Market Talk – June 23, 2020

Posted Jun 23, 2020 by Martin Armstrong |

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ASIA:

China National Biotec Group (CNBG) has won approval to run a large-scale “Phase 3” clinical trial of its novel coronavirus vaccine candidate in the United Arab Emirates (UAE), the company said on Tuesday. China is seeking to trial potential vaccines overseas because of a lack of new patients at home.

China on Tuesday successfully put into orbit its final Beidou satellite, completing a navigation network years in the making and setting the stage to challenge the U.S.-owned Global Positioning System (GPS). The idea to develop Beidou, or the Big Dipper in Chinese, took shape in the 1990s as China’s military sought to reduce its reliance on GPS, which is run by the U.S. Air Force.

India’s western state Maharashtra, home to the financial capital of Mumbai, has stalled a proposal by China’s Great Wall Motor to invest nearly $500 million. This comes days after a deadly border clash between the two nations, potentially delaying the company’s plan to tap one of the world’s biggest car markets. The state government said on Monday it had put on hold three investment proposals from Chinese firms worth $658 million in total, including Great Wall. The initial agreements are not canceled, but further action is awaited, said Maharashtra’s industries minister Subhash Desai.

India’s Union Aviation Ministry stated on Tuesday that the government is considering the establishment of “individual bilateral bubbles” with the US, the UK, Germany, and France for allowing airlines of the respective countries in the agreement to operate international passenger flights. The ministry’s statement came on the heels of the US Department of Transportation’s announcement Monday that it has barred Air India from operating chartered flights between India and the United States from July 22 without its prior approval, in what seems to be a retaliatory measure against Indian government’s decision of not allowing American carriers to operate between the two countries. Creating a travel bubble involves reconnecting countries or states that have shown a good level of success in containing the novel coronavirus pandemic domestically. Such a bubble would allow the members of the group to rekindle trade ties with each other, and kickstart sectors such as travel and tourism.

India’s Supreme Court rejected a request by power producers to extend a deadline to install equipment to cut emissions by two years to 2024, according to an order uploaded on the court’s website late on Monday. India has a phased plan for plants to comply with emissions standards, which involve installing Flue Gas Desulphurization (FGD) units that cut emissions of Sulphur dioxide known to cause lung diseases. More than half of India’s coal-fired power plants ordered to retrofit equipment to curb Sulphur oxide emissions are set to miss deadlines which go up to the end of 2022.

The major Asian stock markets had a green day today:

NIKKEI 225 increased 111.78 points or 0.50% to 22,549.05
Shanghai increased 5.35 points or 0.18% to 2,970.62
Hang Seng increased 396.00 points or 1.62% to 24,907.34
ASX 200 increased 9.90 points or 0.17% to 5,954.40
Kospi increased 4.51 points or 0.21% to 2,131.24
SENSEX increased 519.11 points or 1.49% to 35,430.43
Nifty50 increased 159.80 points or 1.55% to 10,471.00

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00144 or 0.21% to 0.69430
NZDUSD increased 0.00112 or 0.17% to 0.65036
USDJPY decreased 0.47 or -0.44% to 106.45
USDCNY increased 0.00057 or 0.01% to 7.05769

Precious Metals:

Gold increased 11.09 USD/t oz. or 0.63% to 1,765.55
Silver increased 0.12 USD/t. oz or 0.67% to 17.9400

Some economic news from last night:

Japan:

Manufacturing PMI (Jun) decreased from 38.4 to 37.8

Services PMI increased from 26.5 to 42.3

South Korea:

PPI (YoY) (May) remain the same at -1.7%

PPI (MoM) (May) increased from -0.9% to 0.0%

Australia:

Manufacturing PMI increased from 44.0 to 49.8

Services PMI increased from 26.9 to 53.2

Some economic news from today:

Japan:

BoJ Core CPI (YoY) increased from -0.1% to 0.0%

Singapore；

CPI (YoY) (May) decreased from -0.7% to -0.8%

EUROPE/EMEA:

Boris Johnson has eased the lockdown to bring England out of “hibernation” after ditching the two meter social distancing rule as part of the most significant relaxation of coronavirus restrictions since they were imposed three months ago. Pubs, restaurants, hotels, and hairdressers can open from July 4 in England, when social distancing rules will be eased. Two households in England will also be able to meet indoors and stay overnight with social distancing. The prime minister warned that all the steps were “reversible.”

UK Ministers are in talks to create “air bridges” with a number of “core” European countries including Spain, Italy, Greece, France, Turkey, and Croatia to let holidaymakers go abroad this summer without having to quarantine on their return. Austria and Germany are also among the countries officials are considering, the Guardian reported.

The German government leapt into action Monday to rescue a proposed €9 billion ($10.1 billion) coronavirus bailout for Lufthansa that has run into resistance from a billionaire shareholder. German billionaire Thiele has in recent weeks built up a 15 percent stake in Lufthansa, making him the group’s largest single shareholder and raising fears he could block the government deal. Lufthansa shareholders are voting on Thursday on a rescue plan that would see German government take a 20 percent stake in the company.

France, the second biggest economy in the European Union returned to growth this month even as activity in the rest of the region continued to decline. The $3 trillion French economy grew this month for the first time since February, as coronavirus restrictions were eased and domestic consumption ticked up, according to a closely-watched survey published by CNN. Country’s Purchasing Managers’ Index, which tracks activity in the manufacturing and services sectors, jumped to 51.3 in June from 32.1 in May. French President Emmanuel Macron said in March that no French company, whatever its size, would be allowed to collapse because of the pandemic. The government will be spending close to $521 billion to help its economy recover, French finance minister Bruno Le Maire said in an interview with French radio RTL this month.

The major Europe stock markets had a green today:

CAC 40 increased 68.98 points or 1.39% to 5,017.68
FTSE 100 increased 75.50 points or 1.21% to 6,320.12
DAX 30 increased 260.79 points or 2.13% to 12,523.76

The major Europe currency markets had a mixed day today:

EURUSD increased 0.00376 or 0.33% to 1.13124
GBPUSD increased 0.00245 or 0.20% to 1.25185
USDCHF decreased 0.00254 or -0.27% to 0.94463

Some economic news from Europe today:

UK:

Composite PMI increased from 30.0 to 47.6

Manufacturing PMI increased from 40.7 to 50.1

Services PMI increased from 29.0 to 47.0

France:

French Manufacturing PMI (Jun) increased from 40.6 to 52.1

French Markit Composite PMI (Jun) increased from 32.1 to 51.3

French Services PMI (Jun) increased from 31.1 to 50.3

Germany:

German Composite PMI (Jun) increased from 32.3 to 45.8

German Manufacturing PMI (Jun) increased from 36.6 to 44.6

German Services PMI (Jun) increased from 32.6 to 45.8

Euro Zone:

Manufacturing PMI (Jun) increased from 39.4 to 46.9

Markit Composite PMI (Jun) increased from 31.9 to 47.5

Services PMI (Jun) increased from 30.5 to 47.3

US/AMERICAS:

Keith Krach, the US undersecretary of state for economic growth, addressed his disappointment with the UK for employing Huawei to implement 5G towers despite heeding warnings over the company’s alleged deceptive practices. Krach called the Chinese tech giant a “parasite” that will leech onto the UK. “They want to get their hands on the technology and IP [intellectual property] to take back to China,” he stated.

In other US-China news, Trade Adviser Peter Navarro retracted his statement that the trade deal was effectively “over” between the two countries. Navarro said his statements were taken “wildly out of context” by the media. President Trump took to Twitter on Monday night to reiterate that the trade deal is still in place. “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!” Trump tweeted. US equities experienced gains in early Tuesday trading after the issued was clarified.

The new U.S.-Mexico-Canada trade agreement goes into effect on July 1. However, there is already some controversy brewing, as the US is reconsidering reimplementing tariffs on Canadian aluminum. According to Reuters, the American Primary Aluminum Association claims that Canada’s recent outpouring of aluminum imports is “destroying what remains of the United States industry.” Canada maintains that their trade has not jeopardized the US aluminum market.

A judge has ordered President Jair Bolsonaro of Brazil to begin wearing face masks in public. Bolsonaro has been an outspoken critic of the coronavirus response and has adamantly discouraged wearing a mask in public. Federal Judge Renato Borelli said Bolsonaro will be subject to a fine of 2,000 reais ($387 USD) per day if he is seen without a mask.

US Market Closings:

Dow advanced 131.14 points or 0.5% to 26,156.1
S&P 500 advanced 13.43 points or 0.43% to 3,131.29
Nasdaq advanced 74.89 points or 0.74% to 10,131.37
Russell 2000 advanced 5.81 points or 0.41% to 1,439.34

Canada Market Closings:

TSX Composite advanced 47.85 points or 0.24% to 937.54
TSX 60 advanced 2.29 points or 0.24% to 937.54

Brazil Market Closing

Bovespa advanced 639.2 points or 0.67% to 95,975.16

ENERGY:

UAE’s ADNOC today announced a $20.7 billion deal with six international companies for the acquisition of a minority stake in Adnoc Gas Pipeline Assets. Under the terms of the deal, Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund, the Ontario Teachers’ Pension Plan Board, Snam, and NH Investment and Securities will acquire a 49-percent interest in ADNOC Gas Pipeline Assets, a new subsidiary of the UAE’s national oil and gas company. The acquisition will give the buyers lease rights to 38 pipelines, but ADNOC will retain ownership of the assets and responsibility for capital expenditure plans. The lease rights will be in effect for 20 years.

The oil markets had a mixed day today:

Crude Oil increased 0.02 USD/BBL or 0.05% to 40.4800
Brent decreased 0.22 USD/BBL or -0.51% to 42.8100
Natural gas decreased 0.013 USD/MMBtu or -0.78% to 1.6450
Gasoline increased 0.0019 USD/GAL or 0.15% to 1.3036
Heating oil decreased 0.0139 USD/GAL or -1.13% to 1.2124

The above data was collected around 13.40 EST on Tuesday.

Top commodity gainers: Ethanol (5.08%), Orange Juice (1.49%), Lean Hogs (1.29%), and Lumber (1.60%)
Top commodity losers: Sugar (-1.26%), Cocoa (-1.79%), Coal (-1.53%), and Soda Ash (-1.30%)

The above data was collected around 13:45 EST on Tuesday.

BONDS:

Japan 0.01%(+0bp), US 2’s 0.19% (-0bps), US 10’s 0.72%(+1bps); US 30’s 1.50%(+4bps), Bunds -0.41% (+3bp), France -0.08% (+3bp), Italy 1.33% (-3bp), Turkey 11.52% (-7bp), Greece 1.32% (+1bp), Portugal 0.50% (-0bp); Spain 0.51% (+4bp) and UK Gilts 0.21% (+2bp).