Sterling at 5-month peak as BOE stands pat, Dollar eases as investors fret over U.S. recovery, Asian shares subdued - Thursday, August 6th, 2020
Economic Data Ahead
Key Events Ahead
DXY: The dollar slumped to an over 2-year trough on rising perception that the U.S. economic recovery could be hobbled by the country’s poor performance in containing the COVID-19 outbreak. Top congressional Democrats and White House officials negotiations headed toward an end-of-week deadline with no sign of an agreement. The greenback against a basket of currencies traded 0.1 percent down at 92.69, having touched a low of 92.52 earlier, its lowest since May 2018.
EUR/USD: The euro rallied to an over 2-year high as investors continued to cheer on yesterday's data showing Eurozone business activity returned to modest growth in July as some curbs imposed to stop the spread of the coronavirus were lifted. The European currency traded 0.3 percent higher at 1.1895, having touched a high of 1.1915 earlier, its highest since May 2018. Investors’ attention will remain on a series of data from Eurozone economies, ahead of the U.S. unemployment benefit claims. Immediate resistance is located at 1.1930, a break above targets 1.1957. On the downside, support is seen at 1.1809 (5-DMA), a break below could drag it below 1.1755 (10-DMA).
USD/JPY: The dollar declined, extending losses for the third straight session, after data showed U.S. private payrolls growth slowed sharply in July, indicating the labour market recovery was faltering. Investors now await weekly data due later in the day, which is expected to show a slight decline in initial claims to 1.415 million last week from 1.434 million in the preceding week. On Friday government data is likely to show U.S. payroll growth slowing to 1.6 million in July from 4.8 million in June. The major was trading 0.1 percent down at 105.46, having hit a high of 106.47 on Monday, its highest since July 24. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ADP unemployment benefit claims. Immediate resistance is located at 105.94, a break above targets 106.19. On the downside, support is seen at 105.09, a break below could take it near at 104.77.
GBP/USD: Sterling advanced to a 5-month peak after the Bank of England kept its benchmark interest rate at 0.1 percent and also left unchanged the size of its bond-buying programme at 745 billion pounds. The major traded 0.4 percent higher at 1.3164, having hit a high of 1.3183 earlier, it’s highest since March 9. Investors’ attention will remain on the geopolitical developments, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3210, a break above could take it near 1.3230. On the downside, support is seen at 1.3074, a break below targets 1.3020. Against the euro, the pound was trading 0.2 percent up at 90.25 pence, having hit a high of 89.80 on Friday, it’s highest since July 13.
AUD/USD: The Australian dollar rose, hovering towards a 1-1/2 year high hit in the prior session, as the greenback weakened as top congressional Democrats and White House officials appeared to harden their stances on new coronavirus relief legislation. The Aussie trades 0.1 percent higher at 0.7195, having hit a low of 0.7076 on Monday, it’s lowest since July 24. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate resistance is located at 0.7230, a break above could take it near 0.7254. On the downside, support is seen at 0.7161 (5-DMA), a break below targets 0.7120.
Asian shares traded within narrow ranges as investor focused on negotiations over a new U.S. stimulus package.
Tokyo's Nikkei fell 0.4 percent to 22,418.15 points, Australia's S&P/ASX 200 index surged 0.7 percent to 6,042.20 points. South Korea's KOSPI gained 1.3 percent to 2,342.61 points.
Shanghai composite index rose 0.3 percent to 3,386.46 points, while CSI 300 index traded 0.3 percent down at 4,762.76 points.
Hong Kong’s Hang Seng traded 1.05 percent lower at 24,832.79 points. Taiwan shares added 0.9 percent to 12,913.50 points.
Crude oil prices surged, hovering towards a 5-month high recorded in the previous session after the Energy Information Administration reported a much bigger than expected drop in U.S. crude stockpiles. International benchmark Brent crude was trading 0.7 percent up at $45.50 per barrel by 0606 GMT, having hit a high of $46.21 on Wednesday, its highest since March 6. U.S. West Texas Intermediate was trading 0.6 percent higher at $42.41 a barrel, after rising as high as $43.50 on Wednesday, its highest since March 6.
Gold prices rallied towards an record peak scaled in the previous session as dismal U.S. jobs data hammered the dollar, while increasing worries about a recovery in the pandemic-ravaged global economy boosted the safe-haven metal's appeal. Spot gold was up 0.5 percent at $2,047.36 per ounce by 0614 GMT, having hit an all-time high of $2,055.92 on Wednesday. U.S. gold futures rose 0.4 percent to $2,056.60.
The U.S. Treasury yields edged lower, with the benchmark 10-year note yield trading at 0.545 percent.
Post included video in which Trump wrongly said that children were ‘almost immune’ from illness
Facebook has removed a post from Donald Trump’s page for spreading false information about the coronavirus, a first for the social company that has been harshly criticized for repeatedly allowing the president to break its content rules.
The post included video of Trump falsely asserting that children were “almost immune from Covid-19” during an appearance on Fox News. There is evidence to suggest that children who contract Covid-19 generally experience milder symptoms than adults do. However, they are not immune, and some children have become severely ill or died from the disease.
“This video includes false claims that a group of people is immune from Covid-19 which is a violation of our policies around harmful Covid misinformation,” a Facebook spokesperson said.
During a press briefing on Wednesday afternoon, Trump repeated his false claims about children and the disease.
Trump’s presidential campaign and tenure in office have been defined by his aggressive use of social media platforms to spread racism, xenophobia, threats, and misinformation. For years, the US-based social media platforms that enabled his broadcasts were hesitant to enforce their own rules against him.
Dollar stays weak Amid signs of lagging U.S. economy, Wall street gains, Gold scales new record, Oil moves up on big Crude inventory decline-august 6th,2020
• US Jul ADP Nonfarm Employment Change 167K, 1,500K forecast, 4,314K previous
• US Imports 208.95B, 199.49B previous
• US Exports 158.25B, 144.69B previous
• Canada Jun Exports 39.71B, 38.80B forecast, 33.90B previous
• US Jun Trade Balance -50.70B, -50.10B forecast, -54.80B previous
• US Jun Trade Balance -3.19B, -0.90B forecast, -1.33B
• US Jul Services PMI 50.0, 49.6 forecast, 47.9 previous
• US Jul Markit Composite PMI 50.0,50.3, 50.0, 47.9 previous
• US ISM Non-Manufacturing Business Activity 67.2, 60.0 forecast, 66.0 previous
• US Jul ISM Non-Manufacturing PMI 58.1, 55.0 forecast, 57.1 previous
The precious metals rally gathered pace overnight as spot gold rose as much as 0.6% to a record $2,031.14 per ounce, while spot silver advanced as much as 1.3% to $26.3473/oz. The printers are running... Investors are counting on even more spending in the U.S. to combat the pandemic's fallout as White House negotiators work "around the clock" to reach a stimulus deal by the end of the week, while markets also latched on to comments from San Francisco Fed President Mary Daly that the U.S. economy will need more support than initially thought. Search for a new reserve currency? Goldman Sachs says gold may climb to $2,300/oz. and RBC Capital puts the odds of a rally to $3,000/oz. at 40%.
U.S. stock index futures are looking to extend gains as traders await progress from Washington on a new coronavirus aid package. "I think the expectation for the market is that we are going to get that stimulus," Ally Invest's Lindsay Bell told CNBC. Better-than-expected earnings from Disney (NYSE:DIS) are also helping sentiment (see below), while closely-watched Moderna (NASDAQ:MRNA) will report before the opening bell. On the trade front, reports suggest that U.S. trade representative Robert Lighthizer and Chinese Vice Premier Liu will meet in mid-August to discuss the Phase One trade deal between the U.S. and China.
Aussie gains on upbeat economic data, Dollar eases on recovery worries, Asian shares consolidate - Wednesday, August 5th, 2020
Economic Data Ahead
Dollar retreats on stimulus talks, Wall street ends higher, Gold gains, Oil edges up to highest since March on hopes for U.S. stimulus-august 5th,2020
• US Redbook (YoY) -7.1%,-8.7% previous
• US Redbook (MoM) 1.1%, 1.1% previous
• US Jul All Truck Sales 11.02M , 10.09M previous
• US Jul All Car Sales 3.50M, 2.97M previous
• Canada Jul RBC Manufacturing PMI 52.9, 47.8 previous
• US Jul ISM NY Business Conditions 53.5%,39.5% previous
• US Jul ISM-New York Index 807.8, 806.0 previous
• US Jun Durables Excluding Defense (MoM) 9.5%, 9.2% previous
• US Jun Factory Orders (MoM) 6.2%,5.0%forecast ,8.0% previous
• New Zealand GlobalDairyTrade Price Index-5.1%,-0.7% previous
Booking.com’s plans to lay off up to 25% of its global workforce as the Covid-19 pandemic continues to take a wide toll on travel, the company reported in a filing Tuesday. Booking.com has more than 17,000 employees, a company spokeswoman told CNBC.
Booking Holdings, Booking.com’s parent company, will finalize its plans and make announcements to employees on a country-by-country basis starting in September, according to the filing. Booking Holdings is also the parent company of other online travel companies like Kayak and Priceline, but the layoffs will only affect Booking.com, according to the filing.
Sterling heads lower after early gains, European shares dips,gold edges back from record peak, Oil falls as rising virus cases overshadow demand recovery-august 4th,2020
• French June Government Budget Balance -124.9B, -117.9B previous
• Spanish Unemployment Change -89.8K, 5.1K previous
• Eurozone PPI (YoY) -3.7%, -3.9% forecast -5.0% previous
• Eurozone PPI (MoM) 0.7%,0.5% forecast, -0.6% previous
Looking Ahead - Economic data (GMT)
•12:55 US Redbook (MoM) 1.1% previous
• 12:55 US Redbook (YoY) -8.7% previous
• 13:30 Canada Jul RBC Manufacturing PMI 47.8 previous
• 13:45 US Jul ISM NY Business Conditions 39.5% previous
• 13:45 US Jul ISM-New York Index 806.0 previous
• 14:00 US IBD/TIPP Economic Optimism 44.0 previous
• 14:00 US June Durables Excluding Defense (MoM) 9.2% previous
Reporting a record $6.7B loss overnight as the oil industry struggles, BP (NYSE:BP) halved its dividend to 5.25 cents per share following in the footsteps of rival Royal Dutch Shell (RDS.A, RDS.B). Analysts are still scratching their heads, with the stock up 8.2% premarket, though some are attributing the big move to business segments that are getting overshadowed. BP said it had "an exceptionally strong contribution" from trading (more than $1B for the quarter) and launched a new green strategy. It pledged to increase low-carbon spending to $5B a year by 2030 and boost renewable power generation to 50 gigawatts while shrinking oil and gas output by 40% compared with 2019.
Disney (NYSE:DIS) will lead the earnings charge after the market close today, with results also expected from Activision Blizzard (NASDAQ:ATVI), Beyond Meat (NASDAQ:BYND) and Nikola (NASDAQ:NKLA). While the House of Mouse has reopened theme parks in Asia, France and Florida, and inked a deal with the NBA to resume the season at its facilities, the company is not out of the woods yet. It has had to contend with shuttered cruise lines, disrupted production schedules, slashed advertising budgets and indefinitely delayed major theatrical releases. Disney+ promises to be a rare bright spot, but from a revenue perspective, the streaming service is still only a small piece of the sprawling media empire.
Aussie steadies as RBA keeps policy steady, Dollar gains against Yen as investors await U.S. stimulus deal, Asian shares surge - Tuesday, August 4th, 2020
Economic Data Ahead
Coronavirus relief talks are re-starting Monday as Democrats meet with the Trump administration to hash out a deal. On Sunday, White House coronavirus task force coordinator Dr. Deborah Birx warned that the U.S. is in a “new phase” of its battle against the coronavirus, which is “extraordinarily widespread” in both urban and rural communities. On Monday, President Donald Trump targeted Birx in a tweet, saying she “hit us” following reported criticism from House Speaker Nancy Pelosi.
Here are some of the biggest developments today:
Record-breaking job creation in May and June appear to be giving way to a more subdued pace, with a possibility that some of those gains even will be reversed.
Current consensus is for July nonfarm payrolls to rise by 1.26 million, according to economists surveyed by Dow Jones. The number would be well below the previous month’s 4.8 million but still easily better than anything the U.S. has seen in the pre-Covid 19 era.
Still, recent signs are indicating that while the previous two months showed surprises to the upside, adding 7.5 million jobs in just two months, July’s story could be different. Spiking coronavirus cases and rollbacks of reopenings in multiple states present roadblocks to continued aggressive gains in jobs.
(CNBC) A summer slump may strike stocks.
After the S&P 500 gained 5.5% in July, CFRA’s Sam Stovall sees it falling 5% to 10% over the next two months.
“We have a lot of concerns out there — in particular the overbought condition of the market right now, tech and large-cap dominance, the concerns surrounding soaring gold prices, the falling dollar, historically low interest rates, as well as just traditional optimism,” the firm’s chief investment strategist told CNBC’s “Trading Nation” on Monday.
Yet, the market kickoff to August didn’t reflect the risks. With potential headway on a coronavirus aid bill and Microsoft announcing its intention to buy TikTok in a multibillion-dollar deal, the S&P 500 and tech-heavy Nasdaq were off to a running start. The S&P gained 0.9%, while the Nasdaq rallied 1.6% to a record high.
But Stovall said the enthusiasm will have a short shelf life.
Stovall, who has been on Wall Street since 1985, warns the market faces “ominous” seasonality in August and September.
“Over the last 25 years, the S&P on average has fallen in price by about 1% [in August],” he said. “Only utilities and technology have been able to eke out advances.”
(CNBC) Treasury yields edged higher on Monday following last week’s decline that pushed some of the frond-end rates to record lows.
The yield on the benchmark 10-year Treasury note was higher by 2 basis points at 0.562%, recovering slightly after falling to its lowest level since March 9 on Friday. Meanwhile, the yield on the 30-year Treasury bond was up 5 basis points at 1.251%. The 30-year rate slipped to its lowest level since April 29 in the previous session. Yields move inversely to prices.
The SPDR Tech Sector ETF (XLK, +1.3%), which rose 5% last week and 5.7% in July, is on the front foot again as Microsoft (MSFT, +2.3%). Apple (AAPL +1.4%) is also higher.
Microsoft is gaining as it looks to move forward with its acquisition of TikTok, which is, along with Instagram, the essential app for the younger users. Pinterest (PINS, +3.1%) added to its huge Friday gains as Pivotal Research upped the stock to Buy from Hold, noting the “astounding” growth rate.
While megacaps are unsurprisingly rising again following last week’s earnings, other stocks are enjoying their Midas Touch as deal activity picks up.
Globay Payments (GPS, +3.7%) is the top gainer in XLK premarket. It announced a new multi-year collaboration agreement with Amazon Web Services, for a cloud-based issuer processing platform to financial institutions.
Microsoft is committed to trying to buy TikTok's U.S. operations, after CEO Satya Nadella discussed a potential deal during a phone call on Sunday with President Trump. Microsoft (NASDAQ:MSFT) said in a blog post that it will move quickly to pursue discussions with TikTok parent ByteDance (BDNCE), aiming to complete negotiations by Sept. 15. "Microsoft fully appreciates the importance of addressing the President’s concerns," the company said. "It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury." The company's aim is to build on TikTok's popular user experience with adding privacy and security protections. The proposed transaction has gained the blessing of top Trump administration officials, including Treasury Secretary Mnuchin, as well as several Republican lawmakers, after the president's Friday night comments that he preferred a TikTok ban in the U.S. instead of a sale took all sides by surprise.
All eyes on U.S. payroll data
The U.S. July employment report, to be released this Friday, will have a binary flavor to it. If the jobs situation is consistent with economists' views, it should give investors more confidence in the economy's health while weak data will weigh on investors' near-term enthusiasm. Current consensus is a rise of 1.65M jobs, albeit a bearish drop of ~27% from last Thursday's projection of 2.25M. Congress is trying to cobble together another stimulus package but, unsurprisingly, Republicans and Democrats are at loggerheads over the specifics.
During July, the Nasdaq hit a new all-time high, driven by the ever-living rally of FAANG and most tech-related stocks. Last week, Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) (NASDAQ:GOOGL), and Facebook (NASDAQ:FB) reported surprisingly good results, justifying the market's ongoing optimism. However, the higher the market rallies, the more difficult it becomes for investors to find stocks with tangible capital return policies at a decent valuation. Still, some options do remain. One such stock, we believe, is Home Depot (HD). The home improvement retailer operates almost 2,300 stores in the US, Canada, and Mexico, which generate around ~110 billion in annual revenues.