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China launched to mid missiles into the South China Sea on Wednesday morning: Source

  
  Analysis
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A source close to the Chinese military

According to a source close to the Chinese military, China launched 2 missiles into the South China Sea on Wednesday morning. The launch was to send a warning to the United States.

According to the source, the missile launch was intended to deny other forces access to the disputed South China Sea region.  Yesterday an American spy plane reportedly neared the Chinese naval drills in the sea.
The US has added 24 Chinese companies to an entity list. That will also impose a visa restrictions as a result of South China Sea tensions.

The full statement of the FOMC rate decision for July 2020

  
  Analysis
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FOMC Rate statement for July 2020

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

Implementation Note issued July 29, 2020

Pres. Trump physical exam shows no significant changes

  
  Analysis
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Strong as an ox

Pres. Donald J Trump
The White House physician is out saying that:
  • Pres. Trump’s physical exam shows no significant changes
  • He weighs 244 pounds
  • Trump took 2 week course of hydroxychloroquine with the zinc and vitamin D
  • EKG was closely monitored during coronavirus preventative treatment. Completed regiment safely and without side effects
  • Trump continues to receive regular Covid 19 testing. To date all results have been negative

PS.  A report of a study to be published in New England Journal of Medicine is saying that:

  • Malaria drug hydroxychloroquine failed to cut infection rates
  • The drug provides no Covid 19 protection
  • 821 people were given drug in randomized controlled trial
The drug was of course the drug touted and taken by Pres. Trump to help prevent him from getting the Covid 19 virus. I wonder if he was part of the sample?

White House says US President Trump coronavirus test result was negative

  
  Analysis
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A statement from Sean Conley, Trump’s doctor.

This is good news if true. Trump in known as a bit of a germaphobe so his caution may have paid off. Wash your hands folks!
In other news, the wife of Spain’s Prime Minister has tested positive.
A statement from Sean Conley, Trump's doctor.

US President Trump says he has taken the coronavirus COVID-19 test

  
  Analysis
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Fox report Trump was tested, results are expected within 48 hours

  • “I decided I should based on the press conference yesterday people were asking that I take the test.”
Trump’s job has brought him into close contact with people confirmed as having the virus so this test is a wise step.
What we have seen so far from the progression of the infection around the globe is older people seem particularly vulnerable to the more severe impacts of the virus, along with those people with existing respiratory issues.
Fox report Trump was tested, results are expected within 48 hours

Bank of Canada cut rates 50 bps. Stocks soar. Biden Super Tuesday results help.

  
  Analysis
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Highlights for today’s near trading session:

  • The Bank of Canada cut the rates by 50 basis points. The expectations was for a 60% chance of a 50 basis point cut. As a result, the Canadian dollar weakened. The USDCAD went from a pre-decision low of around 1.3330, to a session high of 1.34308 (100 pip move). The move took the price above the swing highs from yesterday and the NY session high between 1.3090 to 1.30953. The prices since rotated back to the downside and afternoon trading and trades just above that swing high area.  a move below in the new day would next target the rising 100 hour moving average 1.3377
  • In the US the ADP employment report showed a bigger than expected gain of 183K versus 170K estimate. However the prior month was revised lower to 209K from 291K. The BLS will release the US job data on Friday with a change in nonfarm payroll of 175K estimate. It’s prior month came in at 225K. The revision down in the ADP report brings its number closer to the US number
  • Democratic nominee Biden was resurrected after the Super Tuesday primaries. Biden won 9 of the 12 contests, and took the lead over Bernie’s Sanders in the delegate vote. The big reversal helped to calm market fears about the implications of a Sanders nominee.
  • The US stocks surged with the Dow industrial average rising by over 1100 points on the day.  The Fed easing yesterday was not greeted with as much excitement, but Canada cut rates by 50 basis points as well and others were rumored to be moving in the cut direction.  That stimulus along with the Biden Super Tuesday showing, helped to send stocks soaring. In addition to the NASDAQ rising by over 1100 points or 4.4%, the S&P index is up over 120 points or 4.1% and the NASDAQ index is up 317 points or 3.66%. A huge day to the upside for US equities
  • European shares also close higher but off there high levels of the day. I would expect that all things being equal, they should play some catch up to the US afternoon gains

North Korea warns that Kim’s thoughts on Trump can change

  
Analysis, Politics
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North Korea warns Trump on year-end deadline

North Korea US

In case you missed the news from earlier today, North Korea has set a year-end deadline for the US to change its policies or Kim Jong Un may “embark on a new path” as denuclearisation talks between the two countries appear to have broken down.

If you’ve been following our headlines over the past few months, it is clear that the two countries aren’t getting along well with how frequent North Korea has been conducting missile launches and tests during the period.
As things stand, they want the US to lift more sanctions before committing to any more “denuclearisation” projects but the US wants it to be the other way around. Hence, we have reached a bit of an impasse at the moment.
If anything else, keep an eye on this issue here as it could present a wild card risk for markets in 2020 – alongside the host of other issues.

Trump: US in final throes of reaching a trade deal with China

  
Analysis, Politics
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Positive comments

Reuters is carrying comments from Trump:
  • Trump says in final throes on reaching trade deal with CHina
  • Trump says US wants to see democracy in Hong Kong
This is a slightly different language. It’s the first time in a few days the President has been so optimistic.
I’m reminded that the previous line was that they were in the ‘short strokes’. The modest market reaction suggests that this kind of talk isn’t enough alone to boost sentiment.

US Senator plans legislation to block US govt pensions from investing in Chinese stocks

  
  Analysis
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Senator Marco Rubio want legislation to block the Federal Retirement Thrift Investment Board from investing in Chinese stocks

  • The Board delayed a decision on switching the benchmark for its $50 billion TSP I Fund to mirror an index with Chinese assets
  • for at least two weeks
  • Rubio said he would introduce bipartisan legislation “to ensure that federal retirement savings can never be a source of wealth funding the Chinese Communist Party at the expense of our nation’s future prosperity”
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