August 7th, 2020
Daily Market Commentary
- Canada will impose dollar-for-dollar countermeasures on the U.S. after President Donald Trump said he would reinstate 10% tariffs on some Canadian aluminum imports. “In response to the American tariffs, Canada intends to swiftly impose dollar-for-dollar countermeasures,” Deputy Prime Minister Chrystia Freeland said in a statement. She called the U.S tariffs “unwarranted and unacceptable.,” noting that Canadian aluminum does not undermine U.S. national security but strengthens it.
- Canada’s labor market likely continued its comeback last month, but gains are slowing on the long road to full recovery. Statistics Canada is expected to report that 365,000 jobs were added in July, according to the median estimate in a Bloomberg survey of economists. That would bring total jobs recovered to 1.6 million in the past three months, or just over 50% of the 3 million lost in March and April.
- European stocks opened slightly lower on Friday after a slump in Asian equities that followed two U.S. executive orders against China’s most popular mobile apps, raised fears of further escalation, while the U.S. Congress faced an impasse on stimulus efforts.
- U.S. equity-index futures dropped after President Donald Trump’s latest attack on Chinese tech companies stoked tensions with Beijing. Tech stocks will be in focus after Trump signed executive orders prohibiting U.S. residents from doing any business with WeChat, TikTok or the apps’ Chinese owners. WeChat operator Tencent Holdings Ltd. slumped 5% in Hong Kong.
- Gold extended its decline from a record, trimming the longest stretch of weekly gains since 2006, as a stronger dollar curbed the metal’s haven appeal. Silver fell after earlier closing in on $30 an ounce.
- Oil in New York fell as U.S. President Donald Trump’s latest attack on Chinese tech companies stoked tensions between the two countries, weighing on risky assets.
- Commodity investors face a crammed agenda next week that’ll help them to assess the outlook for gold, crude, crops and China. With bullion setting records and silver on a roll, leading miners Barrick Gold Corp. and Newcrest Mining Ltd. are among senior companies that will present earnings. Flows into bullion-backed exchange-traded fund will also be in focus. Oil investors are in line for vital reports on the virus-hit global energy market, including assessments from OPEC and the International Energy Agency. In crops, the U.S. Department of Agriculture unveils updates to its comprehensive World Agricultural Supply and Demand Estimates.
- After a surge in coronavirus cases across the U.S., all signs point to a slowdown in job gains last month — or worse. Friday’s employment report is forecast to show a 1.48 million increase in nonfarm payrolls in July, the median estimate in projections ranging from a 600,000 decline to a gain of 3.2 million. That’s following a combined rise of 7.5 million in May and June, which just started to make up the 22 million drop over the first two months of the pandemic.
- The Bank of England’s surprisingly upbeat assessment for Britain’s economy in coming months is lost on analysts and investors, who see mounting risks that will trigger another round of monetary stimulus. While policy makers said on Thursday that the hit from the coronavirus was shallower than initially thought, and the consumer-driven rebound faster, the calls in markets were for extra bond purchases after the summer.
- Industrial output in Germany — the region’s biggest economy — rose at a faster-than-expected pace of 8.9% in June, and factory demand is also increasing. With France and Spain experiencing similar trends, signs are mounting that Europe’s initial bounce-back from the worst recession in living memory may be faster than anticipated.
- Goldman Sachs Group Inc. boosted litigation reserves by $2.01 billion after agreeing with Malaysia to resolve probes into the U.S. bank’s role in a scheme to plunder the nation’s 1MDB investment fund. The additional provision cut the firm’s previously announced second-quarter profit by 85%, the bank said Friday in a filing. Goldman Sachs said last month that the Malaysia settlement would “materially increase” the $945 million it had already set aside in the quarter.
- The Bank of England is considering moves to alleviate the “market stigma” lenders face when they run down their capital levels to support loans to business and consumers. That would mean U.K. banks could get even more relief from regulators intent on keeping loans flowing to the rest of the economy through the coronavirus pandemic. The BOE said this week banks might be reluctant to use capital buffers to lend because the more they do, the likelier it is they’ll face automatic regulatory curbs on paying bonuses, dividends and coupons on some capital instruments.
- Negotiations on a new coronavirus relief bill edged toward the brink of collapse after a meeting Thursday between White House officials and top congressional Democrats ended with each side accusing the other of being unwilling to compromise and the biggest issues far from resolved. The four negotiators, House Speaker Nancy Pelosi, Senate Democratic leader Chuck Schumer, White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin, emerged from a more than three-hour meeting with little to show and with no guarantee they would resume talks on Friday.
- Biogen and Eisai said the U.S. Food and Drug Administration has accepted the Biologics License Application for aducanumab, an investigational treatment for Alzheimer’s disease. Biogen shares climbed 9.8% in premarket trading.
- The Trump administration’s move to ban U.S. residents from doing business with Tencent Holdings Ltd.’s WeChat app rippled through Chinese markets, erasing $34.6 billion from the Internet giant’s market value and sending the yuan to its biggest slump in two weeks.
- A high-powered group of U.S. regulators said stock exchanges should set new rules that could trigger the delisting of Chinese companies, following mounting concerns that investors are being exposed to frauds. The President’s Working Group on Financial Markets said Thursday that in order to trade on a U.S. exchange, companies must grant American regulators access to their audit work papers. The group hasn’t determined how to enforce the guidelines, said a senior Treasury Department official who briefed reporters on the condition of anonymity.
- Uber Technologies Inc. generated more revenue from delivering food than transporting people for the first time last quarter, but it failed to offset a steep and prolonged decline in ridership brought on by the coronavirus pandemic. Sales fell 29% in the second quarter to $2.24 billion, ending a decade of unchecked growth. The loss in the quarter also widened, but Uber maintained Thursday that it will achieve its goal of turning an adjusted profit by the end of next year.
- A top banking regulator has fined Capital One Financial Corp. $80 million over a 2019 hack that compromised the personal information of about 106 million card customers and applicants. The Office of the Comptroller of the Currency said the bank failed “to establish effective risk assessment processes” before transferring information-technology operations to the public cloud and “to correct the deficiencies in a timely manner.”
*All sources from Bloomberg unless otherwise specified