Market Commentary – July 23, 2020

Kevin Jock

23rd July 2020

     Wall Street brushes off geopolitical conflicts on better than expects earnings whilst China and Hong Kong indices decline as tensions escalate. The US has slowly intensified rhetoric recently banning TikTok, a popular Chinese owned social media app. And just yesterday demanding the closure of the Chinese consulate in Houston. China thus far has condemned the move. Threatening closures of US embassies in China.

Figure 1 (source Refinitiv Eikon): Economic battle. Intraday comparison between SP500 and HK50

Headliner review

Due to limited economic figures, there are no stats to provide a clear direction. COVID-19 is still a concern in the market. Total number of confirmed cases has increased to more than 15 million and more than 62,000 are died. The new cases are 202k yesterday, which is a bit lower than 213k on Tuesday and much lower than 305k on Monday.

Future generations will pay as Australia’s budget deficit hit 86bn last financial year. And set to widen 184bn next financial year. A blow out of this magnitude not experienced since World War II. The deficit revealed the substantial cost in supporting Australian households through the crisis. Australia’s Treasurer Frydenberg notes ‘the Government’s actions have saved 700,000 jobs’ but will shackle Australia with debt for decades to come.

  • US home sales increase by the most in record from 3.91M to 4.72M, boosted by low mortgage rate. However, the housing market is still not active due to the low inventory and high unemployment rate in COVID-19 pandemic.
  • The crude oil inventories rise unexpectedly from -7.5M to 4.9M, compared with the expectation -2.1 million. The large number increase of coronavirus cases has hit the oil consumption in the US. It is expected the consumer confidence in Europe will be better in the day.
  • Canada CPI m/m increases from 0.3% to 0.8%, which is better than the expectation.

Up Next

Back in session, the United States Senate will begin formal negotiations regarding the next stimulus package. Both parties under tense pressure to iron out details as benefits begin to expire at months end. On top of the agenda eviction bans, tax cuts, stimulus checks and unemployment insurance. Accompanying the economic downturn, many American’s were either let go or left jobless. One third of households missed mortgage payments and face eviction. With many surviving on subsistence via federal payouts. However not everyone agrees on the economic benefits of further payroll tax cuts. Previous cuts have been deemed to have no effect on employment, rather instead benefiting high earners of whom least likely require financial aid.

Headliner to Watch

  • All eyes on US unemployment claims today. Expected to remain steady at 1.3M as labour markets stalls. Amidst a pandemic many retailers have attempted to adapt. Shifting more focus on e-commerce as digital sales rise. However is unlikely to offset closures in physical stores.
  • MPC external member Jonathan Haskel set to present a webinar at the Imperial College Business School on the economic impact of COVID-19. Haskel is expected to present a model depicting economic recovery in the face of a pandemic, the workers affected and consumer habits amid weak labor demand.
  • Aussie flash manufacturing and services PMI set to remain steady. Previous month’s figures at 51.2 and 53.1 respectively.


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Antony Tan
Ben Li
Kevin Jock