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News / Analysis

Finance Update – The Deviation Widens


Asia – China to retaliate against US HK measures

Chinese indices are led down this morning by the Shenzhen Composite’s 1.6% drop, the Hang Seng trailing at 0.24%. The Nikkei is up a per cent and a half, alongside Australia’s S&P/ASX and NZ’s DJ, after the BoJ maintained its -0.1% interest rate and its belief that the economy will improve after the world emerges from COVID-related turmoil.

Consumer confidence in Australia remained level at -6.1%.

China will provide $400 bn-worth of investments to Iran, according to the New York Times. The country’s official Global Times newspaper this morning is threatening retaliation against the US for interference in internal matters, this after President Trump yesterday signed a bill penalizing banks doing business with Chinese officials and signing an executive order ending Hong Kong’s preferential treatment.

Americas – Earnings pushing up indices

Meanwhile, US National Security Adviser O’Brian is in Paris to pressure European countries to follow the UK’s lead in uprooting Huawei from its 5G networks. Deutsche Telekom is refusing to toe the line.

Dallas Fed head Kaplan yesterday said he expected jobs and the economy to improve in 2021, while US Fed board member Brainard countered that financial institutions should expect turmoil as businesses become insolvent.

Earnings season took off yesterday, pushing the DOW up 2.13% with other benchmarks close behind, primarily thanks to increased stock value for Caterpillar (+4.83%), Exxon (+3.31%) and Chevron (+3.45%).

Small Business sentiment soared to 100.6 in June, while consumer inflation managed to remain steady at 1.2% YoY.

Europe – UK data shows improving economy

Europe was mainly red yesterday, the CAC down 0.97% and only the FTSE gaining a trivial 0.06%.

Economic sentiment improved marginally, but failed to meet expectations, as did the seasonally adjusted industrial production measure for May, which climbed out of the negative to expand by 12.4%. Economic sentiment in Germany fell 4 points to 59.3 in July.

In the UK, the National Institute of Economic and Social Research estimates June’s GDP to contract by a worse-than-expected 21.2% YoY.

Consumer inflation in June added a welcome tenth per cent, pushing it up to 0.6% YoY, while the Producer Price Index also surprised to the upside with a 6.4% contraction in June, 3 points better than May.

Retail prices also added a tick, now up to 1.1%.

Commodities – API surprises with drawdown

Oil overnight shot back up above resistance to 40.48 after the API delighted pundits with a colossal 8.3-million-barrel drawdown.

Countering the pressure, OPEC yesterday announced it expected markets to decline by almost 9mB a day this year.

Bitcoin remains firmly above the 9200 mark as Bloomberg reports BoE Gov. Bailey stating Monday that his institution is considering a central bank digital currency.

Corporate – Goldman Sachs reports earnings

EU regulators are expected to rule on a $15 bn Irish tax payment levelled against Apple (+1.65%), while Google (+0.57%) is being fined €600,000 in Belgium for privacy breaches.

Spotify is up 0.62% after announcing yesterday it was now available in 12 new European markets and Russia. And Tesla added 1.32% after rumours abounded that it was opening a 2nd factory in China.

Qantas is up 4.3% after announcing it was cancelling all international flights until next March, according to the Daily Mail.

Earnings-wise, Wells Fargo lost 4.57% after announcing a 0.66% decline in EPS on an 18% drop in revenue to $17.8 bn; Citi is down 3.93% after surprising to the upside with a 50 cent EPS, down 52% QoQ on a 5% drop in revenues QoQ to $19.77 bn; and JPMorgan also pleased with a mere 51% drop in EPS to $1.38 on revenues of $33.82 bn – a 15% increase YoY, pushing shares up by 0.57%. Delta (-2.65%) lost 88% of its revenues YoY at $1.47 bn, EPS is at a $9.97 loss.

Today, expect earnings from Goldman Sachs (Morgan Stanley has been postponed to the 16th), Alcoa and United Health Burberry and JP Morgan (London) will hold shareholders meetings, and Motorola, Quanta and Sempra will be paying dividends.


08:00 AM GMT Italy CPIs
08:30 AM GMT UK House Price Index
11:00 AM GMT US Mortgage Applications. NY Manufacturing Index at 12:30, Manufacturing Production at 1:15 & Beige Book at 6.
02:00 PM GMT Canada Interest rates & policy.
02:30 PM GMT OIL EIA Crude Oil Stock Change
10:45 PM GMT NZ CPIs
01:00 AM GMT (+1) Australia Consumer Inflation expectations. Business confidence & unemployment at 1:30
02:00 AM GMT (+1) China GDP, Industrial Production & Retail sales. House prices – ND.

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