Market Talk – March 23, 2021

Posted Mar 23, 2021 by Martin Armstrong |

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ASIA:

India plans to offer fresh incentives to companies making electric vehicles (EVs) as part of a broad auto sector scheme it expects to attract $14 billion of investment over five years, Reuters reported. The plans envisage $8 billion of incentives for carmakers and suppliers over a five-year period to drive large investment in the sector. Elon Musk’s Tesla Inc is already gearing up to enter India while rivals including Ford, Volkswagen, India’s Tata Motors, and Mahindra & Mahindra also have plans to invest billions of dollars in EVs to meet stricter global emissions regulations. The automotive incentive scheme is part of India’s broader $27 billion programs to attract manufacturers from the likes of China and Vietnam to capture a bigger share of the global supply chain and exports.

Japan’s government in March cut its view on exports for the first time in 10 months, and said overall economic conditions were still showing weakness due to the coronavirus pandemic. Among key economic elements, the government slashed its assessment of exports, a key driver of Japan’s trade-reliant economy, for the first time since May, saying they were increasing at a slower pace. Analysts expect Japan’s economy to shrink sharply in the current quarter as the emergency that ended on Sunday weighed on business activity and consumer spending. But they are also anticipating the decline will be followed by a rebound of an annualized 5.3% in the second quarter, as economic activity is expected to pick up following the easing of lockdown measures

The major Asian stock markets had a mixed day today:

NIKKEI 225 decreased 178.23 points or -0.61% to 28,995.92
Shanghai decreased 31.93 points or -0.93% to 3,411.51
Hang Seng decreased 387.96 points or -1.34% to 28,497.38
ASX 200 decreased 7.10 points or -0.11% to 6,745.40
Kospi decreased 30.72 points or -1.01% to 3,004.74
SENSEX increased 280.15 points or 0.56% to 50,051.44
Nifty50 increased 78.35 points or 0.53% to 14,814.75

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00742 or -0.96% to 0.76665
NZDUSD decreased 0.01131 or -1.59% to 0.70174
USDJPY decreased 0.12 or -0.11% to 108.68
USDCNY increased 0.00784 or 0.12% to 6.51540

Precious Metals:

Gold decreased 11.24 USD/t oz. or -0.65% to 1,727.45
Silver decreased 0.57 USD/t. oz or -2.20% to 25.207

Some economic news from last night:

Nerw Zealand:

Credit Card Spending (YoY) decreased from -10.7% to -12.4%

Some economic news from today:

Japan：

BoJ Core CPI (YoY) increased from -0.3% to -0.2%

Singapore:

CPI (YoY) (Feb) increased from 0.2% to 0.7%

EUROPE/EMEA:

The UK government, for its part, has again deliberately breached the Withdrawal Agreement with the EU that Prime Minister Boris Johnson signed early last year. The UK has chosen to be outside the EU’s customs union and single market, while the Republic of Ireland (an EU member state) remains in both, an online news agency reported.

European Central Bank President Christine Lagarde said the bank will not respond to inflation “blips,” as prices rise in the euro area. The ECB has struggled to achieve its inflation target of close to, but below, 2% over the past few years, which has been exacerbated by the coronavirus pandemic. However, recent data has shown an uptick in prices. The recent increases in prices in the euro zone have been linked to new tax rules in Germany as well as a new carbon tax, in addition to higher energy prices. The ECB estimates an inflation rate of 1.5% for 2021 and 1.2% in 2022.

The major Europe stock markets had a mixed day:

CAC 40 decreased 23.18 points or -0.39% to 5,945.30
FTSE 100 decreased 26.91 points or -0.40% to 6,699.19
DAX 30 increased 4.81 points or 0.03% to 14,662.02

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00695 or -0.58% to 1.18608
GBPUSD decreased 0.0088 or -0.63% to 1.37744
USDCHF increased 0.00962 or 1.04% to 0.93322

Some economic news from Europe today:

UK:

Average Earnings ex Bonus (Jan) increased from 4.1% to 4.2%

Average Earnings Index +Bonus (Jan) increased from 4.7% to 4.8%

Claimant Count Change (Feb) increased from -20.8K to 86.6K

Employment Change 3M/3M (MoM) (Jan) decreased from -114K to -147K

Unemployment Rate (Jan) decreased from 5.1% to 5.0%

CBI Industrial Trends Orders (Mar) increased from -24 to -5

Italy:

Italian Industrial New Orders (YoY) (Jan) increased from -0.3% to 3.2%

Italian Industrial New Orders (MoM) (Jan) increased from 0.6% to 1.4%

Italian Industrial Sales (YoY) (Jan) decreased from -0.50% to -1.60%

Italian Industrial Sales (MoM) (Jan) increased from 1.10% to 2.50%

US/AMERICAS:

Treasury Secretary Janet Yellen voiced optimism about the US’ financial recovery today and even stated that the nation could reach full employment by 2022. Yellen noted that the US is still nearly 10 million jobs beneath pre-pandemic levels, and 22 million Americans do not have enough food to eat. Still, the Treasury secretary feels confident that the Rescue Plan funds will help Americans to keep “their lives intact.” She noted that the speed and strength of recovery depend on how legislation is implemented and that the government is currently looking at more potential relief options. “I am confident that people will reach the other side of this pandemic with the foundations of their lives intact. And I believe they will be met there by a growing economy. In fact, I think we may see a return to full employment next year,” Yellen stated this Tuesday.

Going against the general consensus, Dallas Federal Reserve President Robert Kaplan stated that he anticipates rates could rise by next year. However, he highlighted that policy changes will be made on concrete outcomes as opposed to forecasts. Kaplan expects unemployment to drop to 4% by the end of the year, which is only 0.5% beneath pre-pandemic levels. He also anticipates the economy to advance 6.5% this year.

The Biden administration has proposed vague new plans to implement new capital gains, wealth, and estate taxes. Those earning over $400,000 annually will pay more on capital gains, but it is unclear if the $400,000 applies to individuals of families. Currently, those making over that amount pay a 37% tax on wages and a 20% tax on investments. The discussions of an increased wealth tax remain unclear, but far-left Democratic senators would like to place a 2% wealth tax on households earning between $50 million and $1 billion, and 3% on households earning over $1 billion. The proposed estate tax may be the most controversial, as it would force heirs to pay taxes on any asset’s appreciation. Additionally, individuals will be limited in the amount they could transfer to heirs tax-free upon their death without their heirs paying estate and gift taxes.

US Market Closings:

Dow declined 308.05 points or -0.94% to 32,423.15
S&P 500 declined 30.07 points or -0.76% to 3,910.52
Nasdaq declined 149.85 points or -1.12% to 13,227.7
Russell 2000 declined 81.16 points or -3.58% to 2,185.69

Canada Market Closings:

TSX Composite declined 145.33 points or -0.77% to 18,669.8
TSX 60 declined 5.68 points or -0.51% to 1,115.77

Brazil Market Closing:

Bovespa declined 1,717.06 points or -1.49% to 113,261.8

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 2.78 USD/BBL or -4.52% to 58.7800
Brent decreased 2.65 USD/BBL or -4.10% to 61.9700
Natural gas decreased 0.048 USD/MMBtu or -1.86% to 2.5340
Gasoline decreased 0.0441 USD/GAL or -2.25% to 1.9157
Heating oil decreased 0.0554 USD/GAL or -3.03% to 1.7739

Top commodity gainers: Palm Oil (3.59%), Lumber (2.19%), Lean Hogs (1.42%) and Bitumen (2.45%)
Top commodity losers: Crude Oil (-4.52%), Cocoa (-2.28%), Brent (-4.10%), and Heating Oil (-3.03%)

The above data was collected around 13:17 EST on Tuesday.

BONDS:

Japan 0.08%(+0bp), US 2’s 0.15%(+0.002%), US 10’s 1.66%(-3bps); US 30’s 2.36%(-0.02%), Bunds -0.33% (+2bp), France -0.07% (-1bp), Italy 0.60% (-4bp), Turkey 18.37% (+30bp), Greece 0.87% (-5bp), Portugal 0.20% (-3bp); Spain 0.31% (-4bp) and UK Gilts 0.77% (-5bp).