Archives of “February 5, 2020” day

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Ahead of markets in China opening for Wednesday – support measures so far and here is what is still to come

  
  Analysis
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Nomura provide a summary of the market-supporting actions out of China (these have been discussed on ForexLive in prior days this week but this a nice summary)

PBOC:
  • cut the OMO rate by 10bps for both 7 and 14 day RRs
  • Monday PBoC injected CNY 2.1tln of short-term interbank liquidity (maturing loans offset some of this)
  • Tuesday the PBoC injected a further CNY net 00 bn yuan in RRs – largest single-day addition since January 2019
CSRC:
  • suspended securities lending from Monday until further notice
  • some funds were told to avoid actively selling stocks
    prop traders at brokerages told they were not permitted to be net sellers of equities this week
    would halt night sessions for futures trading
  • to allow some share pledge contracts to be extended by as long as six months
MoF:
  • an interest subsidy scheme for new loans ear-marked for medical supply companies fighting coronavirus
  • policies to extend loans to entrepreneurs and SMEs which have been hit by the coronavirus
They go on with what is still expected to come:
PBOC expected to cut RRR by 50 to 100bp
  • more MLF operations and OMOs coming (to inject long & short-term liquidity into the banking system)
  • MLF rate cut (by 10bps) – to be relfected in the February Loan Prime Rate (on the 20th)
Other:
  • tax/fee cuts, waivers
  • boost to u/e and insurance benefits to people who have lost income or been infected with the virus
  • higher fiscal deficits
  • local governments to get more flexibility in easing restrictions on the property sectors

Pres. Trump is weighing exiting from WTOs $1.7 trillion procurement pact

  
Analysis, Politics
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Pres. Trump on WTO procurement pact

The WTO procurement pactregulates the procurement of goods and services by the public authorities of the parties to the agreement, based on the principles of openness, transparency and non-discrimination.

The aim of the Agreement is to mutually open government procurement markets among its parties, consistent with principles of reciprocity. There are 48 nations in the pact.
The government procurement agreement (GPA) parties opens procurement activities worth an estimated USD 1.7 trillion annually to international competition (i.e. to suppliers from GPA parties offering goods, services or construction services).

ADP employment report due out Today

  
  Analysis
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Trade data and ISM non manufacturing indices due out tomorrow

Tomorrow in the North American session will have the ADP employment report for the month of January will be released at 8:30 AM ET/1330 GMT.  The estimate is for 158K. That near the expectations for nonfarm payroll on Friday of 162K.
The ADP is supposed to track the NFP numbers, but there can be some divergences as well.
The largest disparities came in November 2019 when  nonfarm payroll was higher than ADP by 122K.
Back in February 2019 there was a larger disparity of 164K. However, in that month the ADP was higher than the nonfarm payroll.
The last 12 months has shown ADP vs NFP:
  • Dec 202K vs 145K
  • Nov 124K vs 256K
  • Oct 121K vs 156K
  • Sept 93K vs 180K
  • Aug. 157K vs 168K
  • July 142K vs 159K
  • June 112K vs 193K
  • May 41K vs 72K
  • April 271K vs 224K
  • March 151K vs 189K
  • Feb 197K vs 33K
  • Jan 300K vs 311K
The differences are:
  • Dec ADP +57
  • Nov NFP +122K
  • Oct NFP +35K
  • Sept NFP +87K
  • Aug NFP +11K
  • July NFP +17K
  • June NFP +81K
  • May NFP +31K
  • April ADP +47
  • March NFP +38K
  • Feb ADP +164K
  • Jan NFP +11K
The ADP average has been 159.25K
The NFP average has been 173.83K
So on average the ADP lags the NFP by about 14K.
Nine of the last 12 months had NFP higher.
There were only 3 months (including the last report), where the ADP was higher than NFP.
The releases tomorrow include:
  • MBA mortgage applications. Last week they rose by 7.2%
  • US trade balance for December will be released at 8:30 AM ET/1330 GMT with estimates of -48.2 billion versus -43.1 billion and November
  • Canada will also release their international merchandise trade for December at 8:30 AM/1330 GMT. The estimate is for C$-0.61 billion versus C$-1.09 billion last month
  • Markit US services PMI for January (F) is expected to come in at 53.2. That is unchanged from the preliminary reading. The composite index has no estimate but last month it was at 53.1
  • ISM nonmanufacturing index for January is expected to come in at 55.1 versus 54.9 in December
Tonight at 9 PM ET, Pres. Trump will present the State of the Union address. He is expected to focus on the economy.

NASDAQ index closes at a record today and up 2.10%

  
Analysis, US Market

S&P and NASDAQ also advance nicely

The NASDAQ composite index is closing at a record level today and rose by 2.10%.  Although the S&P and Dow lagged but still rose by about 1.5%.

The final numbers are showing:
  • S&P index up 48.66 points or 1.5% at 3297.59
  • Nasdaq rose 194.57 points or 2.10% at 9467.97
  • Dow rose 407.82 points or 1.44% at 28807.63
Big gainers for the day included:
  • Tesla, +13.55% however after reaching a high of $968.85, the stock did lose ground into the close and is ending at $886
  • Slack, +10.87%
  • United Airlines, +5.37%
  • First Solar, +4.84%
  • Alibaba, +4.57%
  • Beyond Meat, +4.19%
  • Tencent, +3.67%
  • Delta Air Lines, +3.35%
  • Apple, +3.29%
  • Microsoft, +3.29%
  • Micron, +3.2%
  • Charles Schwab, +3.15%
  • Netflix, +3.06%
  • Caterpillar +2.9%
Losers on the day included:
  • Chewy, -3.05%
  • Alphabet, -2.51%
  • General Mills, -0.83%
  • Northrop Grumman, -0.53%
  • McDonald’s, -0.21%
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