Equities Buoyed by Promising Vaccine News and Expansive Macroeconomic Developments

July 21, 2020

Reports have surfaced of promising results in early Covid-19 vaccine trials involving three different projects — those of Oxford, Pfiser, and BioNTech. Global cases advanced another 210k over the past 24 hours, but there was a smaller number of U.S.-reported deaths (554).

Leaders of the European Union compromised on a EUR 750 billion joint pandemic recovery fund to consist of EUR 390 billion of grants and EUR 360 billion in low-interest loans. The grant total represents a compromise between two initial proposals, one of EUR 500 billion and a more conservative option of EUR 350 billion.

Senate Republicans are reportedly now amenable to a new pandemic relief package totaling $1 trillion in the United States.

Trade tensions have heated up further between the Chinese and U.S. governments.

The trade weighted dollar fell to its weakest level since March 9th. The dollar sank overnight by 0.9% against the Australian dollar, 0.7% relative to the Mexican peso, 0.5% versus the Canadian dollar, 0.4% vis-a-vis the New Zealand dollar and sterling, 0.2% against the Swiss franc, but just 0.1% versus the yen and euro.

Stock markets in the Pacific Rim closed up 2.6% in Australia, 2.3% in Hong Kong, 1.8% in Taiwan, 1.7% in New Zealand, 1.4% in India, 1.3% in Indonesia, 0.7% in Japan but just 0.2% in China. Share prices so far have risen in Europe by 2.0% in Italy, 1.8% in Spain, 1.7% in Germany, 1.2% in France and 0.6% in Great Britain. U.S. futures are up, too.

Ten-year sovereign debt yields are 1 basis point high in the United States, Germany and Great Britain.

Gold climbed 0.5% to $1,827.30 per ounce, its highest level since September 2011. Gold’s all-time peak price of $1,917.9 was touched that year in late August. The price of West Texas Intermediate crude oil, meanwhile, jumped 2.5% overnight to nearly $42 per barrel.

Minutes from this month’s Reserve Bank of Australia Board meeting express comfort with the existing monetary policy settings, which are not expected to get tightened for a considerable while longer. More easing wasn’t ruled out but is not currently warranted. Nor are officials inclined to intervene in the foreign exchange market.

Japanese overall CPI inflation last month remained at the 3-year low of 0.1%. Core inflation unexpectedly rose 0.2 percentage points to zero percent.

CPI inflation in Hong Kong dropped 0.8 percentage points in June to a 39-month low of 0.7%.

Filipino CPI inflation slid 0.1 percentage point in May to a 41-month low of 0.6%.

South Korean producer prices recorded a 12-month 0.9% rate of decline in June, which was only half as much as the drop in May and the smallest on-year slide since March.

The Swiss CHF 2.808 billion trade surplus in June represents a 2-month high and lifts the first-half 2020 surplus to CHF 18 billion, 48.8% larger than a year earlier. Swiss M3 money growth accelerated to 3.11% in June.

Greece posted its smallest current account deficit in five months in May (EUR 914 billion).

The year-on-year change in Polish retail sales was negative for a fourth straight time in June but narrowed to 1.9% from -8.6% in May and a record of -22.6% in April.

British public sector net borrowing of GBP 127.9 billion in April-June represented a record second quarter deficit and compares to a PSNB of GBP 24.0 billion one year earlier. Outstanding fiscal debt climbed to 99.6% of GDP at end-June from 96.9% one month earlier and 80.7% at mid-2019.

Finland’s 7.9% jobless rate in June was 1.7 percentage points higher than a year earlier.

Monetary officials in Hungary are reviewing monetary policy today and seem likely to cut their main interest rate of 0.75% somewhat further.

Canadian retail sales data and the Chicago Fed National Activity Index will be released later today.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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