News / Analysis
Finance Update – The Golden ParachuteAugust 12, 2020
The big news this morning is gold, which plummeted 8% beginning last night and continuing throughout the Asian session – its largest single-day decline in 7 years. This morning finds the commodity at 1891 with further downside indicated, after a spike in risk aversion on yesterday’s announcement that Russia was launching COVID treatments with its newly registered (untested) vaccine.
WTI yesterday added 9 cents to the barrel after the API recorded another 4.4mB drawdown. Meanwhile, DeautscheBank, Credit Suisse, BNP and other major banks face public outcry over their financing of oilfields in Ecuador despite the producers’ mistreatment of ethnic minorities in the Amazon region.
A major casualty of yesterday’s gold meltdown were US indices, the Nasdaq continuing down another 1.69% with the S&P following at -0.8%, as tech shares fell across the board.
The dollar index only managed to add 23 cents overnight despite better-than-expected PPIs and an improvement in the Redbook Index for the 1st week in August. Bond yields increased dramatically ahead of the 10-yr auction tonight as expected prices fall.
Equity failure spread overnight to Asia, the Shenzhen Composite losing 2.94% and only the Nikkei adding 0.21% – equities also pressured down by uncertainty over US stimulus talks.
The AUD is down a ½ per cent this morning after wage data missed expectations with a 0.2% increase QoQ – the lowest ever recorded.
And the NZD isn’t doing much better despite a slight improvement in Visitor Arrivals in June to -98.4%. The nation’s central bank maintained its 0.25% as the first COVID case appears after 100 days. In its policy statement, the bank said it was considering negative rates, but would suffice for now in expanding its bond-buying activities.
European indexes yesterday managed to escape yesterday’s mayhem, the Spain’s IBEX adding 2.97%, Italy’s FTSE 2.84% and the CAC40 adding 2.41%.
The ZEW institute yesterday reported a marked improvement in Economic Sentiment throughout the EU and Germany in August but a 1-point contraction in the Current Situation.
The pound could be showing signs of recover this morning thanks to a better-than-expected 21.7 contraction in Q2 GDP. The nation’s trade surplus added a billion pounds while manufacturing and industrial production both exceeded expectations by about 3% each.
Unemployment in the UK maintained a 3.9% level in June surprising investors to the upside, while average earnings contracted by a disappointing 1.2%. Data does not reflect a huge drop in freelance workers, creating the worst UK job loss in a decade, according to Reuters. And, finally, finance minister Rishi Sunak may delay the 2021 budget due to continued COVID mayhem.
To return to today’s main theme, though, Moderna shares shot up 13% after hours upon Trump’s announcement that the government had reached a $1.5bn deal with the company.
Qualcomm (+2.32%) added 5% after hours after the US Circuit Court of Appeals ruled against the Federal Trade Commission’s antitrust allegations.
Tesla (-3.11%) yesterday announced a 5-for-1 stock split for the end of the month, sending stocks soaring more than 7% after hours.
And Airbnb yesterday announced it would list its shares by year’s end on the US stock exchange through Morgan Stanley and Goldman Sachs underwriting – this after raising a billion dollars in private funding earlier this year.
Later today, expect earnings reports from Cisco, Lyft and ABN Amro, and a dividend payment from Citizens Financial.
|09:00 AM GMT||Italy||CPIs|
|09:00 AM GMT||EU||Industrial Production|
|11:00 AM GMT||US||Mortgage Applications. CPIs at 12:30 and the Monthly Budget Statement at 6.|
|02:30 PM GMT||OIL||EIA Oil Stocks Change|
|11:01 PM GMT||UK||House Prices|
|01:00 AM GMT (+1)||Australia||Consumer Inflation Expectations. Unemployment & participation at 1:30.|