Market Talk – July 27, 2021

Posted Jul 27, 2021 by Martin Armstrong |

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ASIA:

Intel Corp said on Monday its factories will start building Qualcomm Inc chips and laid out a roadmap to expand its new foundry business to catch rivals such as Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co Ltd by 2025. Intel said on Monday it expects to regain its lead by 2025 and described five sets of chipmaking technologies it will roll out over the next four years.

Indian digital payments firm Paytm expects to launch its initial public offering (IPO) at around the end of October, pending regulatory approvals, Reuters reported. Paytm, which has filed for a 166-billion-rupee ($2.2 billion) IPO that will likely be the largest ever in India, also expects to break even in 18 months, the source familiar with the matter said. The startup, which counts China’s Ant Group and Japan’s SoftBank among its backers, narrowed its operating loss to 16.55 billion rupees in the financial year to end-March 2021 from 24.68 billion a year before.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 136.93 points or 0.49% to 27,970.22
Shanghai decreased 86.26 points or -2.49% to 3,381.18
Hang Seng decreased 1,105.89 or -4.22% to 25,086.43
ASX 200 increased 37.10 points or 0.50% to 7,431.40
Kospi increased 7.58 points or 0.24% to 3,232.53
SENSEX decreased 273.51 points or -0.52% to 52,578.76
Nifty50 decreased 78.00 points or -0.49% to 15,746.45

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00247 or -0.33% to 0.73597
NZDUSD decreased 0.00475 or -0.68% to 0.69543
USDJPY decreased 0.72 or -0.65% to 109.61
USDCNY increased 0.04679 or 0.72% to 6.52819

Precious Metals:

Gold increased 2.77 USD/t oz. or 0.15% to 1,800.04
Silver decreased 0.545 USD/t. oz or -2.16% to 24.620

Some economic news from last night:

China:

Chinese Industrial profit (YoY) (Jun) decreased from 36.40% to 20.00%

Chinese Industrial profit YTD (Jun) decreased from 83.4% to 66.9%

Japan:

Corporate Services Price Index (CSPI) (YoY) decreased from 1.5% to 1.4%

South Korea:

GDP (QoQ) (Q2) decreased from 1.7% to 0.7%

GDP (YoY) (Q2) increased from 1.9% to 5.9%

Some economic news from today:

Indonesia:

Foreign Direct Investment (YoY) (Q2) increased from 14.00% to 19.60%

EUROPE/EMEA:

The European Central Bank confirmed its expansive monetary policy this week, in accordance with its recently reviewed inflation target and in a context of growing Covid 19 contagions that threaten recovery. As expected, the ECB kept its main interest rates remain at their lowest level, particularly negative 0.5% for banks deposits in ECB to force private banks to get money circulating. Likewise, with the Covid 19 Pandemic Emergency Purchase Program, PEPP launched in March 2020. with 1.85 trillion Euros for the purchase of private and government debt to keep financial conditions fluid. According to ECB President Christine Lagarde this program is expected to last until “at least until March 2022”, or in the case that ECB governors’ council considers that the coronavirus situation is over “. However, this situation seems to be losing predicament since the number of Covid 19 cases in Europe is again spiraling.

The annual inflation rate in the Euro Zone dropped slightly in June to 1.9% from 2% in May. If energy and food are excluded the aggregate was at 0.9%, which reflects weak inflationary pressures, particularly salaries and debilitated jobs market. For the time being ECB retains its expansive monetary policy because it considers that the recent spike in prices, following years of sliding down, almost deflation, is temporary and because it expects inflation to drop back to 1.4% by 2023.

The major Europe stock markets had a negative day:

CAC 40 decreased 46.68 points or -0.71% to 6,531.92
FTSE 100 decreased 29.35 points or -0.42% to 6,996.08
DAX 30 decreased 99.85 points or -0.64% to 15,519.13

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00332 or 0.28% to 1.18365
GBPUSD increased 0.00634 or 0.46% to 1.38866
USDCHF decreased 0.0025 or -0.27% to 0.91313

Some economic news from Europe today:

Italy:

Italian Trade Balance Non-EU (Jun) increased from 4.77B to 4.79B

UK:

CBI Distributive Trades Survey (Jul) decreased from 25 to 23

Euro Zone:

M3 Money Supply (YoY) (Jun) decreased from 8.4% to 8.3%

Loans to Non Financial Corporations (Jun) remain the same at 1.9%

Private Sector Loans (YoY) increased from 3.9% to 4.0%

US/AMERICAS:

The Federal Open Market Committee (FOMC), the decision-making branch of the Federal Reserve, will meet this week to discuss current monetary policies. Inflation is a notable concern after rising 5.4% in June, despite Federal Reserve Chairman Jerome Powell stating that inflationary pressures are temporary. The central bank has maintained rates near zero since the pandemic began in March 2020, citing that they want to see drastic improvements to the job market, among other things, before changing their position. The FOMC will likely need to explain their plan to continue purchasing $120 billion in monthly bond purchases despite some notable recovery, which was a policy that began in 020 to maintain artificially low rates and promote borrowing.

Walmart, America’s largest private employer, announced that it will pay the full cost of college tuition for its workers. As part of the Live Better U program, Walmart plans to invest $1 billion in the next five years to helo further employee education. The program will begin on August 16, providing 1.5 million workers with an opportunity for education.

The Department of Justice (DOJ) has stated that it is not illegal for public employers to mandate vaccinations. “As access to the COVID-19 vaccines has become widespread, numerous educational institutions, employers, and other entities across the United States have announced that they will require individuals to be vaccinated against COVID-19 as a condition of employment, enrollment, participation, or some other benefit, service, relationship, or access,” the DOJ’s Office of Legal Counsel wrote in an opinion piece. However, the White House has not mandated that their staff be vaccinated, and Secretary Jen Psaki admitted.

US Market Closings:

Dow declined 85.39 points or -0.24% to 35,058.92
S&P 500 declined 20.79 points or -0.47% to 4,401.51
Nasdaq declined 180.14 points or -1.21% to 14,660.58
Russell 2000 declined 25.09 points or -1.13% to 2,191.83

Canada Market Closings:

TSX Composite advanced 8.39 points or 0.04% to 20,173.35
TSX 60 advanced 0.97 of a point or 0.08% to 1,211.98

Brazil Market Closing:

Bovespa declined 1,391.83 points or -1.1% to 124,612.03

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 0.54 USD/BBL or -0.75% to 71.3700
Brent decreased 0.27 USD/BBL or -0.36% to 74.2300
Natural gas decreased 0.119 USD/MMBtu or -2.90% to 3.9830
Gasoline decreased 0.0032 USD/GAL or -0.14 % to 2.3051
Heating oil decreased 0.0137 USD/GAL or -0.64% to 2.1373

The above data was collected around 14:06 EST on Tuesday

Top commodity gainers: Palm Oil (1.05%), Orange Juice (4.67%), Bitumen (1.69%) and Soda Ash (4.27%)
Top commodity losers: Methanol (-1.98%), Natural Gas (-2.90%), Silver (-2.16%), and Lumber (-6.73%)

The above data was collected around 14:10 EST on Tuesday.

BONDS:

Japan 0.018%(+1bp), US 2’s 0.21%(+0.011%), US 10’s 1.2378%(-5.68bps); US 30’s 1.8943%(-0.05%), Bunds -0.4410% (-2.7bp), France -0.0890% (-1.5bp), Italy 0.6262% (-1bp), Turkey 16.98% (+4bp), Greece 0.6260% (-2bp), Portugal 0.199% (-1bp); Spain 0.294% (+6.79bp) and UK Gilts 0.560% (-1bp).