Archives of “August 2020” month

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Oil climbs to post-pandemic high as Laura intensifies

  
Analysis, Crude

WTI crude breaks the August high

WTI crude breaks the August high
WTI crude closed yesterday at a post-pandemic closing high but today it has also broken the intraday high. Crude was near a session low until the latest weather observations showed Hurricane Laura as a Category 3 storm and likely to intensify further. It’s headed for the heart of US offshore oil production and refining.
I’m skeptical of a storm-inspired breakout in oil because it’s not a fundamental change in the market. The chart to watch is Brent, as it also flirts with the August high and the 200-dma.
Brent
The next major update for Laura will be at 11 am ET. It’s expected to make landfall late tonight or early tomorrow.

France to unveil economic recovery plan on 3 September

  
Analysis, Economy

As confirmed by French prime minister, Jean Castex

France
The original unveiling date for the proposed plan was for 25 August but that has been pushed back since the weekend, with the government now confirming that they will present details of the €100 billion plan on 3 September instead.
Castex also adds that local authorities would do all they can to avoid another lockdown in efforts to limit the spread of the virus, as fears are growing over a second wave of infections starting to hit the country over the past few weeks.

Nikkei 225 closes lower by 0.03% at 23,290.86

  
Analysis, Global Indices

A tepid session for Asian equities today

Nikkei 26-08
Asian stocks are failing to take heart in the record-setting day for both the S&P 500 and Nasdaq yesterday, as the Nikkei closes near flat levels while the Hang Seng and Shanghai Composite are seen down by 0.1% and 1.3% respectively.
Equities are sort of taking a bit of a breather for now, though rising Treasury yields may be a bit of a concern as well. 10-year yields are now up by 3 bps to 0.714% on the day and are moving close to the 13 August high @ 0.725%.
The mixed risk tone is leaving little for major currencies to work with as ranges are keeping more narrow to start European morning trade. EUR/USD is a little lower at 1.1816 but still holding within a 32 pips range today.

China reportedly said to expect record amount of US soybean purchases this year

  
  Analysis
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Bloomberg reports, citing people familiar with the matter

The report says that China is said to expect a record amount of US soybean purchases this year as “lower prices help to boost purchases pledged under the Phase One trade deal”.
Adding that the total imports from the US will probably reach about 40 million tonnes in 2020, which will be around 25% more than the 2017 level – the baseline year for the deal.
That said, one of the sources did provide a caveat in saying that despite the forecast and expectation, China’s imports will ultimately be decided by soybean prices and the impact of the virus pandemic i.e. no firm commitment.
I don’t think the report here is a coincidence after customs data yesterday showed that Chinese imports of US soybeans were unusually low in July this year, while imports of Brazil soybeans surged considerably.
For some context, China’s purchases of US farm goods up until July are at just ~27% of the target implied by the Phase One trade deal.
US China

US election outcome poses potential downside risks to US equities

  
  Analysis
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Via HSBC, beginning with where we are at:
  • latest national opinion polls show Senator Joe Biden maintaining a healthy lead over President Trump
  • although lower than the double-digit gap reached in late June
  • Biden’s strong polling performance has coincided with a period of high US unemployment as the country grapples with the Covid-19 pandemic and a period of heightened social tensions earlier this summer
But, that could change:
  • A number of factors could materially shift either candidate’s standing in the coming weeks. 
  • Positive for Trump would be developments that lead to a faster economic recovery. This may include the potential for the pandemic to subside or further progress to be made with treatments and/or vaccines. Congress passing a new stimulus package that includes an extension to the unemployment insurance top-up will also be considered important. 
  • Other factors complicate the picture. There is uncertainty about the impact of increased mail-in voting due to the pandemic. Meanwhile, the US Electoral College system places greater importance on ‘battleground states’ to the final result, making national polls a less useful predictor. In the majority of these states, Biden is forecast to do worse than at the national level.
For markets:
  • The outcome of the election poses some potential downside risks to US equity markets. 
  • These include the possibility of a divided government and “deadlock” over fiscal policy support, while Biden may implement higher corporate taxes. 
  • For the time being, we maintain our overweight view on US equities as the “swoosh” economic recovery remains in play.”
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