By Geoffrey Smith
Investing.com -- The U.S. releases jobless claims data, a day after posting a new record high for Covid-19 infections. A wary stock market is set to open mixed. Joe Biden makes a keynote speech on economic policy while Donald Trump awaits a Supreme Court ruling on his tax returns. Metals surge - and not just gold - as price data out of China foster hopes about its economic rebound and drive local stocks to a new record. Here's what you need to know in financial markets on Thursday, July 9th.
1. Jobless claims due
The U.S. will release its latest data for initial and continuing jobless claims at 8:30 AM ET (1230 GMT), to a market increasingly concerned about the risk of a fresh downturn due to the pandemic.
Continuing claims had actually ticked up in last week’s figures but are expected to fall by over 300,000 to 18.95 million, while initial claims – which have repeatedly overshot analysts’ expectations in recent weeks – are expected to slow by another 52,000 to 1.375 million.
The release comes as the U.S. reported a new record of over 62,000 fresh cases on Wednesday, nearly 10% above the previous daily record. The Covid Tracking Project recorded over 900 deaths from the disease for the second day running. Johns Hopkins now puts the U.S. death toll at over 132,000, just under a quarter of the global total.
2. Yuan regains 6-handle as deflation fears ease
The Chinese yuan broke through the 7 level against the dollar as the roaring rally in mainland equities continued unabated.
By close of trade in Asia, the yuan was quoted at 6.9845 to the dollar, its lowest since mid-March, on the back of another surge in mainland stock indices. The Shanghai Shenzhen CSI 300 closed up 1.4% and has now risen 17.8% so far this month.
The latest surge came after figures showing a bigger rebound in domestic price trends than expected, allaying fears of deflation in factory gate prices. Producer prices were down only 3.0% on the year in June, after being down 3.7% in May – a figure that now looks likely to mark the short-term bottom. Consumer prices also fell by only 0.1% in June, rather than the 0.5% expected.
3. Stocks set to open mixed; Walgreens, airlines in focus
U.S. stock are set to open mixed with one eye on the jobless claims numbers.
By 6:45 AM ET, the Dow futures contract was down 97 points, or 0.4%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 futures contract was up 0.3%.
In the spotlight later will be Walgreens Boots (NASDAQ:WBA), which is set to release its quarterly numbers, as well as airline stocks. United Airlines (NASDAQ:UAL) said it may furlough up to 45% of its workforce, some 36,000 people, by October as a result of the drop in demand for air travel.
Also of note could be General Motors (NYSE:GM) and Fiat Chrysler (NYSE:FCAU) stock, after a judge rejected a GM suit alleging FCA had bribed union officials to get a sweeter deal on pay than its rivals.
4. Biden to speak, Trump to get Supreme Court ruling on tax returns
The Democratic Party’s presidential nominee Joe Biden will deliver a speech outlining some of his key economic priorities.
According to various reports, Biden will talk up “buy American” policies, especially as regards government procurement, while also signalling an expansion of healthcare coverage. There have been few details about his plans on taxes, which have been a major concern for investors in the past.
Biden’s opponent in the presidential election, Donald Trump, is meanwhile set to hear from the Supreme Court on whether his tax returns can be released to Congressional investigators and prosecutors. Trump has refused subpoenas from three House committees controlled by Democrats, as well as Manhattan District Attorney Cyrus Vance Jr.
5. Base metals shine as gold consolidates
Metals continue to post new highs on a cocktail of factors from fears of currency debasement by central banks to mine closures forced by the pandemic.
Gold futures were consolidating, down 0.3%, after hitting 9-year highs earlier in the week, but the world’s two most important base metals – Copper and Aluminum – both rallied on a wave of Chinese bullishness. Aluminum futures in London rose to their highest since March 11, while copper futures hit their highest level since April last year, helped in part by an announcement from Rio Tinto (NYSE:RIO) that it will close a smelter in New Zealand and put other facilities under review.
Copper prices are being squeezed, among other things, by the spread of Covid-19 around Latin America, where many of the world’s biggest mines are located.
By Cheng Leng, Julie Zhu and Engen Tham
BEIJING/HONG KONG/SHANGHAI (Reuters) - Chinese state lenders are revamping contingency plans in anticipation of U.S. legislation that could penalise banks for serving officials who implement the new national security law for Hong Kong, sources at five state financial institutions said.
In worst-case scenarios under consideration by the Bank of China (SS:601988) (HK:3988) and Industrial and Commercial Bank of China (ICBC) (SS:601398) (HK:1398), the lenders are looking at the possibility of being cut off from U.S. dollars or losing access to U.S. dollar settlements, two sources said.
The dollar is the dominant global currency for international payments and central bank reserves.
"We are hoping for the best, but preparing for the worst. You never know how things will turn out," one of the sources said.
Reflecting concern over the erosion of the former British colony's autonomy, the U.S. House and Senate unanimously passed the bill last week. It has yet to be signed into law by President Donald Trump.
The bill calls for sanctions on Chinese officials and others who help violate Hong Kong's autonomy and on financial institutions that do business with them. But it does not spell out what the sanctions would look like.
"There are sanctions in this bill which could be interpreted to prevent a bank from clearing some dollar transactions via U.S. institutions, but unlike other congressional sanctions bills there are not specific provisions mandating it," said Nick Turner, a lawyer specialising in sanctions and anti-money laundering at Steptoe & Johnson in Hong Kong.
He said it remained to be seen whether the law would be used in such a way.
In a milder scenario being looked at by the Agricultural Bank of China (OTC:ACGBF) (AgBank) (SS:601288) (HK:1288), lenders would need to find ways to address the problem of clients blacklisted by the United States, especially those who might face a sudden loss of liquidity, a third source said.
The sources all declined to be named as the planning is confidential. Bank of China, ICBC and AgBank did not immediately respond to Reuters requests for comment.
LEASING FIRMS TOO
The contingency planning has been initiated by the banks themselves, three of the sources said.
The People's Bank of China and the China Banking and Insurance Regulatory Commission, top financial regulators overseeing country's financial stability and the banking sector, did not immediately respond to Reuters requests for comment.
The worst-case scenario under consideration by the Bank of China also envisions what would happen in the event of a run on its branches in Hong Kong if customers feared that it would run out of U.S. currency, one of the sources said.
It is also looking at the experience of banks in Iran, the same person said. Iranian banks have been hit from time to time by U.S. sanctions dating back to the 1979 Islamic Revolution.
Bank of China, the country's most international lender, had the biggest exposure of the country's big four lenders to the greenback at the end of 2019, with about $433 billion in liabilities.
China's top four banks, which also include ICBC, China Construction Bank (SS:601939) (HK:0939) and AgBank, had a combined 7.5 trillion yuan ($1 trillion) in U.S. dollar liabilities at the end of 2019, annual reports show.
The sources also said that least three state-run leasing firms, including an ICBC unit and CSIC Leasing, are also making contingency plans. Leasing firms are often heavily reliant on dollar borrowing to fund purchases of aircraft, machinery and facilities.
ICBC Leasing and CSIC Leasing did not immediately respond to requests for comment.
PARIS (Reuters) - France will back Spanish Economy Minister Nadia Calvino for the presidency of the Eurogroup of euro zone finance ministers, French Finance Minister Bruno Le Maire said on Thursday.
"We support Nadia Calvino because she showed her competency during the Eurogroup meetings of recent months, and we support her because we share with Spain the same desire for stronger euro zone integration," Le Maire told journalists.
Euro zone finance ministers are due to vote late on Thursday on the group's presidency, for which Pascal Donohoe of Ireland and Pierre Gramegna of Luxembourg are also candidates.
BEIJING (Reuters) - China must take steps to stabilise foreign trade and support firms to survive the difficult times, the official Xinhua News Agency reported on Thursday, citing comments made by Vice Premier Hu Chunhua.
China would also strive to maintain the stability of supply chains, and actively take part in the restructuring of the global supply chains, Hu said, according to Xinhua.
By Marc Jones
LONDON (Reuters) - European shares were rising again after a two-day wobble on Thursday as China's markets continued their charge, and something between fear and greed propelled gold to a nine-year high.
Chinese stocks set their longest winning streak in two years and the yuan had strengthened past 7 per dollar overnight [.SS], despite rising tension over Hong Kong and the economic uncertainty caused by COVID-19.
It was the Shenzhen blue-chip index's eighth straight day of gains, adding another 1.5% to its 16% surge this month, and pushed Europe in the right direction after some hesitation caused by uninspiring German data.
Also improving risk sentiment was the dollar’s downward momentum – it was at a one-month low against the euro, a three- week low versus the British pound and four-month lows against the Swiss franc.
That was a green light for emerging markets too. MSCI's EM currency index was at a one-month high. Trade- and commodity- related currencies also reacted to China's gains. The New Zealand dollar was at the highest since January and the Aussie dollar at a one-month high.
"We've seen a more generalised view back to riskier assets. The Chinese equity surge has been the poster child for risk-on move across the last few sessions," said Jeremy Stretch, CIBC Capital Markets' head of G10 FX strategy.
Asia's investors have been riding high after a front-page editorial in Monday's China Securities Journal extolling market fundamentals, which was taken as official encouragement to buy stocks.
State-run media warned on Thursday that investors should still pursue rational investments and manage risks, but that didn't rein in the bulls.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8% and touched a 20-week high. The yuan rose to a four-month high as it broke through the 7-per-dollar barrier.
"Broadly speaking, the Chinese economy is coping better not only with a recovery but also in dealing with the potential of a second wave (of infections)," said National Australia Bank (OTC:NABZY) FX strategist Rodrigo Catril.
"Rightly or wrongly, that market is liking the idea that the yuan can strengthen on the back of equity inflows."
Although China's factory-gate prices fell for a fifth straight month in June, signs of a pickup suggest a slow but steady recovery remains intact.
Elsewhere, German export figures recovered less than expected in May as demand remained subdued despite lockdowns being lifted in large parts of Europe.
They jumped by 9% on the month after diving by 24% in April, but economists had been hoping for a near 14% bounce and the numbers remained almost 27% lower than their pre-crisis level in February, the Federal Statistics office said.
Deutsche Bank (DE:DBKGn)'s chief international strategist, Alan Ruskin, said the yuan enjoyed the "perfect combination" of tight monetary policy, yield advantage and equity demand.
In any case, its rally ignored growing pressure from the West over China's tightening grip on Hong Kong, surging U.S. coronavirus cases and a fresh lockdown of 5 million Australians in Melbourne.
Australia's benchmark ASX 200 index rose 1% and Japan's Nikkei rose 0.6%. The Australian dollar rose 0.2% to $0.6995, but - perhaps indicating a cap on exuberance - it was unable to break past resistance at $0.70.
U.S. Treasuries were not sold into the rally, either. Nor were the safe havens of gold or the Japanese yen. The yield on benchmark U.S. 10-year Treasuries remained under pressure at 0.6545% and gold at $1,810.73 an ounce.
EARNINGS AHEAD
The U.S. earnings season approaches with investor hopes high for a stabilisation, but warning signals are flashing and Federal Reserve officials raised fresh doubts on Wednesday about the durability of the rebound.
The United States has also posted its largest number of daily new coronavirus cases since the outbreak began and global tensions are on the rise.
U.S. jobs data due at 1230 GMT will offer the next checkup on the recovery's progress, followed by results next Tuesday from J.P. Morgan, Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), then Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX) on Thursday.
"Earnings season is upon us, and we really want to see what it looks like," said Jun Bei Liu, a portfolio manager at Australia's Tribeca Investment Partners.
Graphic: World FX rates in 2020 http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html
Graphic: Asian stock markets https://product.datastream.com/dscharting/gateway.aspx?guid=516bc8cb-b44e-4346-bce3-06590d8e396b&action=REFRESH
By Joseph Ax and Jarrett Renshaw
(Reuters) - Democratic presidential candidate Joe Biden on Thursday will propose boosting manufacturing and innovation by spending $700 billion in his first four-year term to procure more American-made goods for the U.S. government and invest in research and development.
Biden will outline the plan, which the campaign said would create 5 million new jobs, in a speech in northeastern Pennsylvania, near his childhood hometown of Scranton.
At the same time, Republican Vice President Mike Pence will attend a business roundtable focused on reopening the economy in Malvern, a suburb of Philadelphia, before speaking to the Philadelphia police union later in the day.
The opposing visits underscore Pennsylvania's status as a key battleground state in November's presidential election. President Donald Trump carried the state in 2016 by a slim margin, the first Republican to do so since 1988.
Biden's announcement is the first prong of a broader economic plan titled "Build Back Better" to revive the U.S. economy after the devastating coronavirus pandemic.
The plan includes proposals to build a clean energy economy; support caregivers, including those providing child and elder care; and advance racial equity.
Biden will offer more details about those areas in the coming weeks, senior campaign officials said.
Biden proposed trillions of dollars in new federal efforts on climate change, healthcare and infrastructure even before the pandemic, and he has since called for more stimulus spending. It remains to be seen whether he could convince Congress to support such ambitious proposals.
Both Biden and Pence are visiting areas that have grown less politically hospitable for their party in the Trump era.
Biden will spend the day in Lackawanna County, a longtime Democratic stronghold that like many parts of Pennsylvania with large concentrations of union blue-collar workers has swung hard toward Trump.
Meanwhile, Chester County, where Pence will travel, is one of several counties near Philadelphia that have seen Democratic gains since 2016, reflecting a broader trend in suburbs around the country.