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European shares and the day with solid gains

German Dax up 1.9%. UK FTSE 100 up 2.3%

The major European indices are ending the day with solid gains led by the UK’s FTSE 100.
The provisional closes are showing:
  • German DAX, +1.9%
  • France’s CAC, +1.7%
  • UK’s FTSE 100, +2.3%
  • Spain’s Ibex, +1.5%
  • Italy’s FTSE MIB, +1.8%

In the European debt market, the benchmark 10 year yields are ending the day mixed results. The UK and Spain yields are down marginally while Germany, France, Italy are marginally higher.

China says that US is blatantly bullying Chinese companies

China foreign ministry remarks on the SMIC case

US China
  • Urges US to stop oppressing Chinese companies
  • Says that without evidence, the US has abused national power to take measures on Chinese companies
In case you missed what the drama is all about, you can check out this post here.
It is all part of the recent tech tensions between the two countries but in the bigger picture, this is still all part of the show as they push each other’s buttons but not far enough to break the facade of the Phase One trade deal.

Switzerland August foreign currency reserves CHF 848.3 billion vs CHF 845.8 billion prior

Latest data released by the SNB – 7 September 2020

  • Prior CHF 845.8 billion

A slight increase in Swiss foreign reserves last month but the data here is mostly used as a proxy indicator of SNB intervention. However, the weekly sight deposits data offers a better (and quicker) glimpse of that so there isn’t much to read from the release above.

Have you heard about a ‘K’ shaped recovery?

Via Bloomberg

There was an interesting piece on Bloomberg mid week that countered the idea of a ‘V’ or ‘U’ shaped recovery with the idea of a ‘K’ shaped recovery. In essence this is highlighting that there is a two tier recovery that is taking place. The ‘two pathway’ system has a higher rate of recovery for the richer nations than the poorer nations.
The stocks and currencies from wealthier nations are outperforming their poorer emerging market peers during the COVID-19 crisis. It is a classic case of the ‘haves’ vs the ‘have nots’ with the potential divergence to increase if COVID-19 is not contained equally.
A Bloomberg study of 17 emerging markets found a correlation of 42% between GDP per capita and stock performance since the risk sell off began in January of this year. The correlation between GDP per capita and currency returns was 31%. Take a look at this Bloomberg chart below which illustrates the point:
Via Bloomberg 
The rich and poor divide is most pronounced in Asia. The stock returns from the four economies per capita GDP above $10000 last year (China, S.Korea, Taiwan and Malaysia) have been 20% above that of the nations which fall below that level including India, Indonesia. Philippines, and Thailand. Part of this is also the presence of more tech companies in the first list of countries it has also been the fact that the more affluent countries have had the benefit of advanced technologies, strong governance and a wider range of policy options to cope with the crisis.

Russia’s oil minister Novak Friday comments weighing on oil prices in Asia Monday

Russian Energy Minister Alexander Novak spoke On Friday at an on-line oil conference.

In summary:
  • oil demand globally could fall by 9 to -10 million barrels per day (bpd) this year
  • due to the impact on economies of the COVID-19 pandemic
Via Reuters:
  • “I have a rather more modest forecast, comparing to Goldman Sachs, for 2021. In my opinion, again, speaking about the average price per year, we could be in a corridor of $50 to $55 per barrel. But the volatility might be there,” he said via an interpreter.
(Novak referring to the Goldman Sachs Brent projection to $65/ barrel by Q3 of 2021 (and average $59.40 for the year)
Russian Energy Minister Alexander Novak spoke On Friday at an on-line oil conference.

Reports the US is considering blacklisting China tech firm SMIC

CNBC reports that the US is mulling imposing controls on SMIC

  • The firm is key player in China’s effort to boost its domestic semiconductor industry
  • Imposing export controls on SMIC would impact U.S. companies that sell chip-making technology to China manufacturers
SMIC denies its tech is being used for military purposes.
Weekend info from US media. Shares in the company in China (on the HK exchange) are under pressure due to the Sunday pieces.