Market Commentary - July 20, 2020

Posted by Kevin Jock on Jul 20, 2020 4:57:55 AM

     A pandemic out of control as nations respond with stricter mandatory measures while others in internal deadlock. Both Hong Kong and the Victorian state of Australia now require mask to be worn when outside. Fines will apply if disregarded. Across the Pacific, Trump reassures supporters the virus will disappear whilst withholding new federal funding for coronavirus testing.

     More than 14.6 million Coronavirus Cases have been infected, and more than 600,000 people have died in the coronavirus around the world. Cases in the United States reach 3.7M, outpacing Brazil, India and Russia. European Union members in deadlock regarding the 750 billion euro stimulus package. Differences arising whether distribution of funds be in the form of grants or loans.

     Alongside the crisis, mixed markets as we head towards another week of US quarterly earnings. So far announced earnings have been on a downward spiral, losses are still better than analyst consensus. Markets so too have been propped up by talks of additional fiscal stimulus.

     EU leaders face 'mission impossible,' as Reuters states, at deadlocked recovery summit after three days economic summit. It is now the deepest recession since World War Two. The leader proposed for the 750 billion euros recovery fund on capital markets by the EU’s executive European Commission.

Figure 1 (Source IS Prime): IDX.JP.225 dips on news that exports see 4th straight month.

Headliner review

  • China kept benchmark lending rate unchanged today, matching market expectations. It is a sign that China is seeing some recovery from the coronavirus pandemic. Recent news of Chinese regulators sizing control of insurers, trust companies and brokers on the verge bankruptcy illustrate growing concern in the region. The one-year loan prime rate were held at 3.85%. The five-year loan prime rate remained at 4.65%.
  • Fuel demand has recovered from a 30% drop in April but the use of oil is still below pre-pandemic levels. Concerns are limiting the oils upside even after the COVID recovery.

Headliners to Watch

  • RBA set to release Monetary Policy Meetings Minutes. No surprises with rates and bond purchases on hold and a central bank in wait-and-see mode.
  • UK MPC members Haldane and Tenreyro due to speak before the Treasury vying for their own re-appointment.
  • RBA Gov Lowe due to speak via satellite regarding Australia labour market and public sector balance sheets during COVID-19.

 

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

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