy is on its course to recovery following steps takes by the region for looser restrictions in the second half of 2021, and a rebound in hiring, spending, and economic activity. Europe is one of the few developed regions in the world in which some economists expect to see better GDP gains in 2022 than in 2021. The near-term fiscal and monetary policy outlook is relatively more positive for markets there, as well. Unlike US and China European Union’s largest-ever stimulus package hasn’t even begun to be distributed, and this makes investors feeling valuation vertigo may help find cheaper stocks in Europe, where indexes trade at marked discounts to their American peers

The major Europe stock markets had a green day:

CAC 40 increased 117.63 points or 1.85% to 6,464.48
FTSE 100 increased 117.15 points or 1.70% to 6,998.28
DAX 30 increased 206.23 points or 1.36% to 15,422.50

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00225 or 0.19% to 1.18006
GBPUSD increased 0.00878 or 0.64% to 1.37178
USDCHF decreased 0.00404 or -0.44% to 0.91730

Some economic news from Europe today:

UK:

Public Sector Net Borrowing (Jun) increased from 19.87B to 22.02B

Public Sector Net Cash Requirement (Jun) decreased from 21.703B to 11.254B

Italy:

Italian Industrial Sales (YoY) (May) decreased from 105.10% to 40.20%

Italian Industrial Sales (MoM) (May) decreased from 3.30% to -1.00%

US/AMERICAS:

Johnson & Johnson announced today that they expects to sell $2.5 billion worth of COVID vaccines in 2021. The single-dose vaccine grossed $12.59 in revenue for the company, resulting in a 17.2% YoY increase. The company’s medical device sales also soared during the pandemic after generating $6.9 billion (62.7% YoY). If a booster shot for COVID variants becomes available, the company will likely see profits soar. Their estimated earnings for the year were revised upward from a high-end estimate of $90.3 billion to $93.3 billion.

After the financial success of their coronavirus vaccination, biotech company Moderna is set to join the S&P 500. The company, currently valued over $100 billion, will replace Alexion Pharmaceuticals on the index as the company is being acquired by AstraZeneca. Shares of the company have soared over 280% over the last year due to their two-dose coronavirus vaccine. Moderna has provided over 100 million vaccinations worldwide and plans to deliver another one billion doses during 2021, with plans to triple that figure by 2022.

Biden announced that he agrees with Federal Reserve Chairman Jerome Powell’s decision to maintain a patient steady position regarding monetary policy changes. This goes hand in hand with Biden’s declaration that increased spending will not affect inflation, as Chairman Powell has stated that he is not concerned about growing inflation as he sees it as temporary. The matter has led many to believe that the Biden Administration will support Powell’s reinstatement. Former President Trump disagreed with the Fed’s decision to maintain artificially low rates, but the new administration stands behind the central bank’s current policy. A recent Reuters survey showed that 36 of 40 economists expect that he will be reinstated, but it is likely that we will not have confirmation until September.

US Market Closings:

Dow advanced 286.01 points or 0.83% to 34,798.00
S&P 500 35.63 points or 0.82% to 4,358.69
Nasdaq advanced 133.08 points or 0.92% to 14,631.95
Russell 2000 advanced 39.74 points or 1.81% to 2,234.04

Canada Market Closings:

TSX Composite advanced 167.34 points or 0.84% to 20,110.05
TSX 60 advanced 8.57 points or 0.71% to 1,207.89

Brazil Market Closing:

Bovespa advanced 475.05 points or 0.38% to 125,876.41

ENERGY:

The oil markets had a green day today:

Crude Oil increased 3.05 USD/BBL or 4.54% to 70.2500
Brent increased 2.85 USD/BBL or 4.11% to 72.2000
Natural gas increased 0.039 USD/MMBtu or 1.01% to 3.9150
Gasoline increased 0.0819 USD/GAL or 3.84 % to 2.2134
Heating oil increased 0.0727 USD/GAL or 3.61% to 2.0854

The above data was collected around 15:51 EST on Wednesday

Top commodity gainers: Crude Oil (4.54%), Brent (4.11%), Lumber (7.75%) and Coffee (7.18%)
Top commodity losers: Canola (-3.38%), Zinc (-1.17%), Bitumen (-1.41%), and Orange Juice (-0.90%)

The above data was collected around 15:55 EST on Wednesday.

BONDS:

Japan 0.015%(+1bp), US 2’s 0.21%(+0.008%), US 10’s 1.2917%(+6.99bps); US 30’s 1.9374%(+0.06%), Bunds -0.3900% (+2bp), France -0.0450% (+1.1bp), Italy 0.6928% (+0bp), Turkey 16.74% (-7bp), Greece 0.683% (+1bp), Portugal 0.259% (+2bp); Spain 0.356% (+8.9bp) and UK Gilts 0.6070% (+4bp).