Archives of “September 2020” month

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China’s Global Times (opinion piece) says the country likely to reduce its holdings of US Treasury bonds

  
  Analysis

This really should be read as a bit of a troll from the Global Times, here goes:

GT citing ‘experts’:
  • “China will gradually decrease its holdings of US debt to about $800billion under normal circumstances. But of course, China might sell all of its US bonds in an extreme case, like a military conflict,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Thursday. 
  • Zhou Maohua, an analyst at the Everbright Bank, said that although the US has never defaulted on its federal debts, it’s unlikely that US Treasury bonds will be dumped in the short term, and holders of those bonds — including China — face increasing default risks in the long term.
  • “Not defaulting before does not mean it won’t default in the future, and risks are accumulating with the ballooning debts and the slumping economic outlook in the US,” he told the Global Times
Check out the link above for more from the article
This really should be read as a bit of a troll from the Global Times, here goes:

US stocks tumble. Major indices have worst day since June (for S&P and Dow) and March (for Nasdaq)

  
Analysis, US Market
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Dow Jones falls -1025 points at its lows

The major indices are closing sharply lower. The major indices declines were the sharpest since June for the S&P and Dow.

For the NASDAQ, you have to go all the way back to March to have a worse trading day.

The Dow industrial average is now back negative in 2020. The declines snaps the S&P and NASDAQ 4 day winning streak. All 11 sectors of the S&P closed lower.
The final numbers are showing:
  • The S&P index fell 125.92 points or -3.52% at 3454.92. S&P index fell -4.28% at its lows
  • The NASDAQ index fell -598.34 points or -4.96% at 11,458.16. NASDAQ index fell -5.77% its lows
  • The Dow fell -808.50 points or -2.78% at 28292.33. Dow industrial average fell -3.52% at its lows

European shares are dragged back down as US stocks tumble

  
Analysis, Global Indices

Snatch defeat from the jaws of victory

The European indices were higher at the North American opening. However, the indices could not ignore the liquidation in the US indices and are closing the session lower on the day. The provisional closes are showing:
  • German DAX, -1.6%. It was up 1.64% at its highs
  • France’s CAC, -0.7%. It was up 1.98% at its highs
  • UK’s FTSE 100, -1.6%. It was up 0.93% at the high
  • Spain’s Ibex, -0.4%.. It was up 2.33% at its highs
  • Italy’s FTSE MIB, -1.8%. It was up 1.42% its highs

In the 10 year note sector, the benchmark yields are mixed:

Snatch defeat from the jaws of victory_
In other markets as London/European traders look to exit:
  • spot gold is trading down $16.4 or -0.84% $1926.70
  • spot silver is trading down $0.89 or -3.24% $26.55
  • WTI crude oil futures are down $-1.01 or 2.46% at $40.49

EUR/USD: Weekly close sub-1.1763 would target 1.15 – Citi

  
Analysis, Forex

Citi on the US

Citi on the US

Citi discusses EUR/USD technical outlook and flags scope for further downside.

“EURUSD peaked the week of 04 Sept 2017 at 1.2092 and entered into a deep correction that took it back to 1.1554 over 9 weeks. That was the deepest correction since the rally began in earnest in April that year. Thereafter it rallied higher to the 1.2555 Feb 2018 peak. Then, as now, weekly momentum was very overbought and started to turn lower,” Citi notes.

“Good support comes in between 1.1754 and 1.1782 and if that gives way then a deeper move towards 1.15 again would look an increased danger. A weekly close this week below 1.1763, if seen, would be a bearish outside week at the trend high and suggest more losses to come,” Citi adds.

Eurozone August final services PMI 50.5 vs 50.1 prelim

  
  Analysis

Latest data released by Markit – 3 September 2020

  • Composite PMI 51.9 vs 51.6 prelim
The preliminary report can be found here. Some slightly higher revisions but the story is the same as per what we are seeing across all the other national readings today i.e. a loss in momentum in the recovery.
The narrative is that the economic recovery in the region owes much to domestic demand, but that can only do so much as new business is somewhat lacking.
Add that on top of the more subdued labour market conditions, it is keeping the pace of the recovery limited and it remains to be seen how the situation will fare as we look towards the latter stages of the year. Markit notes that:

“Service sector companies across the eurozone saw growth of business activity grind almost to a halt in August, fueling worries that the post-lockdown rebound has started to fade amid ongoing social distancing restrictions linked to COVID-19.

“The near-stalling needs to be viewed in the context of the strong expansion seen in July: business growth had surged to a near two-year high as economies opened up further from the severe COVID-19 lockdowns. However, the latest reading still sends a disappointing signal that the rebound has lost almost all momentum.

“The deterioration was often linked to worries of resurgent COVID-19 infection rates, notably among consumer-facing companies and especially in Spain and Italy, where virus containment measures remained particularly strict.

“The larger size of the services economy means the subdued picture offsets the more upbeat survey of manufacturers in August, suggesting that the overall pace of economic growth has waned midway through the third quarter.

“Although the relative strength of the PMI data in July and August mean the autumn is likely to still see the economy rebound strongly from the collapse witnessed in the spring, the survey highlights how policymakers will need to remain focused firmly on sustaining the recovery as we head further into the year.”

China says will take ‘necessary response’ to new US restrictions on Chinese diplomats

  
Analysis, Politics

Comments by the Chinese foreign ministry

  • New US restrictions are illegal, not legitimate
They are alluding to this movement restriction imposed by the US on Chinese diplomats in the country. If anything else, the escalation in tensions continue to be rather gradual and as mentioned before, the trade deal – or at least the facade of it – is what matters most for the market and both sides aren’t willing to risk that for the time being.

Nikkei 225 closes higher by 0.94% at 23,465.53

  
Analysis, Global Indices

A bit of a mixed session for Asian equities

Nikkei 03-09
Japanese stocks end the day higher but gains petered out towards the end with US futures slipping a little in the closing stages in Asia. E-minis are down a little by ~0.3% currently, following record gains in Wall Street once again yesterday.
Elsewhere, the Hang Seng is down by 0.7% while the Shanghai Composite is down 0.5% with the latest round of US-China tensions adding to some pessimism on the day.

 

In the currencies space, the main story is still the pullback in the dollar as the greenback keeps firmer going into European trading. EUR/USD is down to fresh one-week lows around 1.1800 as the ECB begins jawboning the currency ahead of next week’s meeting.
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