Archives of “August 6, 2020” day

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US dollar dips after Trump talks about payroll tax cut order

  
  Analysis
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Trump says executive order coming on a payroll tax cut and eviction protections

Trump says executive order coming on a payroll tax cut and eviction protections
Trump can delay the collection or payroll taxes and he can ban evictions for a time, but eventually those payments will come due. The idea may be that the end of the deferral will put pressure on Congress to waive it but it could also result it a bit of a payment cliff.
This was rumored and hinted at for more than a week so I’m not sure this is what’s moving the dollar at the moment but it’s something to watch. The larger theme of relentlessly rising US deficits is one that’s going to last years, not months.

European shares end the day lower. UK’s FTSE falls -1.1%.

  
Analysis, Global Indices

Down day for the major indices

The European shares are ending the day lower. The UK FTSE has fallen -1.1%. The Bank of England was very cautious about the prospects for the economy, but said that negative rates are not being considered (at least at the moment).

The provisional closes are showing:
  • German DAX, -0.4%
  • France’s CAC, -0.9%
  • UK’s FTSE 100, -1.2%
  • Spain’s Ibex, -1.1
  • Italy’s FTSE MIB, -1.3%

In the European debt market, the benchmark 10 year yields all fell on the day.

European yields are lower
In other markets as the European/London traders look to exit:
  • Spot gold is up $15.70 or 0.76% at $2053.44
  • Spot silver is up $1 or $0.04 or 3.86% $28
  • WTI crude oil futures are down $0.17 in a up and down trading session. The high price reached $42.65. The low price extended to $41.61.

US stocks have seen their share of ups and downs as well

  • S&P index is currently down -5 points or -0.15% at 3322.57
  • NASDAQ index is down -2.7 points or -0.02% at 10996
  • Dow industrial average is down 6.6 points or -0.03% at 27195

China repeats that it will take strong countermeasures as it opposes US-Taiwan meeting

  
  Analysis
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US health secretary, Alex Azar, will travel to Taiwan this month

US China
The trip will mark the highest-level visit by a US official to Taiwan since 1979 and marks a further break from convention in US-China ties in general.
China has come out to voice their displeasure over the situation and have now said that they will be taking firm countermeasures in response.
As much as this looks to be another point of escalation in tensions between the US and China, it still isn’t leading to any material breakdown in the relationship as both countries are still willing to play their respective parts in this whole “show”.

 

From what we have seen with these “strong countermeasures” and “tit-for-tat” response by both sides recently, it has all been child’s play and there is no reason to believe that this time around it will be any different.

Nikkei 225 closes lower by 0.43% at 22,418.15

  
Analysis, Global Indices

A softer day for Asian equities

Nikkei 06-08

Asian stocks are on the retreat in trading today as investors continue to weigh up the virus situation globally as well as the stalemate between US lawmakers on a stimulus deal, alongside the more exuberant mood in Wall Street overnight.

The better mood from US equities isn’t quite translating over with the Hang Seng seen down 1.6% while the Shanghai Composite is also down by 0.8% currently.
That said, the mood in US futures are more calm with S&P 500 futures up ~0.1% but off earlier highs in Asia Pacific trading. All eyes will be on Congress and whether or not they can reach a stimulus deal ahead of the weekend, though optimism is slowly fading.
In the currencies space, the dollar is still keeping a little weaker with EUR/USD up to 1.1885 though keeping in a narrower range for the day – only 23 pips up to 1.1900, extending gains following the BOE decision.
USD/JPY is also lower, down to 105.45 but is settling in a 23 pips range in trading thus far.

Full statement of the BOE August monetary policy meeting decision

  
  Analysis
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The full statement by the BOE on its August policy decision

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. In that context, its challenge at present is to respond to the economic and financial impact of the Covid-19 pandemic. At its meeting ending on 4 August 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee voted unanimously for the Bank of England to continue with its existing programmes of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, maintaining the target for the total stock of these purchases at £745 billion.

The Committee’s projections for activity and inflation are set out in the accompanying August Monetary Policy Report. Although recent developments suggest a less weak starting point for the Committee’s latest projections, it is unclear how informative they are about how the economy will perform further out. The outlook for the UK and global economies remains unusually uncertain. It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors. The MPC’s projections assume that the direct impact of Covid-19 on the economy dissipates gradually over the forecast period. Given the inherent uncertainties regarding the evolution of the pandemic, the MPC’s medium-term projections are a less informative guide than usual.

Global activity has strengthened over recent months, although it generally remains below its level in 2019 Q4. Covid-19 has continued to spread rapidly within a number of emerging market economies, however, and there has been a renewed rise in cases in many advanced economies. (more…)

BOE leaves bank rate unchanged at 0.10%

  
Analysis, Economy

BOE announces its latest monetary policy decision – 6 August 2020

  • Prior 0.10%
  • Bank rate votes 0-0-9 vs 0-0-9 expected
  • Asset purchase program total £745 billion
  • Will continue to minor the situation closely
  • Stands ready to adjust monetary policy accordingly
  • UK GDP expected to have been over 20% lower in Q2 2020 than Q4 2019
  • Higher frequency indicators imply that spending has recovered significantly
  • Projections assume that direct impact of the virus will dissipate gradually
  • Housing market activity appears to have returned to close to normal levels
  • Doesn’t intend to tighten policy until there is clear evidence that significant progress is being made in eliminating spare capacity and 2% inflation is sustained
  • Risks to the outlook are judged to be skewed to the downside
  • Sees UK GDP at -9.5% in 2020 (previously -14%)
  • Sees UK GDP at +9% in 2021 (previously +15%)
  • Sees UK GDP at +3.5% in 2022 (previously +3%)
  • Sees UK CPI at 0.25% in 2020 (previously 0.60%)
  • Sees UK CPI at 1.75% in 2021 (previously 0.50%)
  • Sees UK CPI at 2.00% in 2022 (previously 2.00%)
There are positives and negatives to take away but on the balance of things, it is more skewed to the former by the slightest bit. But in terms of key policy decisions, nothing has really changed as the BOE reaffirms their commitment to support the economic recovery.
In terms of positives, they are seeing that the economic downturn isn’t as severe – the language and current year projection show that – and that is something for bulls to chew on. In terms of negatives, it’s mostly on the inflation narrative over the next few months.
However, policymakers still see a modest recovery in inflation next year so that’s another positive takeaway but for now, it means more accommodative policy will stay for longer.
On the issue of negative rates, they side-stepped that by saying that they have other instruments to tweak such as asset purchases and forward guidance for now.
The pound is rising to fresh session highs against the dollar following the decision, with cable up to 1.3180 from around 1.3130 before the announcement.

Amazon’s Bezos sold $1.9 billion of his shares …. yours!

  
  Analysis
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Reuters with the report on stock sales by Amazon head and founder Jeff Bezos.

  • During the first two working days of August, Bezos sold over 600,000 shares
  • part of a previously announced trading plan
Bezos now only has 54.9 million shares left (roughly $176 billion). I know you’ll join me in sending thoughts and prayers. 😀
Reuters with the report on stock sales by Amazon head and founder Jeff Bezos.
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