Monday, July 20, 2020

Asia Times: Market awaits additional fiscal stimulus while the second waves spread in many Asia regions

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Market RecapMarket awaits additional fiscal stimulus while the second waves spread in many Asia regions

 

Wall Street finished mixed with only DJI slipping 0.23%, S&P and Nasdaq both rose 0.28% on Friday. Dow fell after the consumer sentiment data disappointed the market and the continued rise in Covid-19 cases partly offset the optimism over scope of additional fiscal stimulus from the Fed. The Consumer Sentiment Index in the US fell sharply to 73.2 in July (preliminary) from 78.1 in June, much lower than the market expectation of 79. Further details of the figures showed that the current economic conditions index dropped from 87.1 to 84.2 and the index of consumer expectations worsened to 66.2 from 72.3. The reading indicated that consumer optimism and spending may need further support from the employment and income sustainability in the future.

Apart from the disappointed economic figures, the Covid-19 infections’ spreading in the US is in another day record high continues to arouse worries among investors. The U.S. posted a record of more than 70,000 new coronavirus cases in a single day Friday, the highest reported by any country since the start of the outbreak. The U.S. now has 3.58 million cases, or about a quarter of the global total, and 138,360 deaths. However, investors still position themselves for an onslaught of earnings this week as more discussions are coming on the renewal of the fiscal stimulus ahead of the expiration of supplemental unemployment benefits by the end of July. The Fed on Friday has firstly modified the Main Street Lending Program to provide greater access to credit for non-profit organizations such as educational institutions, hospitals, and social service organizations. Should more be coming this week, DJI and S&P may enjoy another weekly gain after recording third-straight of gains.

For the week, the Dow finished 2.3% higher, the S&P 500 booked a gain of 1.3%, while the tech-heavy Nasdaq lost 1.1%. Tech-giant Netflix slumped 6.5% on Friday, with concerns over the second-half outlook overshadowing a jump in revenue and the addition of more than 10 million new subscribers to the video streaming service. Netflix’s worsen-than-expected result has extended worries on whether the bright outlook of the technology sectors during the early virus outbreak could be sustained in the second half of the year. Amazon closed 1.3% lower, and were off 7.4% for the week, marking the worst week for the stock since February. Investors may slightly lower the earnings forecasts of tech-related stocks after the upcoming Q2 result announcement.

 

Indexes Daily Change (%) Net Change Closing Price
Dow -0.23% -62.76 26,671.95
S&P500 +0.28% +9.16 3,224.73
Nasdaq +0.28% +29.36 10,503.19
*Source: Bloomberg

The greenback declined on Friday as markets weighed a week of strong bank earnings against mixed U.S. economic data and mounting coronavirus cases the US. Former Fed Chairs Ben Bernanke and Janet Yellen warned that the U.S. economic recovery from the coronavirus shock could be slow and uneven and said the central bank may opt to cap yields on Treasury securities to help it along. Their statements strengthened the market expectations on additional fiscal stimulus before the end of July, pressuring the US dollar while enriching the optimism in the equities market.

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WTI oil fell 4%, to settle at $40.59 a barrel. Gold price edged 0.5% higher to settle at $1,810 an ounce. Bond yields rose, with the yield on the 10-year Treasury note up about two bps to 0.63%. Bond yields and prices move in opposite directions.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.74% +13.26 1,810.42
Silver +0.89% +0.17 19.33
USD/JPY -0.23% -0.25 107.02
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +0.0bps 0.15%
10-Year +1.0bps 0.63%
30-Year +2.1bps 1.33%
*Source: Bloomberg
Oil Futures Daily Change (%) Net Change Closing Price
Brent -0.53% -0.23 43.14
WTI -0.39% -0.16 40.59
*Source: Bloomberg

In Asia, stocks opened mostly lower on Monday morning, the Covid-19 second waves in many Asia countries arouse worries amongst investors. Hong Kong reported more than 100 new infections on Sunday, reaching a record as government extend mandatory wearing masks to more public spaces. A surge in COVID-19 cases in Australia’s second-biggest city, Melboune could take weeks to subside.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei -0.35% -80.19 22,616.23 10:35:03 AM
KOSPI -0.40% -8.68 2,192.51 11:09:50 AM
ASX200 -0.57% -34.13 5,999.50 11:09:44 AM
*Source: Bloomberg

US Companies reporting earnings next include:

Logitech International (LOGI) – After Bell

International Business Machines Corp. (IBM) – After Bell