Archives of “May 2020” month

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China reaffirms that it is to steadily promote the internationalisation of the yuan

  
Analysis, Forex
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Comments via Chinese state media, Xinhua

China
  • China will increase two-way fluctuations of the yuan
  • China is to improve market-based currency formation mechanism
  • China will deepen market-based interest rate reform
  • China to allow foreign controlled companies in more sectors
  • China to ease market access in the services sector
  • China will minimise direct interference from government on micro-economic activities
Some interesting remarks being communicated at an interesting time. If anything, I would argue that this repeated pledge to further open up its economy and financial markets is to reassure investors that the overall landscape has not changed.
In the big picture though, you have to wonder how the amount of nationalism and xenophobia brought about by the coronavirus crisis is going to translate into business/investment decisions of many companies from all countries across the world.

Chinese oil demand is reportedly almost back to pre-coronavirus crisis levels

  
  Analysis
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Bloomberg reports on the matter

The report says that Chinese oil demand is all but back to levels last seen before nationwide lockdown measures were imposed to curb the spread of the coronavirus outbreak, according to people with inside knowledge of the country’s energy industry.

Adding that consumption of gasoline and diesel has fully recovered as factories reopen and commuters drive rather than use public transport.
The exact level of oil demand in real time – according to executives and traders who monitor the country’s consumption – is said to be about 13 million bpd, which is just shy of the 13.4 million bpd seen around May 2019 and the 13.7 million bpd seen in December 2019.
For some context, the apparent drop in Chinese oil demand was seen at around 20%:
However true the figures are from this report, it is certainly giving hope to oil bulls that the market can recover from the severe imbalance – and perhaps more quickly than thought – that we are seeing currently. WTI crude is now up by over 8% on the day to $31.85.

Bundesbank: German Q2 economic activity significantly below that of Q1

  
Analysis, Economy

Comments by the German central bank in its monthly report

  • Sees momentum picking up later in Q2 as lockdown is lifted
  • Construction sector to be more robust than the rest of the economy
  • Fiscal support plan should be targeted, temporary
  • Some 6 million workers in state wage support during the month of April

A couple of token remarks from the Bundesbank with the headline pretty much reaffirming what we all already know about the German – and Eurozone for that matter – economy.

Later this week we will be getting the May preliminary PMI reports from the euro area and they should reflect a decent improvement relative to the historically low figures from April.
But even then, just take note that the bounce in PMI will not reflect the true loss of economic activity since PMI survey sentiment is largely based off one question i.e. how are business conditions compared to last month?
In that sense, the economic situation in May is certainly better than in April as lockdown measures are slowly being eased but it is definitely still way off pre-virus levels.

Six EU states to scrap bans on short-selling after today

  
  Analysis
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Austria, Belgium, France, Greece, Italy and Spain decide to scrap bans on short-selling stocks that began back in March

Besides Italy, the other five EU states will see the bans expire at 2159 GMT today and they have decided against renewing it. For some context, the bans were introduced back in March due to “excessive market volatility” and were extended back in April here.

As the other market watchdogs choose not to extend the bans, Italy is following to cut short their short-selling ban – supposed to be until 18 June – to align itself with the others.

Sell Buy

Huawei says that sees no immediate solutions to US chip restrictions

  
  Analysis
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Comments by Huawei rotating CEO, Guo Ping

Huawei
  • Still working out a response to US chip restrictions
  • Business will be significantly affected by the curbs
  • But confident of finding solutions soon
In case you missed it, the Huawei issue from last Friday dragged the market lower initially before equities staged yet another late comeback towards the end of the week.
This is going to be a long and drawn out saga between the two countries, so expect more measures and countermeasures to be enacted in the coming weeks/months in response.

Put Trading First, Be There Day In and Day Out

  
Analysis, Education
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  • Consistency is your willingness to put trading first in your life so you’re online day in and day out, trading your system to maximize the odds that it will work for you when the market is moving.
  • When traders take a break for whatever reason — because they want to play, because they have experienced a series of losses, because of complications in their personal lives, or because the market is dead — they end up missing moves that could have resulted in hefty profits.
  • That doesn’t mean you always have to trade, but you should always be there to follow the markets.
  • It’s very easy once you’re self-employed and trading to excuse yourself for all kinds of reasons. This can prove to be a devastating mistake. You will find over time that those days you take off to play golf or go fishing or whatever will inevitably be the days when the two or three trades you’ve been waiting for are triggered. These trades would have made your month very profitable. Then you have to scramble for the rest of the month. When you trade this way, you tend to lose money. Inconsistency does not pay off.

Trade on Intuition, Not Impulse

  
Analysis, Education
  • If you do your homework, you will develop a sense of intuition regarding the market. Intuition evolves from a foundation of long hours of study and work. It wells up from a long period of successful experience, thoughtful research, reflection, and wrestling with ideas, concepts, and markets.
  • Traders who trade on impulse are usually ungrounded, very excitable, emotional, and often wrong about their trading decisions. Impulsive traders tend to get carried away by greed and fear.

Japan GDP for Q1, preliminary: GDP -0.9% sa q/q (vs. expected -1.1%)

  
Analysis, Economy
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Japanese economic growth in the January to March quarter of 2020 – this the preliminary release

GDP -0.9% sa q/q
  • expected -1.1%, prior -1.8%

GDP -3.4% annualised sa q/q

  • expected -4.5%, prior -7.1%
GDP -0.8% nominal q/q
  • expected -1.3%, prior -1.5%

GDP deflator (an inflation indication) %

  • expected 0.7%, prior 1.2%

Private consumption -0.7%

  • expected -1.6% q/q, prior -2.8%

Business spending -0.5% (capex)

  • expected -1.5%, prior -4.6%
More:
  • 2 consecutive quarters of contraction for the Japanese economy, the economy moves into recession for the first time since H2 of 2015
  • Q1 exports had their biggest drop q/q since the 2nd quarter of 2011, down 6%
January and February were stable to slowly picking up for Japan but the outbreak in  March hit economic growth. The April to June quarter is likely to be even worse, with a more prolonged impact. Restrictions were imposed by the April 7 national emergency declaration shutting many restaurants, large retail outlets, hotels and more. The restrictions were partially lifted on May 14, but are still in place for Tokyo and Osaka, the two largest cities in Japan.
Yen doing little.
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