Finance Update – Economics in the Shadow

Asia – Abe quits, Data improves

Chinese equities are leading Asia up this morning, the FTSE’s China A50 up 3.15%!. Except in New Zealand the region is green, even in Japan where the Nikkei has gained 1.73%.

Accompanying Japanese PM Shinzo Abe’s dramatic retirement over the weekend are mixed economic figures, including a 2.8% contraction in retail trade for July YoY but a dramatic improvement in industrial production – an 8% expansion in July MoM.

The yuan broke its 8-month high after the China Federation of Logistics and Purchasing (CFLP) produced much better-than-expected Manufacturing and Non-Manufacturing PMIs for August (ahead of tomorrow’s Caixin number. The latter is up a pointThe unit of price change for bonds (1%), futures (0.01%), shares ($1) and mortgage fees (1% of the p... to 55.2, the former refusing to drop 2 points as expected.

In New Zealand, business confidence improved somewhat in August but remains negative at 41.8, while Australian private sector credit increased by an excellent 15.2% in Q2.

After threatening the Czeck FM for visiting Taiwan, China this morning launched antisubsidy investigations into Australian wine imports. According to Reuters.

Europe – Data bright, Brexit less so

European equities began munching on bitters last week, the FTSE down 0.6%, the DAX -0.48% and the AEX a full per cent.

Consumer confidence in Germany has fallen to -1.8 ahead of September. Still, most sentiment markers from the EU for August are bright – services up to -17.2, industrial confidence at 12.7 and economic sentiment at 87.7 – a 5-point rise. Consumer confidence is also up in Italy, where industrial orders tanked in June to the tune of -11.8% YoY and sales, -16.4% YoY.

Americas – US in the grips of mayhem

While streets rage, US stock markets continue to close up, Friday being no exception with the S&P up 0.67%.

The USD is down 0.14% this morning after initial jobless claims remained in the 4-figure region for the week of August 21 – 1.006 mn new claimants adding to a worse than expected 14.54 mn continuing claims.

Q2’s preliminary GDP reading came in at a better than expected 31.7% annualised contraction but pending home sales for July pleased with a 5.9% increase. Despite the failure of leaders to forward a stimulus bill, personal spending and consumption improved marginally in July, while the Chicago PMI fell to 51.2 in August – a period during which Michigan University measured a 1.7 point increase in consumer sentiment to 74.1.

Commodities – Saudis find more oil

Oil is in a bullish wedge towards 43.20 this morning – optimism gained after the Baker Hughes company last week announced a 3-rig cut to an even 180 active wells.

And Gold, perhaps leaning on Fed Head Powell’s dovishness last Thursday, has been in a bullish mood, currently retracing at 1978.

Finally, in China, the China Construction Bank yesterday closed down a beta wallet for Digital Yuan. For several days, bank clients could activate their personal wallet through the bank’s mobile application.

Corporate – Buffet invests in Japan

Aramco is up nearly a 1/3% this morning after yesterday’s announcement that the company had discovered 2 new oil and gas fields worth about 3.2mB and 16mf3, respectively, a day.

In a departure for his Berkshire Hathaway company, Warren Buffet announced last week that it has invested expansively outside the US. According to Reuters, and perhaps to be seen as an expression of faith, the fund has purchased upward of 5% in, respectively, Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co Ltd and Sumitomo Corp.

And in the continuing TikTok saga, after Walmart joining Microsoft and Oracles bid for the company, Teletrader this morning reports that ByteDance cannot sell its video app without Chinese government approval.

Today, Zoom video reports on Q3 lockdown-energised earnings. Despite the quick influx of already-present suppliers to the arena, the company’s technical prowess had it in front for a 169% revenue growth the previous quarter.

Still, Morgan Stanley analysts expect a 30% beat of estimates this reading, as users continue downloading the app. Expect sales of $498 mn (+241.6% YoY) and an EPS of 45 cents (+462% YoY)

Events