Finance Update – Techs on Trial

Americas – FED stays pat

After Trump’s announcement that he would not defend its European allies from an attack by Russia, prompting his former communications director Anthony Scaramucci to call the president a racist KGB agent, the Dollar index this morning is at a 2-year low.

Also, yesterday, the US Fed left interestThe cost of accessing money not owned. rates at 0.25%, saying the “path of the economy will depend significantly on the course of the virus.”

Indexes closed up led by the Russel’s 2.03% increase, even as Reuters reports the economy’s largest quarterly contraction since the Great Depression – a Q2 34% annualised drop in GDP, with COVID-19 destroying consumer and business spending and “potentially wiping out more than five years of growth.”

Pending home sales in June surprised to the upside by 6.3% MoM and the Goods Trade DeficitA trade balance that is negative as a result of cost (imports, on the national level) being greater ... narrowed to $70 bn. Wholesales inventories, on the other hand, widened to -2% and July’s Mortgage applications decreased by 0.8%, following June’s 4% increase.

Asia – HK construction threatens lenders

The Nikkei and Chinese benchmarks are slightly down this morning with the Hang Seng up 0.8% and New Zealand’s DJ 1.06% – the last despite July business confidence in New Zealand, which contracted to -31.8.

Building permits in Australia also failed to hit the mark contracting by 4.9% MoM in June despite hopes for a level 0.

In Japan, the Nikkei was unimpressed with June’s impressive 13% improvement in seasonally adjusted Retail trade, as foreign investments in stocks decreased by 110 bn Yen and bonds by half a trillion.

Reuters reports this morning a 30% drop in Hong Kong construction values over the past year and the start of a wave of defaults, causing consternation amongst lenders.

Europe – UK cars hit 60-yr low

European indices remained red yesterday, save the CAC, which was up 2/3 of a per cent and the FTSE’s meagre 0.04% rise.

Net lending in the UK was surprisingly up by £1.8 bn and consumer credit nearly expanding at a much-better-than-expected £-0.086 bn in June and Mortgage applications by 40K, all nudging the pound up by 0.08%.

Reuters also reports that the defunct UK auto industry reported its lowest production level since 1954.

Commodities – Oil ignores huge drawdown

Oil continues in a bearish wedge towards 41.20 despite a monolithic 10 mB drawdown reported yesterday by the EIA.

Meanwhile, gold at 1974 continues to surge upwards, and Bitcoin is calmly holding on to its latest 11K foothold.

Corporate – Tech lords admit wrongdoing – shares soar!

The Big-4 techs yesterday did poorly at their congressional anti-trust hearing, none even trying to forcefully rebut accusations of monopolistic and user-data mining activities.

Not surprisingly, Facebook closed up 1.38%, Google 1.32%, Amazon 1.11% and Apple a whopping 1.92%. Highlights include Bezos’s admission that his company may have used 3rd-party seller data for its own benefit and that stolen goods were indeed sold on the platform, and Zuckerberg’s failure to deny that it had copied, cloned and co-opted competitors. Ironically, the only FAANG not to appear at the trial was Netflix, which lost 0.82% during the session.

Kodak share trading was temporarily halted yesterday when shares soared by over 169% on the announcement the veteran camera-making company would begin making pharmaceutical ingredients for the US government.

Across the Atlantic, Airbus (-2.62%) announced production cuts amidst a 55% drop in revenues YoY to €8.32 bn, pushing EPS down to €1.42. Meanwhile, Boeing (-2.32%) announced it would end production of its 747 in 2022, amidst a 25% drop in revenues to $11.8 bn.

GE (-4.35%) revenues fell by 24% YoY, GM (-1.67%) by 53% Rio Tinto (+0.93%) by 13.7% and Qualcomm (+1.73%) 49%. Om the other edge of the scale, PayPal (+4.73%) reported an 11% increase YoY.

Today’s earnings reports are expected from Apple, Amazon, Comcast, Volkswagen, Baxter, Alexion, Stryker, Anglo American, American Tower, Danone, Orange, Textron, Valero, Fresenius and Davita. Ralph Lauren will hold a shareholder’s meeting.

Events