Market Commentary - July 31, 2020

Posted by Kevin Jock on Jul 31, 2020 8:20:06 AM

     Asia continues to falter despite Big Tech from Wall Street smashing earning estimates after hours. Amazon, Apple and Facebook saw surging second quarter revenues pulling Nasdaq higher with only Google recording it’s first revenue decline. What is becoming more evident is the gap in dual economies. Traditional stores and services have seemingly suffered from the on-going virus pandemic, whilst millennial firms catering to the new-age, thrive.

     Bucking the trend, China continues to post stats supporting momentum in their economic recovery. With manufacturing PMI numbers again improving. Amid heavy flooding in central and southern China have yet to derail government-led construction and infrastructure projects. Patches of small viral outbreak across the continent may cause household confidence and spending to suffer in the short-term but recent revision by economist see GDP growth at 2% this year. One of few nations expected to grow annually in 2020.

image_2020_07_31T06_47_58_150Z

Figure 1 (Source: Refinitiv): NASDAQ Weekly - NASDAQ looking to end the week off by closing at record highs.

Headliner to Review

  • The US advance GDP dropped from -5% to -32.9%. The advance GDP Price Index decreased to 1.4% to -1.8%. The unemployment claims increased from 1,422,000 to 1,434,000. From the figures, US economy suffers historic contraction. The US economy contracted by the most in history as shutdowns closed businesses and left millions of people out of work in the coronavirus pandemic.
  • President Donald Trump floated delaying US election on November election until people can vote securely and safely, which he does not have the power to do. Only the Constitution give Congress the power to set the voting date. Lawmakers from both parties said there was no intention that the election would be delayed.
  • German Prelim GDP declined from -2.0% from -10.1%, which is even worse than the forecast -9.0%. This is the largest decline from the start of calculation 50 years ago.
  • China Manufacturing PMI increased slightly from 50.9 to 51.1 and non-manufacturing PMI decreased slightly from 54.4 to 54.2. Both PMI look positive for five consecutive months. China’s economic recovery continued to be strong in July.

Headliner to Watch

  • Top-up unemployment benefits will expire today unless Republicans and Democrats can come together in the final hours to iron out a deal. With an economy contracting one third and a deteriorating labour market, allowing benefits to expire, especially for households who need it the most, will have dire consequences.
  • Following on from yesterday, more GDP data will be announced today.
    • Both Spain and Italy expected to continue contractions in the 2nd QoQ flash/prelim GDP to be at -16.0% and -15.0% respectively. As a result, EU looking to post -12.0% from -3.6%
    • Canada, one of few on a fortunate list to see growth in Q2. Market analyst see’s a 3.5% increase from -11.6%
  • Out of the EU, price of goods and services remain relatively unchanged.
    • France prelim CPI will edge over into deflationary territory from 0.1% to -0.1%
    • Italian prelim CPI expected to remain unchanged 0.1% to 0.1%
  • Deluge of negative news grips American confidence with US consumer sentiment expected to decline from 73.2 to 72.9.

 

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Authors:
Antony Tan
Ben Li
Kevin Jock

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