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Finance Update – Markets Vaxed?


Asia – Asia unimpressed with COVID spin

Despite an excellent August services PMI from China Chinese benchmarks are all down this morning, led by the Hang Seng’s 0.56% drop. The 54-point result was a tick lower than July’s but better than the expected drop to 50.4.

And regardless of Markit’s 0.4 point drop in Japan’s services activity index to 45, the Nikkei is up 0.95% and the ASX 0.7% after Australia’s trade surplus for July came in overnight at a disappointing $4.6 bn.

The nation’s Combank produced a better-than-expected services PMI for August – 49 points, while commodity prices in New Zealand contracted by 0.9%.

Europe – Brexit barbs begin again

European indices closed in the green yesterday, the Dax up front with a 2.07% rise.

The Euro is down despite a better-than-expected 0.6% increase MoM in the Producer Price index for July. And the Pound is also down despite a much better than expected 2% increase MoM in UK housing prices for August. Still, Reuters this morning reports a Springboard survey showing more than 10% of UK shops empty.

Meanwhile, Bank of England governor Andrew Bailey yesterday criticized the EU’s decision to grant cross-border access to European financial markets to British investment companies, while his deputy, Dave Ramsden warned that the UK economy would continue suffering without additional quantitative easing.

EU negotiator Michel Barnier told an official forum yesterday that the end-of-October deadline for Brexit negotiations was sealed and that the UK would now have to address EU demands on fair competition, fisheries and disputes settlement.

Meanwhile, France yesterday released details on its planned €100 bn rescue package.

Americas – Indices up on COVID, Fed not so much

Amidst US and Chinese restrictions on diplomats, US indices continue up on news that the US administration expects a Coronavirus vaccination to be in effect long before November elections. The Dow was up 1.59% and the Russel200 0.94%.

Mortgage applications contracted by 2% – a third of July’s data, the ADP reported a 428K increase in jobs – half the expected, but factory orders increased by 6.4% – half a per cent better the expected and in line with June figures.

New York Fed head John Williams yesterday told a Bretton Woods seminar that the Fed does not rely only on unemployment as an indicator of economic conditions. The Fed’s Beige Book report yesterday warned that economic growth was “sluggish” and uneven. San Francisco Fed head Mary Daly yesterday told the Kennedy Inst of Politics that to resuscitate the economy further spending on infrastructures, education and other sectors was required.

Commodities – US derivatives trading up 20%, EU Assets trading down 20%

Oil is down to 41.25 this morning after losing $2 within minutes after a very surprising 9.36 mB drawdown, according to the EIA.

In other news, the Chicago Mercantile Exchange (CME Group) yesterday released its August metrics, showing a 20.6% increase MoM in contracts for the month, while the Deutsche Bourse (for comparison) published a 20.5% decline in total turnover.

And Pornhub has announced it will now be accepting Bitcoin & Litecoin as payment options for premium content. Bitcoin lost 4.7% in overnight trading.

Corporate – Aramco up, Saudi economy down

Aramco shares are up 2.13% after the announcement of additional oil fields in its purview. Markit reports a decline into contraction for Saudi Arabia’s PMI, after a tripling of VAT hit the non-oil producing private sector. The tax was aimed at supplementing losses on low oil prices but ended up curbing consumer spending.

After shooting up 6% following the announcement of its earnings beat, Macy ended up only 0.57% for the day. Income was down from $48mn in Q1 to a $431mn loss, with EPS falling to a negative $1.39.


7:00-8:00 AM GMT Italy, France, Germany, EU Services & Composite PMIs. EU retail sales at 9
08:30 AM GMT UK Services PMI
11:30 AM GMT US Job cuts. Jobless claims & Trade Balance at 12:30, Services & composite PMIs at 1:45-2 PM.
00:30 AM GMT (+1) Australia Retail sales


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