News / Analysis
Finance Update – America in FlamesJune 1, 2020
The US Dollar continues south as Trump deploys the national guard against anti-police protesters.
While the world awaits to see the extent of the US’ anti-China sanctions, indexes in the US felt the wrath of Trump as the week ended. The DOW is losing 0.07%, while the Nasdaq added 1.29%.
Futures, however, tell a different story, as anti-police violence has pushed all three major benchmarks down more than 1%.
Chinese media have called Trump’s move to revoke Hong Kong’s special trading status in retaliation for China’s new security measures on the island as suicide.
On the diplomatic front, Trump’s invitation to a G7 meeting has met with its first hurdle – Germany’s Angela Merkel who has said she would not personally attend.
Trump immediately retaliated by postponing the summit to September and saying that the G7 was an “outdated group of countries.”
A better-than-expected continuing jobless claims Thursday showed applications falling by nearly 3 million. The initial number, however, grew to 2.123 mn in May.
Durable goods fell by 7.4% in April And personal consumption missed the mark at 1.6%. Pending home sales also contracted by 33.8% (YoY) – double the March result. Canada’s figures came in better than expected, with an 8.2% GDP contraction QoQ in Q1.
On Friday, Chinese equities seemed relatively unperturbed by US President Donald Trump’s ending Hong Kong’s special trade status, claiming that the island is no longer “sufficiently autonomous (of Chinese policies) to warrant special treatment.”
The Shenzhen Composite was up 3.05%, surpassed only by the Hang Seng itself, which added 3.55%.
Meanwhile, Bloomberg reports that relocation firms in Hong Kong are reporting a 20-fold increase in immigration inquiries. Since Hong Kong does not publish immigration statistics, requests for lack-of-criminal-record certification are up 50% YoY.
UK Foreign Minister Dominic Raab Thursday declared that he would ease the citizenship path for about 300,000 Hong Kong resident holders of British Overseas National status. Taiwan, the U.S., Canada and Australia have made similar promises.
North of the border, China’s closed-door parliamentary meeting on Thursday mostly ignored the troubles festering on the island, placing employment at the top of its list by promising fiscal stimulus worth 4% of GDP, Reuters reports.
China’s official manufacturing PMI fell 2 ticks to 50.6 in May, while the non-manufacturing result rose by 4 to 53.6.
The Markit figure surprisingly soared to an expansionary 50.7!
Australia’s CB manufacturing PMI also surprised by losing only a 1/10th of a percent, on expectations of a 2-point contraction for May, while Japanese data, as last week ended, came in mostly below expectations, retail trade in April declining by 13.7% YoY, industrial production by 14.4% YoY, and housing starts -12.9%.
Consumer confidence in May actually exceeded expectations by climbing 3 points to 24, while the unemployment rate added 1 tenth instead of 2, arriving at 2.6%. This morning’s Jibun Bank Manufacturing PMI came in level with April – a contractionary 38.1.
A Euro-GBP tug-of-war is in the works as Brexit talks reconvene this week – a no-deal exit gaining in likelihood.
European sentiment markers fell in May, services to -43, industry to -27.5 and economic – though rising to 67.5 – missed expectations by 3 points, while consumer inflation fell to 0.1% YoY in May.
Meanwhile, in Germany, retail sales in April fell by 5.3% – better than the expected 12 – while May’s preliminary CPI fell to 0.6% YoY.
France’s Q1 GDP came in at -5.3% QoQ – also slightly better than the 5.8% contraction expected, while Italy’s figure showed a 5.3% contraction – the same as the previous quarter.
European equities last week were depressed by US President’s Trump return to trade-war stance. All ended down, led by the FTE’s -2.29%, with Italy relatively unscathed at -0.84%.
Oil stalled its recovery – mainly on profit taking but also on Russia’s hope to ease restrictions, this as Algeria recommends bringing the OPEC+ meeting forward to this week.
But the big story is gold, which is up 70 cents since Thursday, when Bloomberg reported “one of the largest ever physical transfers of the metal.”
The news-source says that about $30 bn-worth have been shipped to the US since the onset of the Corona crisis in March – equal to the entire production output during that period, with countries such as Australia ramping up extraction.
With futures prices soaring, traders have been buying the metal at spot prices. Selling futures at a huge profit, and covering their positions with physical bullion.
Tesla shares sharpened their incline somewhat, adding 3.62% Friday after the successful launch of Elon Musk’s SpaceX, carrying 2 astronauts to the International Space Station.
And, finally, ratcheting up the Twitter-Trump front tension, that company and Reddit Thursday joined the Internet Association’s lawsuit against the US State Department that requires visa applicants to submit their social media accounts for scrutiny.
|7:15AM-1:45PM GMT||Portugal, Italy, France, Germany, EU, UK & US||Markit manufacturing PMIs|
|02:00 PM GMT||US||ISM Manufacturing PMI & Construction Spending|
|10:00 PM GMT||Australia||New Home Sales. RBA Interest Rate at 4:30 AM GMT (+1)|
|06:00 AM GMT (+1)||UK||Housing Prices|