Asia – China/UK tensions mount

Following the PBoC’s decision to maintain its 3.85% interest rate, he indices are up all over China this morning, 3.1% for Shanghai’s composite and 0.28% in Hong Kong, but down 0.04% in Tokyo after June’s merchandise trade deficit failed to drop dramatically as expected, sufficing with attaining ¥-268.8 bn YoY on weak exports and improving imports.

Last night’s BoJ meeting minutes reveal that some board members believe the economy has “bottomed out”.

China’s ambassador to the UK yesterday warned his country would respond harshly if Britain attempted to sanction its officials, Reuters reports. After accusing China of “gross” human rights violations, UK Foreign Secretary Dominic Raab is expected to announce today the suspension of the nation’s extradition treaty with Hong Kong, whose banks are closing due to the Corona influx to the isle.

Europe – Euro bosses bicker

European indices are set to open slightly down this morning after closing mixed on Friday – up 0.63% in London, down 0.31% in Paris.

The Euro is marginally up after Thursday’s improvement in May’s trade surplus and the ECB’s decision to maintain an even 0% interest rate. Construction output increased significantly by 27.9% in May, following April’s 18% contraction.

The currency is also enjoying some backwind from EC President von der Leyen hopes that EU leaders will finalise a recovery aid bill today, though how to “carve up” the cake and its ingredients remain points of contention, Reuters reports.

Polish PM Morawiecki refuses to sign on due to a clause freezing funds for countries violating the rule of law, and Hungarian PM Orban is accusing Holland’s Mark Rutte of blocking the entire deal.

Americas – Markets await McConnell’s trillion

Index futures are down a half per cent this morning. On Friday, the Dow lost about a quarter per cent while the Nasdaq and S&P gained the same.

US data as the week ended was generally good – a 7.5% increase in retail sales for June and a 270K improvement in continuing jobless claims. The number for initial claims dropped to 1300k, but not as well as the 1250K hoped for.

Building permits improved but missed the mark, whereas housing starts satisfied expectations with a 1.186m unit increase. Still, Michigan’s preliminary consumer sentiment index for July shows a 5-point contraction to 73.2.

Meanwhile, Senate Majority Leader Mitch McConnell is expected to reveal the nation’s 4th trillion-dollar relief bill this week.

Commodities – China relaxes oil buying

Oil is wedging down towards 40.5 after the Baker Hughes company revealed a 1-rig contraction to 180 this past week. Bloomberg this morning reports that oil futures are being pressured by a relaxation of China’s recent buying spree, which peaked in Mid-June.

Gold is at the top of its 10-day band, still comfortably above the 1800 level.

Corporate – Moderna begins human vaccine trials

Bloomberg also reports that Boeing (=1.65%) is running out of space for stored, unsold 787 Dreamliners.

Moderna closed 15.94% up on Friday after the company announced the commencement of “extensive clinical trials” involving 27,000 participants for its RNA-based COVID-19 vaccine.

After announcing a 24% drop in earnings on a 6% drop in sales in Q2, Dutch health tech company Philips said it expected to return to growth in the 2nd half of this year.

Earnings reports are still expected today from IBM (+0.89%) and Haliburton (-0.076%).

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