Market Commentary - August 11, 2020

Posted by Kevin Jock on Aug 11, 2020 4:55:27 AM

    Off to a positive start for Asia with indices up over yesterday’s session highs, shrugging off an ever-deteriorating relationship between America and China. In response to US placing sanctions on 11 Chinese and Hong Kong officials, China retaliated with 11 sanctions of their own. The list avoided direct personnel from Trump’s administration but did include allying US senators such as Marco Rubio and Ted Cruz.

    China thus far has remained ahead of the curve in their economic recovery. Recent auto sales data illustrated a 16.4% year on year increase alongside four months of consecutive gains. Crude oil responded upbeat to the data on top of announcements by Iran to cut output by 400,000 bps in compensation for overproduction for the past 3 months. Vacancies in oil storage are also rising as energy companies begin taking back product to meet renew demand.


US Crude Oil

Figure 1 (Source: IS Prime): US Crude Oil Daily Chart - Ongoing release of positive news keeps crude prices edging higher amidst production increases from OPEC states starting August.

   

    Amid a global recession, the Chinese yuan has seemingly found a happy medium. Not yet a global reserve currency authorities envisioned its role to be. Nonetheless its subtle depreciation from March highs of 2018 has benefited China in cheapening exports, avoiding over inflation and more importantly side-stepping rhetoric of being a currency manipulator. By years end, most analyst expect the yuan to depreciate to 7.0000 level.

Headliner to Review

  • US stimulus talks continue as congressional parties are at a stale mate. Market consensus expect on top of Trump’s executive orders, only an additional $1tn - $1.5tn will be added to the economy. A far cry from the $3.5tn aid package Democrats are negotiating for. The additional $2tn focuses on directly bailing out States hit hardest by the calamity. Of which Republicans refuse to oblige, attributing State balance sheet holes to mismanagement. Regardless, Trumps’ recent tweet revealing democrats “want to meet to make a deal” sees the later party out of time in resolving their constituents needs.
  • Renew concerns and a resurgence of cases in Victoria has battered business confidence in Australia. With the NAB index declining from 1 to -14. Outlook seemingly grim with Victoria in lockdown, NSW and Queensland closing state borders.
  • Revised GDP estimates shows Singapore contracted more than initially thought. New figures reveal the nation plunging 42.9% compared to early figures of 41.2%. Lockdown heavily impacted retail tourism and construction activity, of which makes up a substantial portion of Singapore’s GDP. Recovery remains uncertain amid government stimulus measures equivalent of 19% of GDP.
  • US JOLTS Jobs saw a surprising uptick to 5.89M. Further supporting last week’s employment figures that after a temporary slowdown, labour demand is resuming.

Headliner to Watch

  • Stronger economic outlook will weigh in on the Reserve Bank of New Zealand from increasing quantitative easing. The nation has been reaping rewards from successfully eliminating transmission of Covid-19. Retail sales had risen three consecutive months with unemployment declining to 4%. Inflation has been suppressed as the Kiwi has appreciated against the green back in past months. Of concern is tourism, seen as the only drag in the economy considering border closures from internationals.
  • UK unemployment rate set to increase to 4.2% with claimant counts increasing to 9.7K. A drip-feed of furloughed employee is expected to be made redundant in coming months. Especially as the governments furlough job retention scheme expires at the end October.

 

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice.

Authors:
Antony Tan
Ben Li
Kevin Jock

Topics: Market Commentary

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