Archives of “September 2020” month

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SNB leaves policy rate unchanged at -0.75%

  
  Analysis

SNB announces its latest monetary policy decision – 24 September 2020

  • Prior -0.75%
  • Sight deposit interest rate unchanged at -0.75%
  • Swiss franc is highly valued
  • Ready to step up intervention in FX market as necessary
  • Expansionary policy is necessary to ensure appropriate monetary conditions
  • Inflation outlook is subject to unusually high uncertainty
  • Sees inflation this year at -0.6%, 2021 at +0.1%, 2022 at +0.2%
  • Full statement

As expected, more or less a non-event as the SNB reaffirms their pledge to intervene in the market and to limit any significant appreciation in the franc. Given their outlook on inflation, one can expect continued interventions until the recovery looks less fragile.

BOJ minutes – policy Board says yet again it’ll will ease further if needed

  
  Analysis

Bank of Japan July 2020 meeting minutes.

Headlines via Reuters:
  • Board members agreed must ease further without hesitation if needed, with eyes on the impact of the pandemic on the economy
  • one member said must examine whether current policy framework is sufficient, act promptly if action is needed
  • one member said close, appropriate coordination between fiscal and monetary policies is crucial

 

  • members agreed there was risk financial intermediation could stagnate if financial institutions’ profits remain under prolonged strain
  • members agreed there was chance financial system vulnerability might heighten
  • one member said the BOJ must look more deeply into how monetary policy could be shaped in ‘with-corona’ world
  • one member said must scrutinise how monetary policy affects business management from medium-term perspective

 

more to come

US Indices tumbled lower. NASDAQ down 3% on the day

  
Analysis, US Market

S&P index falls over 2%

The S&P index and NASDAQ index closed lower for the 5th time in 6 days. All 11 sectors of the S&P moved lower. Stocks closed near their session lows with the NASDAQ index tumbling over 3%. The S&P index is 9% away from its high. The NASDAQ index is now 12% from its all-time high. The major indices are on track for their 4th week in a row lower.
No good news in all those statistics.
A look at the final numbers show:
  • S&P index -78.65 points or -2.37% at 3236.92. The low for the day reach 3232.57
  • NASDAQ index fell 330.565 points or -3.02% to 10632.96. The low price reached 10612.91
  • Dow industrial average fell -525.05 points or -1.92% to 26763.13. The low price reached 26716.12

Big losers today included:

  • Albemarle, -15.61%
  • Tesla, -10.3%
  • US steel, -8.06%
  • Lyft, -4.73%
  • Chevron, -4.73%
  • Salesforce -4.73%
  • Amazon, -4.18%
  • Schlumberger a, -4.15%
  • Netflix, -4.14%
  • Apple, -4.09%
  • Nvidia, -4.05%
  • Intuit, -3.89%
  • Square, -3.89%
  • AMD, -3.84%
  • Boeing, -3.6%
Winners today included:
  • Nike, +8.77%
  • Western Digital, +6.72%
  • Twitter, +6.11%
  • Zoom, +1.62%
  • Chipotle, +1.2%
  • Chewy, +0.94%
  • First solar, +0.71%
  • Bristol-Myers Squibb, +0.39%
  • Micron, +0.32%
  • J&J, +0.12%

Major European indices close higher but most close near their session lows

  
Analysis, Global Indices

UK FTSE outperforms

The major European indices are closing higher. However, most are closing near their session lows. The one exception is the UK FTSE which has the largest gain and closed near mid range.

The provisional closes are showing:
  • German DAX, +0.5% after trading as high as 1.88%
  • France’s CAC, +0.8% after trading as high as +2.07%
  • UK’s FTSE 100, up 1.3%, after trading as high as 2.49%
  • Spain’s Ibex, +0.4% after trading as high as 1.99%
  • Italy’s FTSE MIB, is up 0.3% after trading as high as 1.78%
Benchmark 10 year yields close mixed with UK yields up 1.8 basis points . Italian yields fell by -1.8 basis points.
European yields are mixedIn other markets as London/European traders head for the exits:
  • spot gold is continuing the tumble lower (following the clues from the higher USD) and trades down $-33.00 or -1.77% at $1866.48.
  • Spot silver is also sharply lower by $1.35 or -5.55% to $23.04
  • WTI crude oil futures are up $0.22 at $40.02

UBS says expects emergency approval of 1-3 vaccines in Q4 2020, to spark rotation in equities

  
  Analysis

UBS’ asset management arm weighs in on the market outlook later in the year

The firm says that they expect some form of emergency approval of between one to three coronavirus vaccines during Q4 2020, adding that they expect “full approval for broad inoculation to begin by the middle of next year”.
Considering such a development, the firm says that they would expect the vaccine approval to help spark a rotation in the equities space, with investors to shift from mega-cap tech firms – as per what we have been seeing – to value/cyclicals instead.
As for equities in general, the firm says that they prefer “pockets outside of the US”, noting that emerging markets, particularly Latin America, are a standout as the respective currencies look rather attractive as well.

UK September flash services PMI 55.1 vs 55.9 expected

  
Analysis, Economy

Latest data released by Markit/CIPS – 23 September 2020

  • Prior 58.8
  • Manufacturing PMI 54.3 vs 54.0 expected
  • Prior 55.2
  • Composite PMI 55.7 vs 56.1 expected
  • Prior 59.1

The recovery in the UK economy begins to lose steam, with household demand seen weakening towards the end of Q3. Business activity continues to grow at a modest pace but the data here mainly reflects the past as the focus stays more on the virus situation now.

The market is looking more towards what restrictions will be introduced by the government to curb the spread of the virus and that is what matters more for the pound at this stage.
Inevitably, if the virus situation worsens, that will also be reflected in business activity data as seen above as well. Markit notes that:

“The UK economy lost some of its bounce in September, as the initial rebound from Covid-19 lockdowns showed signs of fading.

“It was not surprising to see that the slowdown was especially acute in services, where the restaurant sector in particular saw demand fall sharply as the Eat Out to Help Out scheme was withdrawn. Demand for other consumer-facing services also stalled as companies struggled amid new measures introduced to fight rising infection rates and consumers often remained reluctant to spend.

“Encouragingly, robust growth in manufacturing, business services and financial services has offset weakness in consumer-facing sectors, meaning the overall rate of expansion remained comfortably above the survey’s long-run average, which adds to expectations that the third quarter will see a solid rebound in GDP from the collapse seen in the second quarter.

“However, jobs continued to be cut at a fierce rate in September as firms sought to bring costs down amid weak demand, meaning unemployment is likely to soon start rising sharply from the current rate of 4.1%. The indication from the survey that growth momentum is quickly lost when policy support is withdrawn underscores our concern over the path of the labour market once the furlough scheme ends next month, and raises fears that growth could fade further as we head into the winter months, especially as lockdown measures are tightened further.” 

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