Market Talk - Friday, Aug. 27

ASIA:

The Reserve Bank of India may launch its first digital currency trial programs by December, central bank governor Shaktikanta Das told CNBC. Central banks including those in China, Europe, and the UK are exploring digital currencies that they would issue, either to commercial lenders or to the public directly. The RBI is studying various aspects of a digital currency, including its security, impact on India’s financial sector, and how it would affect monetary policy and currency in circulation, according to the governor.

Bank of Japan (BOJ) board member Toyoaki Nakamura said Japan’s economy is expected to recover as the pandemic’s impact fades, pointing to the boost to growth from robust global demand and a recovery in capital expenditure. He also said that shortage of semiconductor chips may persist for the rest of this year if the coronavirus pandemic keeps Southeast Asian factories shut and it may have larger impact on global economy due to supply constraints. Nakamura’s remarks are the strongest warning to date by a BOJ policymaker of the broadening impact of the chip crunch, which has affected Japanese manufacturers including auto giant Toyota Motor Corp.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 101.15 points or -0.36% to 27,641.14
  • Shanghai increased 20.49 points or 0.59% to 3,522.16
  • Hang Seng decreased 7.80 or -0.03% to 25,407.89
  • ASX 200 decreased 2.90 points or -0.04% to 7,488.30
  • Kospi increased 5.37 points or 0.17% to 3,133.90
  • SENSEX increased 175.62 points or 0.31% to 56,124.72
  • Nifty50 increased 68.30 points or 0.41% to 16,705.20

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00684 or 0.94% to 0.73103
  • NZDUSD increased 0.0066 or 0.95% to 0.70140
  • USDJPY decreased 0.22 or -0.20% to 109.83
  • USDCNY decreased 0.01877 or -0.29% to 6.46314

Precious Metals:

  • Gold increased 25.47 USD/t oz. or 1.42% to 1,817.62
  • Silver increased 0.51 USD/t. oz or 2.17% to 24.050

Some economic news from last night:

China:

Chinese Industrial profit (YoY) (Jul) decreased from 20.00% to 16.40%

Chinese Industrial profit YTD (Jul) decreased from 66.9% to 57.3%

Japan:

Tokyo Core CPI (YoY) (Aug) increased from -0.3% to 0.0%

Tokyo CPI (YoY) (Aug) remain the same at -0.4%

CPI Tokyo Ex Food and Energy (MoM) (Aug) decreased from 0.3% to 0.1%

Australia:

Retail Sales (MoM) (Jul) decreased from -1.8% to -2.7%

Some economic news from today:

India:

Bank Loan Growth increased from 6.1% to 6.5%

Deposit Growth increased from 9.8% to 10.6%

FX Reserves, USD decreased from 619.37B to 616.90B

EUROPE/EMEA:

European Central Bank’s governing council dissented on new policy guidance on the future path of policy because they fear it understates the risk of rising inflation, according to the minutes of its latest policy meeting. The new wording states that interest rates will not rise until the ECB forecasts that inflation will reach its 2 percent target “well ahead” of its projection horizon and that policy rates will be raised only if the evidence is sufficient to expect that the pace of price growth will persist “durably.” It also states that not only headline inflation but also underlying inflation should be heading towards 2 percent. The guidance will be tested at the ECB’s rate-setting meeting next month, when policymakers are widely expected to discuss when to start scaling back their pandemic-era emergency bond purchases.

The major Europe stock markets had a green day:

  • CAC 40 increased 15.89 points or 0.24% to 6,681.92
  • FTSE 100 increased 23.03 points or 0.32% to 7,148.01
  • DAX 30 increased 58.13 points or 0.37% to 15,851.75

The major European currency markets had a mixed day today:

  • EURUSD increased 0.00372 or 0.32% to 1.17929
  • GBPUSD increased 0.00629 or 0.46% to 1.37647
  • USDCHF decreased 0.00605 or -0.66% to 0.91170

Some economic news from Europe today:

Germany:

German Import Price Index (MoM) (Jul) increased from 1.6% to 2.2%

German Import Price Index (YoY) (Jul) increased from 12.9% to 15.0%

Norway:

Core Retail Sales (MoM) (Jul) decreased from -0.1% to -3.1%

France:

French Consumer Confidence (Aug) decreased from 100 to 99

Italy:

Italian Business Confidence (Aug) decreased from 115.2 to 113.4

Italian Consumer Confidence (Aug) decreased from 116.6 to 116.2

US/AMERICAS:

The core personal consumption expenditures price index in the US rose by 3.6% in July, marking the largest spike in about 30 years. Personal income spiked 1.1% in July as well, surpassing analysts’ estimates of 0.3%. Consumer spending rose 0.3%, which was in line with expectations. At the monthly level, core inflation advanced 0.3%. The energy sector noted a large gain in inflationary pressures last month after rising 23.6%.

Chairman Jerome Powell addressed the nation at the much-anticipated Jackson Hole Economic Policy Symposium. The Fed maintains that the current spike in inflation is temporary and isolated to certain sectors. Powell said the Fed is monitoring the sectors most affected by the pandemic and expects overall inflation to decline once these categories, such as automobiles, cool down. The Fed also maintains their 2% inflation target, citing that anchoring long-term expectations at 2% is crucial for long-term sustainable employment and price stability.

Powell also indicated that the Fed will begin tapering their extensive buying program by the end of the year. Analysts believe the Fed may begin pulling back as soon as September. “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” the chairman stated. As for interest rates – they will remain stable until the economy shows more stability, including lowering the rate of unemployment. Powell said that there is “much ground to cover” before reaching sustainable unemployment levels. In July, unemployment dropped to 5.4%, significantly down from the April 2020 high of 14.8%, but well above the 3.5% pre-pandemic level.

US Market Closings:

  • Dow advanced 242.68 points or 0.69% to 35,455.8
  • S&P 500 advanced 39.37 points or 0.88% to 4,509.37
  • Nasdaq advanced 183.69 points or 1.23% to 15,129.5
  • Russell 2000 advanced 63.17 points or 2.85% to 2,277.15

Canada Market Closings:

  • TSX Composite advanced 140.49 points or 0.69% to 20,644.64
  • TSX 60 advanced 7.24 points or 0.59% to 1,236.87

Brazil Market Closing:

  • Bovespa advanced 1,953.63 points or 1.65% to 120,677.6

ENERGY:

The oil markets had a green day today:

  • Crude Oil increased 1.24 USD/BBL or 1.84% to 68.6600
  • Brent increased 1.43 USD/BBL or 2.01% to 72.5000
  • Natural gas increased 0.192 USD/MMBtu or 4.59% to 4.3760
  • Gasoline increased 0.0285 USD/GAL or 1.26% to 2.2839
  • Heating oil increased 0.0222 USD/GAL or 1.07% to 2.1054

The above data was collected around 14:12 EST on Friday

  • Top commodity gainers: Natural Gas (4.59%) and Bitumen (2.58%), Platinum (3.04%) and Lean Hogs (3.21%)
  • Top commodity losers: Palm Oil (-1.43%), Rubber (-5.06%), Cocoa (-1.55%), and Live Cattle (-1.76%)

The above data was collected around 14:19 EST on Friday.

BONDS:

Japan 0.024%(+0bp), US 2’s 0.2190%(-0.02%), US 10’s 1.3188%(-3.54bps); US 30’s 1.9242%(-0.03%),Bunds -0.4190% (-0.2bp), France -0.0630% (-0.3bp), Italy 0.6375% (-3bp), Turkey 16.66% (+1bp), Greece 0.6960% (+0bp), Portugal 0.177% (-2bp); Spain 0.314% (+6.61bp) and UK Gilts 0.5790% (-2bp).

Disclosure: None.

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