A Many-Sided Investor Gloom
September 8, 2020
The U.S. Labor Day holiday pause didn’t restore stability to tech stocks, which continue to look overpriced and are set to fall sharply again this Tuesday. Talks between the EU and British government over a post-Brexit trade deal and between U.S. Republicans and Democrats over a fiscal stimulus package remain totally stalled, and it looks like both negotiations will fail to reach agreement. Sino-U.S. trade frictions remain at a high tempo as President Trump mulls a further commercial wall between the world’s two largest economies. The pace of new U.S. coronavirus cases and deaths continues to slow but is being counteracted by signs of a second wave in many other countries. Global cases advanced over 200k in the past 24 hours, but the United States accounts for only about an eighth of that incremental growth. India has moved ahead of Brazil into second place in the Covid case ranking.
West Texas Intermediate crude oil tumbled 6.0% overnight to a 3-month low. Gold is 0.3% softer.
Ten-year sovereign debt yields dropped today by four basis points in the United States and Germany, 3 bps in Great Britain and a basis point in Japan.
European stock markets are so far down 2.1% in Italy, 1.6% in France and Spain, and 1.3% in Germany. This downturn has overshadowed the more upbeat earlier trading in the Pacific Rim that saw share prices rise 1.1% in Australia, 0.8% in Japna and 0.7% in China and South Korea.
The U.S. dollar and yen were lifted by safe-haven demand. The U.S. currency overnight climbed 1.1% versus the Mexican peso, 1.0% against sterling, 0.5% relative to the Australian, Canadian and New Zealand dollars, and 0.2% vis-a-vis the euro but lost 0.1% against the yen.
Revised Japanese national accounts revealed a slightly bigger 28.1% annualized contraction of real GDP between the first and second quarters versus a 27.8% decline estimated initially. This was the third consecutive quarterly drop of GDP, resulting in a 9.9% slide from a year earlier. The GDP price deflator advanced 1.3% on year.
In separate Japanese data released today,
- household spending dropped 6.5% in July, almost three times more than the anticipated monthly decline, and was 7.6% lower than in July 2019.
- July’s current account surplus of JPY 964 billion was 8.1% smaller than June, and such fell on an unadjusted basis to JPY 1.468 trillion from JPY 2.023 trillion a year earlier.
- Nominal and real labor cash earnings were 1.3% and 1.6% lower in July 2020 than in July 2019.
- In response to BOJ support, on-year growth in bank lending accelerated to 6.7% in August from 6.4% in July, 4.7% in the second quarter and 1.9% in the first quarter.
- Japan’s economy watchers index rose 2.8 points to an 11-month high but still sub-50 reading of 43.9. The forward-looking outlook economy watchers index printed at 42.4, up from 15.6 back in April and almost level with January’s 41.8 reading.
Revised real GDP growth in the euro area also arrived today, showing a marginally downward revision in the huge contraction to 11.8% from 12.1% reported a month ago. The main source of this modification was a change in estimated German growth to -6.9% from -10.1%. Italian and Finnish GDP declines, by contrast, were largest than estimated initially. Compared to a year earlier, GDP in the second quarter had plunged by a record 14.7%, embodying falls of 21.5% in exports, 21.1% in business investment, and 15.9% in personal consumption. Employment in the euro area slumped 2.9% on quarter and 3.1% from a year earlier.
Germany’s current account surplus in July was EUR 20.0 billion, down marginally from EUR 20.4 billion in June but a touch wider than EUR 19.4 billion in July 2019. The seasonally adjusted trade surplus has rebounded to EUR 18.0 billion (similar to last year’s monthly average of EUR 18.8 billion) from EUR 14.5 billion in June and just EUR 3.1 billion in April.
Italian retail sales recorded their first monthly drop (2.2%) in July since April and were 7.2% lower than a year earlier. Swedish industrial production and factory orders recorded year-on-year declines in July of 8.0% and 6.4%.
The French trade deficit of EUR 6.994 billion in July was its smallest size in 3 months.
Dutch CPI inflation imploded a full percentage point in August to a 45-month low of 0.7%.
Business confidence in Australia, where Covid-19 trends have been stubbornly resilient, rose 6 points in August but remained weak overall at -8. Moreover, the companion index for Aussie business conditions relapsed into the red with a reading of -6.
South Africa reported a 51% annualized second quarter-over-first quarter contraction of real GDP. The on-year slide of 17.1% was the largest since before Apartheid ended in 1994.
Lebanon’s private purchasing managers index fell to a 2-month low in August of 30.1, reflecting the huge Beirut explosion.
Small business sentiment in the United States rose to a 2-month high in August of 100.2. Such bottomed in March at 86.4.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland GDP, German current account, Japanese GDP and current account, tech stock sell-off