Bloomberg report
The US has been pushing a narrative about China stealing user data and hacking with TikTok for awhile. The US government evidently wants to keep a monopoly in that business.
Archives of “July 2020” month
rssEuropean indices end the day in the red
Indices close near lows for the day
The European indices are ending the day lower and also closing near the lows for the day.
The provisional closes are showing:
- German DAX, -0.5%
- France’s CAC, -1.4%
- UK’s FTSE 100, -1.1%
- Spain’s Ibex, -1.7%
- Italy’s FTSE MIB, -0.7%
For the week, the indices are down sharply:
- German DAX -4.0%
- France’s CAC -3.49%
- UK’s FTSE 100, -3.25%
- Spain’s Ibex, -5.7%
- Italy’s FTSE MIB, -4.9%
For the month, the German DAX closed near unchanged. The other indices were lower:
- German DAX, unchanged
- France’s CAC, -3.1%
- UK’s FTSE 100, -4%
- Spain’s Ibex, -4.9%
- Italy’s FTSE MIB, -1.46%
In the benchmark 10 year yields today, yields have moved back higher after being negative at the start of the North American session
Japan warned about forex intervention earlier today
Finance minister Aso hinted something was coming
Japan tried some verbal intervention earlier today and it didn’t do much at first but it’s likely responsible for the reversal today, if not outright intervention.
A senior ministry of finance official was on the wires saying ‘forex stability is important’. That’s a code word and he added that they continue to watch forex markets with a sense of urgency.
That was followed up with comments from Taro Aso himself who repeated the same talking points, including that the yen has been rising rapidly and that the strength in the currency didn’t correspond with trade balance shifts.
USD/JPY continued to decline immediately after the comments but might have been caught in month-end flows out of Tokyo. Now we’re seeing a huge reversal. Later, tehre were reports of a meeting between the BOJ, MOF and FSA to discuss markets. That meeting was at 0700 GMT and the rally kicked off just before it began.
Details on US stimulus package show sides struggling to find common ground
Politico has some of the details
- Democrats blocked a week-long extension
- Republicans hinted at a four-month extension
- Pelosi said an extension need to go to Q1 or at least through January
- Debate for money for state and local governments was ‘contentious’
- Democrats looking for nearly $1 trillion for state/local governments
- There was common ground on PPP but not liability protections
Here’s how Politico’s Jake Sherman summed up last night’s meeting: “At the end of the discussion, they found basically no overlap. They agreed to talk more by phone about the allocation of money in places they agree. A deal is not within reach at this moment.”
For equity markets, a stalemate here would be highly negative but it’s very tough to handicap how it works out. Congress never gets anything done until the last minute. Although the benefits have run out, Congressional recess doesn’t begin until Aug 6. So look for a deal then. It might get worse before it gets better though.
US strikes $2.1 billion coronavirus vaccine deal with Sanofi, GlaxoSmithKline
Sanofi, GSK selected for Operation Warp Speed
The deal will see the firms provide the US government with 100 million doses of the coronavirus vaccine, with the US to provide up to $2.1 billion for development, clinical trials, manufacturing and the delivery of the initial batch of doses.
The US will also have a further option for a supply of additional 500 million doses of the vaccine in the longer-term. GSK adds that if study data are postive, the companies can request US regulatory approval some time in 1H 2021.
To put a bit of a timeline on things, phase 1/2 of the study is expected to start in September with Phase 3 set to be conducted by the end of the year.
That’s another win for both firms after having struck a deal with the UK government earlier in the week here.
China says that it won’t interfere in the stock market to stabilise expectations
And that will remain the tagline so long as things work out in their favour
Despite some choppiness in the past two weeks, it has been a stellar July month for Chinese equities in general. The CSI 300 index rose by nearly 13% this month:
And as long as the rise isn’t too parabolic i.e. going too far, too fast, and in serious need for a major correction à la 2015, then Chinese authorities will not stand in the way surely.
Nikkei 225 closes lower by 2.82% at 21,710.00
A rough end to the week for Japanese stocks
The Nikkei is ending the week on a softer note, as fears surrounding domestic and global growth are still evident amid the escalating virus situation in Japan and the US. The stronger yen also weighed on exporters as we see USD/JPY fall to 104.00 levels.
On the week, the Nikkei is seen down by over 4%.
Elsewhere, the Hang Seng is down 0.3% while the Shanghai Composite is keeping higher by 0.2% in a bit of a mixed session for Chinese equities today.
The broader picture paints a more cautious and defensive risk tone in Asian trading this week. For today, US futures are keeping calmer near flat levels but Nasdaq futures are higher after earnings beats from key tech giants overnight.
In the currencies space, the dollar is still among the laggards as we see EUR/USD inch towards 1.1900 and cable looking to keep a break above 1.3100.
AUD/USD forecast – to top out around 0.8000
Updated projections from National Australia Bank for the Australian dollar
- 0.74 by year end
- 0.77 by June 2021
- 0.80 by June 2022 and to peak there
Citing
- weak USD and to continue
- fair value for AUD has been pushed up
- improvement in risk sentiment
- improvement in key commodity price drivers
- Looking further ahead, better real interest rates and terms of trade are AUD supportive
Risk:
- geopolitical developments
- U.S. elections
Short end of the U.S. treasury curve has never been this low.
USD weakening further into Asia morning FX trade
The overnight (and past weeks!) USD weakness is carrying over into early Asia
Its heading towards 8.30am in Tokyo and 7.30 in Singapore and Hong Kong
Across the board USD weakness, although CAD is a laggard.
Apart from what I have been posting there is no fresh news.