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Finance Update – Markets Preparing for COVID Downturn


Asia – Benchmarks following the drift

Markets this morning are responding in mixed fashion to yesterday’s drops in global equities, the Shanghai and Shenzhen composite up by a fraction and the Nikkei decidedly down by 0.75%, as Japan’s Ministry of Finance delivered a ¥1176.8 bn Current Accounts surplus – the trade deficit narrowing to ¥-556.8 bn.

China’s June foreign cash reserves missed their growth target by $8 bn, and in Australia, banks are extending loan repayments for debtors.

The NZD added 40 pips yesterday on the nation’s Global Dairy Trade price index, which added 8.3% – 4 times the previous report and 6 times the expected reading, only to lose half the gains as the session proceeded.

Europe – Johnson reiterates no-deal to Merkel

Europe closed in the red yesterday, led by the FTSE’s 1.53% drop.

Germany’s Industrial production disappointed with a mere 7.8% improvement, France’s trade deficit widened to €-7.05 bn but Italy’s retail sales growing by 24.3% (MoM) in May.

The UK’s Boris Johnson yesterday reiterated his intention to leave the EU under no-deal conditions in a phone call to Germany’s Angela Merkel. Meanwhile, the Recruitment & Employment Confederation warns that UK jobs are in peril, demand for workers falling rapidly.

In Switzerland, on the other hand, June’s unemployment rate fell to 3.3%, as Credit Suisse announces it will be increasing its presence in China.

Americas – FED may increase purchases

Indices in NY closed down between 0.86% (Nasdaq) and 1.78% (Russel 2000) as earning season slowly shapes up.

Punters seemed pleased with JOLTS’ Job Openings, which presented a 5.397 mn new positions in May, pushing the USDX up by 4 cents, despite a further 0.6% contraction for the Redbook Index this first week of July.

Fed Vice Chair Richard Clarida told CNN yesterday that the central bank was considering additional bond-buying, as the COVID plateau fails.

The Canadian Dollar remains muted on Ivey’s seasonally adjusted PMI in June – a massive 19-point climb out of contraction to a very pleasing 58.2.

Commodities – Inventories rising

Oil, still above the 40 line, lost a 1/3 of a percent overnight after the API reported a 2-million-barrel build in inventories.

Corporate – Bed, Bath & Beyond reporting earnings

Snapchat is up 6% after the White House said it was considering banning Chinese competitor TikTok, claiming it infringes upon child privacy laws and shares data with the Chinese government. Yesterday, the App’s owner Bytedance said it was removing the app from the Hong Kong market due to new security laws.

Levis is down 4% after posting a better-than-expected loss of 48 cents on the share. Revenue, also beating expectations, nevertheless fell by 62% YoY as restructuring and inventory costs cost the company nearly a quarter-billion dollars.

Walmart is up 6.78% as it prepares to launch its Walmart+ rival to Amazon Prime. The service will include same-day delivery of groceries. And Lufthansa is up 10 cents after announcing a thousand job cut, including 20% of its management positions.

Later today, Daimler holds a general shareholders meeting, and Bed Bath & Beyond will be announcing its Q1 earnings results as US markets close. Expect a $1.48 loss per share on $1.32 bn sales – a 49% drop YoY.


11:00 AM GMT US Mortgage Applications. Consumer credit change at 19:00
02:30 PM GMT OIL EIA Crude Oil Stocks Change
11:00 PM GMT UK RICS Housing Price Balance
11:50 PM GMT Japan Machinery orders and foreign investments
01:30 AM GMT (+1) China CPIs
01:30 AM GMT (+1) Australia Home loans

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