Archives of “September 2020” month

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Eurozone September flash services PMI 47.6 vs 50.6 expected

  
  Analysis

Latest data released by Markit – 23 September 2020

  • Prior 50.5
  • Manufacturing PMI 53.7 vs 51.9 expected
  • Prior 51.7
  • Composite PMI 50.1 vs 51.9 expected
  • Prior 51.9

Business activity in the euro area pretty much grinds to a halt in September, with the services sector being the main drag as seen earlier from the French and German readings – owing to the resurgence in virus cases across the region.

The bright spot is that the manufacturing sector remains unperturbed by the situation as a pickup in foreign demand is helping to bolster new orders and output.
When put together, the pace of the recovery has certainly stalled somewhat towards the end of Q3 and this certainly doesn’t bode too well for the outlook going into Q4.
Markit notes that:

“The eurozone’s economic recovery stalled in September, as rising COVID-19 infections led to a renewed downturn of service sector activity across the region.

“A two-speed economy is evident, with factories reporting that production growth was buoyed by rising demand, notably from export markets and the reopening of retail in many countries, but the larger service sector has sunk back into decline as face-to-face consumer businesses in particular have been hit by intensifying virus concerns.

“Job losses also picked up in the service sector as more companies became worried about costs and overheads. Fortunately, factories saw slower staff shedding as pressure on capacity begins to emerge, suggesting the overall rate of job cutting has peaked.

“Encouragement comes from a further improvement in companies’ expectations for the year ahead, but this optimism often rests on infection rates falling, which remains far from guaranteed for the coming months. The main concern at present is therefore whether the weakness of the September data will intensify into the fourth quarter, and result in a slide back into recession after a frustratingly brief rebound in the third quarter.”

Cable extends fall to fresh two-month low as key support levels start to give way

  
Analysis, Forex

GBP/USD falls to 1.2680, its lowest level since 23 July

GBP/USD D1 23-09

Some modest strength in the dollar is helping to push cable lower, but the pound is still unable to get off the floor for the most part and that is also contributing to the decline in the pair to fresh lows since 23 July now.
Of note, the pair is now breaching key support levels from the confluence of the key daily moving averages @ 1.2724-26 as well as the 61.8 retracement level @ 1.2722.
That is leading to the bias in the pair turning more bearish with the drop under 1.2700 now leaving the pair vulnerable to a potential drop towards 1.2500 next.
The trifecta of bearish factors are also continuing to intensify for the pound.

Chinese state media United States actions on TikTok “almost the same as a gangster”

  
  Analysis

China Daily editorial on ‘dirty’ TikTok dealing (via Reuters)

  • China has no reason to approve the “dirty and unfair” deal based on “bullying and extortion” that Oracle Corp and Walmart Inc said they struck with ByteDance
  • “What the United States has done to TikTok is almost the same as a gangster forcing an unreasonable and unfair business deal on a legitimate company”
  • “National security has become the weapon of choice for … Washington when it wants to curb the rise of any companies from foreign countries that are out-performing their U.S. peers,” the editorial said.
  • “China as a big country will not accept blackmail from the U.S. Nor will it hand over control of an outstanding high-tech Chinese company to extortionists”
Is there any doubt on the state of relations between the two superpowers?

JP Morgan highlight a tailwind for equities … next week

  
  Analysis

JPM looking at month-end flows as a bullkiush factor next week.

Citing past research showing:
  • rebalances from fixed-weight asset allocation portfolios, along with the reversion of option rolling-driven expiry week momentum, tended to cause the market to mean-revert into month-and quarter-end.
JPM say that
  • equities have underperformed bonds month-to-date (but outperformed quarter-to-date)  (by -5%)
  •  a large majority of these portfolios rebalance on a monthly rather than quarterly frequency …. historically, the monthly rebalance effect is over 5x stronger than the quarterly rebalance effect. Thus, the equity buying by monthly rebalancing portfolios (due to equity underperformance MTD) much more than fully offsets the selling by quarterly rebalancing portfolios, meaning these portfolios are expected to be net buyers of equities into month/quarter-end. 
And thus:
  • we would expect rebalances by these fixed weight asset allocation portfolios to provide a tailwind to equities next week

More on tougher standards on a COVID-19 vaccine from the FDA, making pre election approval unlikely

  
  Analysis

The Washington Post has the story on the Food and Drug Administration being expected to introduce a new standard for an emergency authorization of a coronavirus vaccine

Which will make pre-election approval less likely.

Says the article:
  • The guidance, which is far more rigorous than what was used for emergency clearance of hydroxychloroquine or convalescent plasma, is an effort to shore up confidence in an agency that made missteps in its handling of those clearances.
Link here for more detail.
Announcement on this expected this week sometime.
The Washington Post has the story on the Food and Drug Administration being expected to introduce a new standard for an emergency authorization of a coronavirus vaccine 

NASDAQ leads the way to the upside. S&P and NASDAQ break 4-day losing streak

  
Analysis, US Market
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Dow breaks 3 day slide

The S&P and NASDAQ index broke a 4 day losing streak. The Dow industrial average broke its 3 day losing streak as investors liked Feds Powell comments on the economy is resilient, and the expectations at the Fed would remain on hold for a long period of time.

A look at the final numbers are showing:
  • S&P index rose 34.49 points or 1.05% to 3315.56. It’s high reached 33 to 0.31. The low extended to 3270.95.
  • Nasdaq index rose 184.83 points or 1.71% at 10963.62. Its high reached 10979.64. The low extended to 10737.51
  • Dow rose 140.34 points or 0.52% at 27288.04. It’s high reached 27333.09. The low extended to 26989.93.
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