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Finance Update – Markets Seeking Direction


Asia – China manufacturing soars

Chinese indices are healthily up this morning, the Shenzhen leading with a 1.84% gain and Japan’s Nikkei starting at 2.17%. Hong Kong is down 0.8%.

In China, July’s manufacturing PMI increased by 2 ticks to 51.1 and the non-manufacturing figure fell by 2 ticks to 54.2 – better than the expected 51. This morning’s Caixin Manufacturing PMI is up 4/10ths to 52.8.

Unemployment in Japan fell a tenth to 2.7%, and industrial production increased by 2.7% in June, after May’s 9% contraction. The overnight Jibun manufacturing PMI revealed a pleasing 3 point increase to 45.2 in July. Housing starts fell by less than expected to -12.8%, but consumer confidence failed to increase by the expected 4 points, climbing only to 29.5 in July.

The Australian dollar suffered an 80-cent loss against the USD after Thursday’s data showed a 4.9% decline in June’s building permits MoM alongside a 1.2% decline in Q2’s PPI (QoQ).

This morning’s ANZ Job advertisements also fell to 16.7% – a 1/3 of June’s figure – but a ½ point increase in the ComBank’s manufacturing PMI. The NZD suffered a similar loss following a 31.8% contraction in July’s business confidence and nearly 9% in general outlook.

Europe – Germans take to the streets

With the UK urging France to clamp down on illegal immigration to Britain through the Channel, European markets were red across the board, save in Russia and Poland.

As anti-COVID measures spread to Germany, the nation’s unemployment suffered little major loss in July, but a 10% contraction in Q2 GDP, based on preliminary figures. Consumer inflation fell more than expected from 0.8% in June to 0 this past July.

France’s preliminary GDP contracted in Q2, the CPI rising by nearly a per cent and consumer spending falling to a slightly better-than-expected 9% expansion; and housing prices in the UK expanded by 1.6% MoM.

Throughout the EU, Q2’s preliminary GDP is expected to contract by a disappointing 12.1% while core consumer inflation could delight with a 1.2% expansion in July. Industrial confidence improved in July to -16.2 and economic sentiment to 82.3. Services sentiment is down to -26.1, and unemployment expanded by a tick to 7.8%.

Americas – FOMC – COVID-2.0 wave has crested

After the FOMC’s policy report estimated that the second corona wave seems to have crested, US markets closed mainly up on better-than-expected quarterly earnings reports last week, with the Russel200 Small-Caps index losing 1.32% on a stunted economy.

Ahead of this week’s NFP, jobless claims paint a dark picture, with the initial figure still rising to 1.43m and the continuing figure soaring by nearly a million to 17m in July. Personal income in June contracted by 1.1% but spending only fell to 5.6%.

GDP contracted in Q2 by 32.9%, based on initial data, not as bad as expected but still more than 6 times the rate in Q1. The Chicago PMI is up to 51.9, but the Michigan consumer sentiment index for July fell a point to 72.5.

North of the border, the Canadian dollar is down 0.12% this morning after Friday’s data revealed a vast improvement in GDP for May – 4.5% MoM. Statistics Canada expects the labour market to improve this month.

Commodities – OPEC to up production

Oil this morning is down 20 cents for a barrel of West Texas Crude after Baker Hughes on Friday read a 1-rig decline in active oil fields, but OPEC expressed intentions to increase production in August.

Gold is up another $9.40, pushing the price to 1995.30 per troy ounce.

Bitcoin is down 1.4% as Japanese officials announce efforts to launch a digital yen as part of this coming year’s legislative agenda.

Corporate – HSBC tanks

The FBI has arrested 3 US citizens – the leading suspect a minor – in the hacking of major Twitter (-0.87%) accounts last month, a hack that led to CEO Jack Dorsey being added to the list of high-tech officials appearing in Congressional anti-trust hearings last week.

Meanwhile, President Trump has given China’s ByteDance 45 days to conclude its sale of TikTok to Microsoft. The company owner has accused Facebook and its owner of plagiarism and defamation.

Samsung over the weekend announced it would be ceasing manufacturing operations in China, sacking half of its 1700-strong workforce.

Qualcomm shares were down Friday 1.47% despite beating earnings forecasts by 15 cents, at 86 cents per share on revenues of $4.89 bn – a 17% beat. Additionally, the company announced a licensing deal with Huawei for its 5G telephone infrastructures.

Heineken reported an 11.5% drop in sales YoY in its half-year report, and HSBC this morning missed profit expectations by $1.3 bn with revenues down 9% YoY to $26.7 bn. EPS, on the other hand, increased from last year’s Q2 13 cent loss to a 10 cent profit this quarter.

Still ahead today, earnings from Ferrari and Siemens. AT&T and Verizon will be paying dividends


7:00 AM – 1:45 PM GMT France, Italy, Germany, EU, UK & US Markit Manufacturing PMIs. ISM’s figure for the US at 2 PM.
02:00 PM GMT US Construction Spending. Total Vehicle Sales at 7:30 PM
11:30 PM GMT Japan CPIs. Foreign Reserves and Monetary base at 11:50
00:30 AM GMT (+1) Australia Retail Sales. Trade balance at 1:30, and RBA Interest Rate at 4:30 AM.

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