Daily Archives: July 7, 2020

World

Immunity to the coronavirus is ‘fragile’ and ‘short-lived,’ immunologist warns – CNBChttps://t.co/aC9aR9Trok

— Christophe Barraud (@C_Barraud) July 7, 2020

Americas

#FederalReserve official warns US recovery may be ‘levelling off’ – FT
*#Fed Bostic said high-frequency data had shown a “levelling off” of economic activity both in terms of business openings and mobility. https://t.co/2QwAJkqISU

— Christophe Barraud (@C_Barraud) July 7, 2020

#Tesla Adds $14 Billion a Day to Its Valuation – Bloomberg
*Market cap adds combined value of Detroit Three in five days
*Link: https://t.co/0hVjtCZKEj pic.twitter.com/qo31wKKLHX

— Christophe Barraud (@C_Barraud) July 7, 2020

U.S. is ‘looking at’ banning #TikTok and Chinese social media apps, Pompeo says – CNBChttps://t.co/iMHEddDz6A

— Christophe Barraud (@C_Barraud) July 7, 2020

#Trump to Host Mexican President, CEOs at White House Dinner – Bloomberghttps://t.co/ojNAanMD5W

— Christophe Barraud (@C_Barraud) July 7, 2020

Asia

All Eyes on #China’s Unstoppable Stocks After $460 Billion Rally – Bloomberg
*Link: https://t.co/OxH6SFvdyI pic.twitter.com/kmLs0PVv65

— Christophe Barraud (@C_Barraud) July 7, 2020

#Australia’s Second-Largest City Re-Enters 6-Week Virus Lockdown – Bloomberghttps://t.co/29xABLzmjb

— Christophe Barraud (@C_Barraud) July 7, 2020

#NorthKorea says it has no intention to sit down with U.S. – KCNA – Reutershttps://t.co/ajLyiNskt2

— Christophe Barraud (@C_Barraud) July 7, 2020

Europe

Macron Picks a Government to Rebuild #France’s Economy – Bloomberghttps://t.co/3fNEooiHbv

— Christophe Barraud (@C_Barraud) July 7, 2020

U.K.’s global trade deals still pose a huge pre-Brexit challenge https://t.co/G0I1RDb6Ly

— Bloomberg Asia (@BloombergAsia) July 7, 2020

Tensions between the U.S. and China could gain traction in a context where latest trade figures (May) confirmed that China won’t be able to fulfill its 2020 commitments related to purchases of U.S. goods. Even if the coronavirus pandemic can be an excuse to explain a part of the recent weakness, several analysts (including me) have already expected a miss since January.

In the details, Chad P. Bown, a senior fellow and trade data expert at the Peterson Institute for International Economics, highlighted that “Through the first five months of 2020, China’s purchases were thus only at 39 percent (US exports) or 49 percent (Chinese imports) of their year-to-date targets.”

 

According to recently released government statistics, China’s purchases of US goods through May remain well under 50% of prorated, year-to-date targets of Trump’s Phase One deal. https://t.co/L2Be1ozw68

— Chad P. Bown (@ChadBown) July 6, 2020

 

Focusing on U.S. data for May, my analysis shows that, using a linear extrapolation, U.S. exports (goods) to China would reach $64.5billion in 2020 (less than 50% of the annual target). In other words, they would decline compared to 2019 ($67.7 billion) while the “Phase One” deal implies a jump of more than 110%!

Over the same period, a Bloomberg analysis concerning Chinese imports of U.S. goods showed that “China had only bought about 19% of the total purchase target of more than $170 billion for goods in 2020. That means China needs to buy about $139 billion in the remainder of the year to meet the terms of the agreement signed in January.

All in all, even if China tries to ramp up purchases of U.S. goods in the coming months, it won’t be sufficient to fulfill its 2020 commitments. Therefore, as I noted on June 28, “U.S. officials could be tempted to increase pressure on Beijing soon in order to support 3Q U.S. GDP just ahead of the presidential election (November 3).”

Without surprise, Reuters reported that “the U.S. Chamber of Commerce and over 40 trade associations on Monday urged top U.S. and Chinese officials to redouble efforts to implement a Phase 1 trade agreement signed by the world’s two largest economies in January.”

Yet, Chinese officials would probably disagree especially if, as suggested by Bloomberg, “Trump is considering two or three actions against China, with a high probability something could be unveiled soon — more likely in days than weeks.” In addition, yesterday, Secretary of State Mike Pompeo told Fox News that “The U.S. is “looking at” banning TikTok and other Chinese social media apps.”

Finally, in the short term, investors will have to focus on the lobster industry. According to press reports, White House trade adviser Peter Navarro said Donald Trump is directing U.S. Trade Representative Robert Lighthizer to report by July 15 on whether China is beginning to comply with $150 million in lobster purchase commitments under the “phase one” agreement. If not, Trump told Lighthizer to consider placing retaliatory tariffs on the Chinese seafood industry.

The trailing price-to earnings ratio of the #SPX Information #Technology Index is close to 30, while the same ratio for consumer-discretionary stocks is fast approaching 40, in large part thanks to a record rally in #Amazon – Bloomberg pic.twitter.com/K8O3jbMBrq

— Christophe Barraud (@C_Barraud) July 7, 2020

S&P Positioning.

Speculators covered even more Shorts last week, almost turning Long.

This was the second largest 2-week net increase of all time, rivaling Sept 2007.

Looking at history – at a minimum, this positioning is no longer a clear supportive signal for Stocks. pic.twitter.com/B1VJlYRYND

— Macro Charts (@MacroCharts) July 7, 2020

This is only 10th time since 1830 that US money supply growth has gone >20%. On all prev occasions nominal GDP soon moved comfortably into double digits, mostly through inflation, DB’s Reid says. Maybe this time is different. He runs little inflation poll https://t.co/jBKKMusTxe pic.twitter.com/C9VOVWOxce

— Holger Zschaepitz (@Schuldensuehner) July 7, 2020

What about asset price inflation? https://t.co/UDiSjdey4h pic.twitter.com/vNtAbFxzFa

— Sven Henrich (@NorthmanTrader) July 7, 2020

#Gold trying to get past USD 1800 again… pic.twitter.com/qGCF1Wp8xD

— jeroen blokland (@jsblokland) July 7, 2020