Bank Notes

Commentary, News
Date:7/17/2020
Events Date:EventEvent Comments
 Earnings Season*mkts will focus on trend vs numbers, as earnings still expected to be weak, earnings trend is positive so far
*upcoming earnings will provide direction for stock mkt
 Coronavirus
*Texas may announce re-shutdown today, maybe headline risk
*possible shutdown spooked the markets, mkts most likely will stay bid if shutdown doesn’t materialize
*recovery supported by central banks, comodities rebound, strength in macroeconomic data, stable reproduction numbers during reopening process
*travel, casino, airline stocks rally will be good measure of mkt view on virus development
 China Stocks*China state funds start selling, can be warning of valuations too high for China indexes
 US China tensions*US readying contract cuts with companies using Huawei phones
*US identifies Chinese companies with link to Chinese gov
*China wants to renegotiate trade deal, which will trigger risk of trade tensions
*Nasdaq proposes to tighten listing rules, impacting Chinese firms
*China increasig soybean imports calm markets for now
*traders monitoring sanctions for risk direction, tech issues still presist between two countries over Huawei etc
 Treasury report*mkts monitor risk of China labeled currency manipulator
 EU tariffs*risk off if EU US trade escalate, speculation more trade escalations with other countries also to come
*US pulls out of tech tax talks
*current US tariffs on EU is small, but highlights risk of escalation
*tech tax will be key to trade escalation and auto tariffs
 Corporate Buybacks* buybacks suspended as companies hoard cash to fight crisis
 Jobs*if layoffs continue, it has been historically proven recessions will be deep and lengthy to turnaround. Mkts watching upcoming jobs numbers positive trends, and what measures gov may start to offset unemployment numbers
August3 Trillion stimulus bill*program considered maybe less than markets expected
*traders eye if unemployment benefits will continue at a lower rate
*likely will not pass congress until at least after July break
OctBrexit deal deadline 
NovUS elections 
   
Central BanksAnnouncement DateComments
FOMC*unch as expected
*yield curve control could be introduced in Sept along with inflation targeting, traders monitoring ycc discussions
BoC15-Jul-20*unch expected
*mkts will be looking at comments for various purchase programs and corporate credit
*hint at possible negative interest rates, but mkts think not likely unless U.S. implements
RBZ *on hold expected
RBA *unch as expected
ECB16-Jul-20*unch as expected
*PEPP purchase size expected to increase
*BB bonds allowed for QE in anticipation of Italy downgrade
BoE *comments cause speculation negative rates in the cards
BoJ15-Jul*unch as expected
*CB targeting low interest rates until 2020
MarketsTickerComments
Macro  
  *IMF cites high corporate debt vulnerable for US and China
*BoC highlights risks monitored <- economy capacity, inflation, wage dynamics, sensitivity to higher rates with elevated debt
*BIS says China, HK, Canada most risk of banking issues
Rates  
 TSY*traders closely watch comments of treasury purchase and unwind plans
*FED favouring  shortening balance sheet duration
*Fed balance sheet target estimate ~$1700 bb
(Powell: Between USD2,500-3,000bn within three to four years with mainly treasuries on balance sheet: mkts think a bit optimistic)
 IHY*Central banks corporate bond buying stabilize credit mkts
 BTP*EU emergency stimulus provide support to spreads
Equities  
 SPX*Trump tweets: mkts pricing out tweets as not always indicative of actual reality
 FXI*China not going to stimulate property sector causing property stocks to sell off
FX  
 TRY*depreciation pressure as gov intervention viewed as temporary
 USD*Mnuchin says no change to U.S. dollar policy as of now, but may in future
*speculation Trump operations  to sell dollar
 MXN*Pemex downgraded
*peso under pressure
 EUR*EUR inflation not expected to last
*ECB comments on options to help weak banking sector
*Trump could challenge trade as EUR devalues
*no solid bid expected until negative rates lifted
 GBP*Brexit caps gains
 AUD*drop with rate cut, employment data to deteremine further cuts
 CNY*most likely move back to within 6 range after trade deal
*CNY becoming petro ccy will faciliate CNY global use
*gains signal China goodwill on trade deal
 CAD*virus, tanking oil drag down CAD
Commodity  
 USO*sanctions provide a pop to crude, longer term price positive as economies reopen
Ratings  
 RATINGS (RATC) 
   
COT Flows  
 
   
Mkt News:
China fintechs granted banking licences in Hong Kong, with eyes on New York and London
Antitrust probe on big tech
Brazil state owned banks have poetntial heavy losses from construction conglomerate scandal
chatter Microsoft interested to buy Bloomberg
Canada losses Fitch AAA rating, US deficit baloons to all time high
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