Market Commentary - August 24, 2020
For the week ahead, the most anticipated event will be the Federal Reserve’s annual Jackson Hole symposium on Thursday. Across the globe, central bankers, finance ministers, academics and bankers will convene virtually to discuss economic policies and options in a COVID-19 ridden world economy. Investors hope for further clarity over the Fed’s response measures if an additional stimulus package fails to be negotiated. Others await whether overshooting inflation beyond 2% is on the cards. If Eurozone’s recovery stalls, would an increase in quantitative easing be warranted. Many are also keen if Mr Bailey would elaborate on utilizing negative interests as one of BOE’s monetary tools if Britain’s recovery loses momentum.
Though little to watch out for today, global indices gapped up on Asia open with Hong Kong rallying 1.3% within the first hour. Buoyed by news of an FDA approved convalescent plasma treatment for COVID-19. However, among patients treated clinical success has been rather mixed. Concern have also been raised over long-term side effects of the transfusion.
Against most G-10s, the dollar parred back some losses on Friday. Thus far, the Sing has enjoyed a steady appreciation against the greenback. Almost retracing back an 8% depreciation since the start of the year. Throughout the pandemic, Singapore has benefited from a government with deep fiscal reserves relieving monetary authorities of lowering the currency band to manage growth concerns. Just recently the government announced a further $100bn aid package in support of recovery efforts
Figure 1 (Source: Refinitiv): USDSGD Daily - A well capitalized Singaporean government keeps the Sing steadily appreciating
On the coronavirus front, two milestones were passed. Records tallied 23M infected with 800K deaths. Over the weekends, Spain reported 8,000 news cases whilst Germany experienced their highest daily spike since April, numbering 2,034. Mexico hit their worst-case scenario with 60,000 deaths and counting. Across the Pacific, South Korea is in the midst of a massive outbreak as infections exceed 300 for 3 consecutive days.
Headliner to Review
- Disappointing services and manufacturing PMI out of Europe marking softer expansion. A resurgence in COVID-19 disrupted demand for services as travel restrictions were re-imposed, whilst manufacturing initially experienced a sharp rebound from back-logged orders. Outstanding orders have now been processed, hence manufacturing activity is expected moderate.
- Flash Services PMI in Europe decreased from 54.7 to 50.1 while Flash manufacturing PMI decreased slightly from 51.8 to 51.7.
- French Flash Services PMI decreased from 57.3 to 51.9 while French Flash Manufacturing PMI decreased from 57.3 to 51.9.
- German Flash Services PMI decreased from 55.6 to 50.8 and German Flash Manufacturing PMI increased from 51.0 to 53.0.
- Across the channel, the figures in UK were much better than expected. The Flash Services PMI jumped to 56.5 to 60.1 while Flash Manufacturing PMI increased from 53.3 to 55.3. Largely attributed from the reopening of the UK economy after lockdown.
- Likewise, America posted strong PMI data. Flash Services PMI jumped from 50.0 to 54.8 and Flash Manufacturing PMI increased from 50.9 to 53.6. Business activity remain strong, as new businesses opening shop rose for the first time since February.
- In Canada, the Core Retail Sales m/m jumped from 11.8% to 15.7% and the Retail Sales m/m increased from 21.2% to 23.7%. Placing figures above pre-COVID levels in February. Primarily led by demand in motor vehicles.
- Retail Sales in New Zealand dropped significantly from -1.2% to -14.6% as the government re-imposed stricter social distancing measures with the recent outbreak.
Headliner to Watch
- BOJ set to release core CPI YoY data. Previous months figure stood at 0.1, with tomorrow expected to remain relatively unchanged.
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Topics: Market Commentary