Archives of “January 19, 2021” day

rss

Yellen: We’re prepared to use our full array of tools to address China

  
  Analysis

Comments from Yellen

Comments from Yellen
  • China is an important, strategic competitor
  • We need to work with allies to confront China
  • We also need to improve competitiveness in our economy
  • We need to take on China’s abusive and unfair practices, including stealing IP and subsidies
  • We’re prepared to use our full array of tools to address China
  • I believe in market-determined exchange rates
  • Value of dollar should be determined by market
  • I oppose foreign countries manipulating FX for gain
  • We will not seek weaker dollar to gain advantage and will work with Biden to oppose those who do
  • Biden doesn’t want to raise taxes during pandemic
  • Wants to reverse some incentives in 2017 Trump tax law, including incentives to move offshore
  • It is necessary for US companies to be globally competitive on taxes
  • Biden wants to ensure robust electric vehicle market along with related infrastructure

It’s pardon day with a side of Janet Yellen

  
  Analysis

What’s on the economic calendar today

It’s a unusual day on the economic calendar. The US is back from holiday but the lone economic indicator is TIC flows, which aren’t a market mover.
Earnings have been rolling out with Goldman Sachs easily beating estimates and rising 2% while Bank of America missed on revenue and shares fell 1.2% in the premarket. After the close, Netflix is due out.
The main economic item will be Yellen’s testimony at 10 am ET (1500 GMT). Her text is already out but she will be grilled by Congress. She will sure be grilled on the dollar and no doubt say she supports market-determined FX rates. If anything, I’m curious how she will respond if she’s asked about China/Swiss FX undervaluation or manipulation. But Yellen is a master of saying nothing so I’d be surprised if that changes now.
On the political front, it’s Trump’s final full day in office and that means it time for some pardons. Reports say he will sign more than 100 pardons. No word if Joe Exotic is on the list:

Germany January ZEW survey current situation -66.4 vs -68.3 expected

  
Analysis, Economy

Latest data released by ZEW – 19 January 2021

  • Prior -66.5
  • Expectations 61.8 vs 59.4 expected
  • Prior 55.0
  • Eurozone expectations 58.3
  • Prior 54.4

The continued jump in the expectations component remains the standout in the report as vaccine optimism and hopes of a stronger economic reopening later in the year is fueling more positive sentiment to start the new year.

This reflects the more optimistic investor sentiment as well but we’ll see how well this will hold up in light of restrictions set to be prolonged further to April in all likelihood.

IEA says that resurgence in coronavirus cases slows oil demand rebound

  
BITCOIN, Crude

IEA slashes oil demand forecast as fresh lockdowns temper with the recovery outlook in Q1

Oil
  • Lowers global oil demand forecast by 600k bpd for Q1
  • Lowers global oil demand forecast by 300k bpd for 2021 as a whole
  • Global oil demand expected to recover by 5.5 million bpd still this year
  • Global oil supply set to rise by more than 1 million bpd in 2021
  • This follows a 6.6 million bpd drop in 2020
  • There may be scope for higher supply growth given expected 2H 2021 demand improvement

I don’t think this comes as too much of a surprise given the way things have started off this year, with lockdowns still prevailing in Europe and some parts of the world.

The fear is that the vaccine timeline runs into trouble and tighter restrictions may still be needed in Q2 or perhaps even Q3 if things go awry in the coming months.
That will temper with the oil outlook further, although prices are not really all too shaken up as the market continues to keep with the reflation narrative for the time being.

Nikkei 225 closes higher by 1.39% at 28,633.46

  
Analysis, Global Indices

Asian equities surge higher on the day

Nikkei 19-01
Stocks are kicking things off on a strong note to start the new day as turnaround Tuesday beckons, with the return of Wall Street anticipated. Asian equities surged with China being the only major red mark on the report card.
The Hang Seng is up 2.1% and the Kospi is up 2.5%, while the Shanghai Composite is seen slumping by 0.9% after advancing yesterday on the Q4 China GDP report.
The risk mood is tilted to being more positive as we see a risk-on push in the market to kick start the new day (and one can argue, the actual start to the week).
S&P 500 futures are up by 0.6% and 10-year Treasury yields are up by 2.2 bps to 1.106%, pinning the dollar and yen weaker ahead of European trading.

China’s Q1 2020 GDP drop was -19.4%, not the officially reported -6.8%

  
Analysis, Economy

The veracity of China’s economic data is an ongoing topic.

Here’s a paper from four researchers at universities in the US and … China.
Their paper, based on traffic flow data, finds that GDP in Q1 of 2020, when China imposed severe restrictions in response to the COVID-19 outbreak, declined by -19.4%, not by the official figure of -6.8%.
Go to top