Market Talk – August 3, 2022

ASIA:

China announced on Tuesday that its People’s Liberation Army (PLA) will launch a series of targeted military operations on the island in response to House Speaker Nancy Pelosi’s visit to Taiwan and its strong defense of national sovereignty and territorial integrity. The announcement came shortly after Pelosi landed in Taiwan for the first time in 25 years for the Speaker of the US House of Representatives. China considers Taiwan to be its “breakaway province”. However, Taipei has insisted on its independence since 1949. The PLA Eastern Theater Command also announced that it will conduct joint military operations around Taiwan, with joint naval and air exercises in the north, southwest and southeast of the island, long-range artillery fire. in the Taiwan Strait and fired conventional missiles into sea areas east of the island starting Tuesday evening, China’s Global Times reported.

Japan and the US plan to pool their economic influence to prevent China from turning its vast resources into strategic victories. Foreign Secretary Anthony Blinken, Commerce Secretary Gina Raimondo and their Japanese counterparts stopped short, citing the “economic NATO” concept proposed by some US lawmakers and allies. Friday’s meeting was held under the auspices of the US-Japan Economic Policy Advisory Committee, a new format for a quartet of diplomatic and economic policymakers to coordinate their efforts to “make our economies more competitive and resilient.”

Today was a mixed day for major Asian stock markets:

  • The NIKKEI 225 was up 147.17 points, or 0.53%, at 27,741.90.
  • Shanghai fell 22.59 points or -0.71% to 3163.67.
  • Hang Seng rose 77.88 points or 0.40% to 19,767.09.
  • The ASX 200 was down 22.20 points, or -0.32%, at 6,975.90.
  • Kospi rose 21.83 points or 0.89% to 2461.45.
  • SENSEX increased by 214.17 points or 0.37% to 58,350.53.
  • Nifty50 increased by 42.70 points or 0.25% to 17,388.15.

Today was a mixed day for the major Asian currency markets:

  • AUD/USD rose 0.00363, or 0.53%, to hit 0.69395.
  • NZDUSD rose 0.00014 or 0.02% to hit 0.62574.
  • USDJPY rose 0.845 or 0.63% to hit 134.179.
  • USDCNY fell 0.01604 or -0.24% to hit 6.76116.

Precious metals:

l Gold rose by $1.14/t. or 0.06% up to 1764.41

l Silver increased by $0.021/t. oz or 0.11% to 19.988

Some economic news from last night:

China:

Caixin Services PMI (July) increased from 54.5 to 55.5

Hong Kong:

Manufacturing PMI (July) fell from 52.4 to 52.3.

Japan:

The index of business activity in the services sector (July) fell from 54.0 to 50.3.

South Korea:

Foreign exchange reserves – US dollars (July) increased from 438.28 billion to 438.61 billion.

Australia:

Construction index AIG (July) fell from 46.2 to 45.3.

The index of business activity in the service sector fell from 52.6 to 50.9.

Retail sales (MoM) decreased from 0.9% to 0.2%.

Retail sales (QoQ) (Q2) increased from 1.0% to 1.4%

New Zealand:

ANZ Commodity Price Index (MoM) down from -0.4% to -2.2%

Employment change (QoQ) (Q2) remained the same at 0.0%

Labor cost index (YoY) (Q2) increased from 3.1% to 3.4%

Labor cost index (QoQ) (Q2) increased from 0.7% to 1.3%

Participation rate (Q2) decreased from 70.90% to 70.80%

Unemployment rate (Q2) increased from 3.2% to 3.3%

Some economic news for today:

India:

Nikkei Services PMI (July) fell from 59.2 to 55.5.

EUROPE/EMEA:

The Bank of England (BoE) has made it clear it will act decisively to control record high inflation, and markets are almost certain of a rare half-percentage rate hike this Thursday. A 50 basis point hike to 1.75% would be the highest interest rate in 27 years and accelerate historic monetary tightening to quell the highest rate of inflation in 40 years. Inflation reached 9.4% in June and the BoE expects it to peak at 11% by the end of the year, well above its 2% target.

The European Central Bank (ECB) favors CBDC as a cross-border payment method over bitcoin (BTC), banking and stablecoins, among others, according to a report published by a major online daily newspaper. While the study highlighted Bitcoin’s inherent issues with scaling and speed, it neglected the upgrades needed for Taproot and Lightning Network, which improved the performance of the network, suggesting that “the underlying technology (and in particular its ‘proof of work’ layer) is inherently expensive and wasteful.” In contrast, the ECB has recognized CBDC as a more visible counterpart for cross-border payments, having better interoperability with foreign exchange (FX) because its benefits include the protection of monetary power and the convenience of instant payments through intermediaries identical to central banks. .

Major European stock markets had a green day:

l CAC 40 increased by 62.26 points or 0.97% to 6472.06.

l The FTSE 100 rose 36.57 points, or 0.49%, to 7,445.68.

l DAX 30 rose 138.36 points or 1.03% to 13,587.56.

Today was a mixed day in the major European currency markets:

  • EURUSD fell 0.0003 or -0.03% to hit 1.01534.
  • GBPUSD fell 0.00076 or -0.06% to hit 1.21429.
  • USDCHF rose 0.00492 or 0.51% to hit 0.96232.

Some economic news from Europe today:

Germany:

German exports (MoM) (June) increased from 1.3% to 4.5%.

German imports (MoM) (June) decreased from 3.2% to 0.2%.

Germany’s trade balance (June) increased from 0.8 billion to 6.4 billion.

Composite PMI of Germany (July) fell from 51.3 to 48.1.

PMI in the German services sector (July) fell from 52.4 to 49.7.

Switzerland:

CPI (MoM) (July) down from 0.5% to 0.0%

CPI (YoY) (July) flat at 3.4%

Spain:

PMI in the Spanish services sector (July) fell from 54.0 to 53.8.

Italy:

The Italian composite PMI (July) fell from 51.3 to 47.7.

PMI in the Italian services sector (July) fell from 51.6 to 48.4.

Retail sales in Italy (y/y) (June) decreased from 6.8% to 1.4%.

Retail sales in Italy (MoM) (June) decreased from 2.0% to -1.1%.

France:

The balance of the state budget of France (June) increased from -82.3 billion to -76.1 billion.

The French index of business activity S&P Global Compopo (July) fell from 52.5 to 51.7.

PMI in the French services sector (July) fell from 53.9 to 53.2.

euro area:

S&P Global Composite PMI (July) fell from 52.0 to 49.9.

The index of business activity in the service sector (July) fell from 53.0 to 51.2.

Producer price index (YoY) (June) decreased from 36.2% to 35.8%.

PPI (MoM) (June) rose from 0.5% to 1.1%

Retail sales (YoY) (June) down from 0.4% to -3.7%

Retail sales (MoM) (June) decreased from 0.4% to -1.2%.

GREAT BRITAIN:

Composite PMI (July) fell from 53.7 to 52.1.

The index of business activity in the services sector (July) fell from 54.3 to 52.6.

USA/AMERICANS:

St. Luis Fed President James Bullard was hawkish this Wednesday as he believes the central bank will need to raise rates after they meet again in September. His announcement did not come as a surprise as the Fed said they would need hard evidence that inflation would drop within a few months. Bullard, a voting member, would like to see rates rise from 3.75% to 4% by the end of the year. However, in September, he expects another increase of 1.5 percentage points.

In other news from the central bank, San Francisco Fed President Mary Daly stressed that the fight against inflation is far from over. “The number of people who can’t afford this week what they easily paid for six months ago just means our job is far from over,” she told CNBC on Tuesday. Despite recent significant rate hikes, Daley warned that there is no sign that the Fed will ease before consistent data is available indicating a reduction in inflationary pressures.

US Market Closing:

  • The Dow rose 416.33 points, or 1.29%, to 38,812.5 points.
  • The S&P 500 rose 63.98 points, or 1.56%, to 4155.17.
  • The Nasdaq rose 319.4 points, or 2.59%, to 12,668.16.
  • Russell 2000 advanced 26.48 points or 1.41% to 1908.93.

Closing the Canadian Market:

  • The TSX Composite advanced 40.61 points or 0.21% to hit 19,545.94.
  • The TSX 60 rose 4.06 points, or 0.21%, to 19,545.94.

Brazil Market Closing:

  • Bovespa climbed 412.98 points, or 0.4%, to 103,774.68.

ENERGY:

Oil markets have had a mixed day today:

l Crude oil fell $3.73/bbl. or -3.95% to 90.816.

l Brent crude fell $3.81/bbl, or -3.79%, to $96,600.

l Natural gas increased $0.541/MMBtu, or 7.02%, to 8.2319.

l Gasoline was down $0.1542/gallon or -5.04% to $2.9018.

l Heating oil was up $0.0251/gallon, or 0.74%, at 3.4042.

The above data was collected around 2:55 pm EST on Wednesday.

l The largest increases in commodity prices were natural gas (7.02%), coffee (2.26%), orange juice (2.76%) and oil (1.94%).

l The main losers were lumber (-4.99%), cheese (-10.05%), milk (-10.56%) and gasoline (-5.04%).

The above data was collected around 3:05 pm EST on Wednesday.

CONNECTION:

Japan 0.189% (+1.4 bp), US 2s 3.10% (+0.019%), US 10s 2.7464% (+0.54 bp); US 30s 2.98% (-0.008%), Bunds 0.8740% (+9.2 bp), France 1.4400% (+6.1 bp), Italy 3.023% (-0.8 bp), Turkey 16.81% (-19 bp), Greece 3.046% (+8.9 bp), Portugal 1.914% (+4.6 bp); Spain 1.984% (+5 bp) and UK gilts 1.9140% (+4.8 bp).