June 2020 - Page 27 of 43 - Financial Occultist

Comments by China’s Cabinet adviser

Says China, US should resume timely communication on trade, other issues

One wonders if this is a message to the US or for prospective companies looking to invest into the Chinese market. Either way, both sides don’t appear to be on the best of terms right now but they are happy to let the illusion of the trade deal appease markets at least.

Nikkei 225 closes lower by 2.82% at 22,472.91

11-Jun-20 11:38 am

Anirudh Sethi

Asian stocks tumble amid the risk-off mood today

Risk is on the defensive following the Fed decision yesterday, with US futures down by over 1.8% currently and that is dragging the overall mood in the market today.

The Hang Seng is down by 1.7% while the Shanghai Composite is down by 0.6%, with the Kospi and STI also seeing losses of over 2% and 3% respectively on the session.

Meanwhile, bonds are rallying with 10-year Treasury yields dragged all the way down to 0.71% and the dollar is holding firmer across the board alongside the yen.

AUD/USD is seen down by over 1% to 0.6927 currently, retracing lower after resistance around 0.7000 and the December high at 0.7032 continues to hold.

There’s chatter of the Fed serving a dire outlook to markets and fears of a second wave of infections in the US weighing on the risk mood here, but I’d argue it is more to do with the Fed not really goosing the market further despite not removing the punch bowl.

A second wave of coronavirus infections brewing in the US?

11-Jun-20 11:35 am

Analysis

Anirudh Sethi

This comes as John Hopkins University reports that confirmed cases in the country surpasses the 2 million mark

A couple of red flags are being raised this week in the US, notably:

Texas reports its highest one-day count of new coronavirus cases i.e. 2,504 cases
Florida reports 8,553 new cases on the week – highest 7-day period total
California’s hospitalisations are at their highest since 13 May

Amid the ongoing protests in the country, the virus story is fading into the background – also the same for markets – but it is still something to be wary about.

I’ve mentioned before that the key thing for markets is how governments react to it and it is highly unlikely to expect a return to lockdown measures again.

In that sense, the “worst” is over but there are still more damaging parts that can’t really be quantified if the virus continues to be widespread among communities.

That will influence consumer behaviour/confidence and also impact the general workforce if there are going to be thousands of people sidelined every week because of this.

Despite the rise in the figures above, health experts are saying it is not clear if they are linked to the reopening of economies and the protests over the past two weeks.

But we’ll see how things go I guess. If there’s anything we’ve learnt from the initial outbreak is that complacency is the real killer.

Fed’s Powell press conference – the one thing that was missed in it

11-Jun-20 11:33 am

Analysis

Anirudh Sethi

A point I have not seen discussed re the FOMC on Wednesday and specifically Chair Powell’s comments were just how downbeat he seemed.

And I want to add my thoughts on what appeared to me to be almost expressions of surrender from the Chair. He was very downbeat on prospects for the economy, probably rightly so. Yes, he was dovish, and the Bank will remain stuck dovish for a oping time to come. But, even with such loose policy settings Powell seems very dour indeed about the outlook ahead.

I suggest that fits with the market response, limited though it is, specifically

gold up (policy looser for much, much longer)

S&P slipping on the day and AUD not taking much positive from the day – US, and thus global growth overall, to remain very, very subdued ahead.

Oh, on the AUD, add in the threats from China for Australia too:

Japan Quarterly Business Sentiment Index survey (Q2): large Japanese companies worst in 11 years

11-Jun-20 07:39 am

Analysis

Anirudh Sethi

Business Sentiment Index (BSI) survey conducted by the Ministry of Finance and the Economic and Social Research Institute (a part of Japan’s Cabinet office) is conducted quarterly.

Business sentiment among large Japanese companies minus 47.6 (from -10.1 in Q1)

worst result in 11 years
3rd quarter in a row in negative territory

For medium-sized companies, negative 54.1

and for mid- to small-companies minus 61.1
each also at their worst ever

Data out a little earlier.

—

Quarterly Business Sentiment Index (BSI) survey, conducted May 15

This survey analyses business leaders’ assessments of and forecasts for the economy
Its purpose is to get information for tracking economic trends
It covers about 15,000 companies that have established their headquarters or principal offices in Japan and have capital stock of 10 million yen or more

Deutsche Bank forecast EUR/USD to 1.20

11-Jun-20 05:39 am

Anirudh Sethi

DB looking for a ‘2nd stage’ USD decline

focus will once again turn to specific growth outcomes across countries
US management of virus crisi has been “suboptimal”, and there are large fiscal cliffs ahead
could push EUR/USD to $1.20

DB “would frame dollar weakness around two stages Stage 1: the removal of the dollar risk premium, EUR/USD to 1.15. This has been the most important driver of the dollar so far”

“Stage 2: the end of dollar exceptionalism”

Via Bloomberg

If Australia joins the US in a new cold war against China it will “pay an unbearable price “

11-Jun-20 05:28 am

Anirudh Sethi

China’s Global Times says Australia’s economy “cannot withstand” a cold war with China

Its an opinion piece in the outspoken GT and comes in response to US Republican Senator Rick Scott urging Australia to join the US in a new “Cold War” against China.

Here is the link, there is plenty more of this sort of thing here:

Canberra should be mindful of avoiding inappropriate statements from its officials or politicians that may echo what Scott urged.
Due to escalating tensions between the two countries on multiple fronts – such as the Hong Kong affair, a US-led inquiry into the origin of the coronavirus origins, and a travel and study warning – China-Australia relations have been rapidly sliding to near freezing point.
A new Cold War may only further jeopardize the already fragile relations between the two sides.

I wouldn’t think this sort of sentiment is a positive for AUD, yeah? Here is the link to the GT article

China's Global Times says Australia's economy "cannot withstand" a cold war with China

US stocks close mixed but off highs

11-Jun-20 05:25 am

Anirudh Sethi

NASDAQ index closes at a record level

The US stocks are closing the session with mixed results and well off the highs for the day. Both the S&P index and the Dow industrial average is closing near their session lows.

The NASDAQ index led the way and was the only major indices in Europe or the US to close higher. It also closed at a new all-time record high. Amazon, Microsoft, and Apple all closed at record high levels.

The S&P index and the Dow industrial average fell as financial slumped. Boeing shares were lower once again falling by 6.14% on the day.

The final numbers are showing: