Market Commentary – August 31, 2020

Kevin Jock

31st August 2020

    Japan rallies on Asia open, recovering back lost ground from Friday as cabinet members of Abe’s Liberal Democratic Party vie for the country’s top position. Current front-runner so far is chief cabinet secretary Yoshihide Suga. A self-made politician, loyal to Shinzo Abe since 2006 and on occasions serving the duties of chief whip. Among other notable candidates, ex defense minister Shigeru Ishiba, popular with voters but lacks sway with fellow lawmakers. And Fumio Kishida, previously thought to be Abe’s successors, but lacks favorability among the populace.

    Elsewhere, the S&P500 closed 7 consecutive days higher into fresh grounds. Following suite, Nasdaq and Dow ended the session up. The industrial average just a little over 3.1% below historic highs made back in February. Oil remained mute despite Hurricane Laura’s aftermath, Gold rallied and in turn, the America greenback resumed weakening against majors after Fed Chair Powell’s remark on Thursday.

    An interest to pair to watch for the week, USDTHB as the currency consolidates within a technical triangle. Being one of the worst performing currencies in Asia, the nation suffered substantially form a lost in tourism income, which contributes a fifth of GDP. Recent comments by Thailand’s finance minister see the economy bottoming out in the second half of 2020 and recovering early 2021.

USDTHB Triangle

Figure 1 (Source: Refinitiv): USDTHB Daily – Thai Baht consolidates in triangle as economy set to recover in 2021.

    For the week ahead, central bank decisions out of Australia, Chile, Colombia and Ukraine while China lifted the yuan’s midpoint to 6.8605 from 6.8891 today. Further, expect a deluge of speeches with Fed vice-chair Richard Clarida speaking Monday, Fed governor Lael Brainard on Tuesday, BOE Andrew Bailey on Wednesday and NY Fed president John William on Thursday.

Headliner to Review

  • China’s Manufacturing PMI dropped by 0.1 to 51.1. The reading is still above the key 50 level, signaling expansion. China’s manufacturing sector was affected seriously earlier this year due to the lockdowns of coronavirus pandemic Recent data show both manufacturing activity and industrial output are well underway in recovering.
  • Japan’s Prelim Industrial Production m/m grew 8.0% in July, compared with the forecast 5.8% and 1.9% increase in June. The growth rate was a record high since 1978. However, retail sales fell from -1.3% to -2.8% year-on-year in July, worse than the expectation -1.7%. The demand in car, department store and supermarkets decreased due to the increase cases of COVID-19 recently.
  • Friday’s economic data in the US was generally better than expected:
    • Personal spending m/m decreased from 6.2% to 1.9%, which is a bit better than the expected 1.5% as household expenditure begin to moderate from back-logged orders.
    • Chicago PMI decreased from 51.9 to 51.2, beating expectations of 51.0.
    • While revised UoM consumer sentiment increased from 72.8 to 74.1, numbers are still far below pre-pandemic levels. Confidence continues to be weighed down economic outlook, especially as the secondary stimulus package stagnates before congress.
    • Core PCE price Index m/m remained at 0.3%.

Headliner to Watch

  • Despite cases of coronavirus hotspots popping up across Australia, the economy has seemingly bottomed out and no changes is expected from RBA’s rate decision tomorrow. Of concern has been the ever-appreciating Australia dollar affecting imports of which the central has yet to make any remarks.
  • Japans unemployment rate set to rise to 3%. On paper, Japan lows employment of 2.8% is envied by other developed nations. However closer inspection reveals the figure benefiting from people leaving the work force amid COVID-19. As the economy re-opens, analyst expect the participation to revert higher, however hiring remains lackluster.
  • China’s Caixin manufacturing PMI expected decline slightly to 52.6 from 52.8.
  • Spanish flash CPI and Italian prelim CPI expected to post positive gains from last month as business continue re-opening from lockdown.


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Antony Tan
Ben Li
Kevin Jock