News / Analysis
Finance Update – China War Down Under Turns NastyMay 12, 2020
In its continued proxy war with Australia, China has banned beef imports from Australia. Australia’s trade minister said he did not believe the move was motivated by Canberra’s call for an inquiry into the source of the Coronavirus.
Still, yesterday China also targeted Australian grain exports, citing dumping and giving Australia a week to respond to the claim.
Chinese inflation indexes decreased dramatically overnight, the producer price index contracting by 3.1% and the YoY CPI down a percent to 3.3% in April, while Australian business confidence improved slightly to -46. Conditions worsened, falling to -34.
Japan’s leading economic index also fell beyond expectations o 83.8 in the March preliminary reading. The Yen added 34 pips after BoJ Governor Kuroda said this morning that the bank would do anything it could to mitigate the COVID economic fallout, reports Reuters.
Indexes throughout the region ended this morning in the red, except the Nikkei, which added a quarter percent and New Zealand, with 0.66%.
The German Bild newspaper reports that Germany’s budget deficit in 2020 is expected to be about €100 billion, as about 90% of companies report COVID-related damage.
Meanwhile, the UK and EU launched the 3rd round of Brexit talks yesterday. After the EU’s chief negotiator last week accused Britain of not taking the talks seriously.
European equities finished mostly in the red on 2nd-wave COVID fears yesterday, led by Spain’s IBEX’s -1.63% followed by the CAX at -1.31%.
The FTSE managed to eke out a 0.06% improvement. Industrial output in Italy contracted by 29.3% in March from -2.3% the month before.
Chicago Fed head Charles Evans said the US Federal Reserve had no intention of going negative on interest rates.
Atlanta’s Bostic was in agreement, and St. Louis’ Bullard claimed there was no proof that negative rates had worked elsewhere.
Short-term bond yields yesterday increased marginally (by 0.05%), while the 3-year bill contracted to 0.23%.
Markets were mixed, the DOW losing 0.45% but the Nasdaq gaining 0.78%.
Trump yesterday told reporters that he refused to reopen the Phase-1 deal with China after Beijing hinted it may invalidate the agreement.
The day after the latest Bitcoin halving finds the asset completing yet another week-long head & shoulders pattern, with Bitcoin options breaking the billion-dollar mark for the first time.
Oil overnight showed a small bump after Saudi Arabia surprisingly said it would deepen supply cuts in June to help alleviate the global crude glut. It fell back to 24.20 as Bloomberg reports a gradual reopening of Shale wells in the US.
Toyota warned investors overnight that it expects operating profits to fall by about 80% YoY. Shares lost 100 Yen on the announcement. In its earnings announcement this morning, the company posted a 1% drop in quarterly revenues YoY.
Meanwhile, Elon Musk has reopened his California plant defying closure orders, risking jail.
Nvidia yesterday added 3% after the company’s acquisition of the Mellanox networking devices company was approved.
In the UK, expect earnings results from both Vodafone and Aston Martin.
|10:00 AM GMT||US||NFIB Business Optimism. CPIs at 12:30 & monthly budget statement at 6 PM.|
|11:01 PM GMT||UK||Like-4-like retails sales|
|11:50 PM GMT||Japan||Trade Balance|
|00:30 AM GMT (+1)||Australia||Consumer Confidence. Wages price index at 1:30|
|02:00 AM GMT (+1)||NZ||Interest rates & Monetary Policy|
|06:00 AM GMT (+1)||UK||Trade Balance, Manufacturing Production & GDP|