Markets are taking a reverse course from yesterday’s last hour weakness this morning, with U.S. and Canadian equity futures rising on the back of rising European and Asian markets. Treasuries and the greenback edged lower, while gold and oil rose.
While markets took a tumble late in the day yesterday, currency volatility has been the place where most the action has been over the past few weeks. Especially if you view gold and bitcoin as currencies. One recurring trend has been the falling US dollar. Remember when everyone was talking about a dollar shortage a few months back? There are many factors at play here. One simple one may just be the fact that the USD was bid up as a safe haven and that is unwinding now. Of course there are more theories out there. We do find it interesting that the speculators, measured by non-commercial futures and options contracts, have become net short USD (see chart of the day). In the past this has lead to a rebound, but then again the bets have been mounting for sometime.
One of this morning’s larger headlines centers around the trade talks that are to take place in the coming days between the U.S. and China. Among expected topics, such as agricultural purchases and the dollar-yuan exchange rate, Beijing is expected to further widen its agenda to include Trump’s latest crackdown on tech businesses including TikTok and WeChat. Trump’s chief economic adviser downplayed threats that those actions may lead to a fall out of the phase one agreement.
Elsewhere, Biden’s running mate – Kamala Harris – was announced yesterday. The California-based senator brings a progressive approach to politics and public policy and possesses a track record of deep electoral experience and expertise in the U.S. criminal justice system. While Biden appeals to moderates, Harris will likely work on appealing to more progressive voters. The duo are due to appear in a virtual fundraiser today.
President Donald Trump is continuing to prop-up the economy heading into the election. Recently, he is contemplating a $100 billion capital gains tax cut for investors by changing Treasury Department guidelines. It is hard to say whether any real action will come before election time; Economists are estimating that any executive orders passed by Trump before elections would have at best, marginal economic benefits, and will ultimately fall short of pledges to provide relief to jobless workers and hence, create jobs through tax cuts.
Back at home, lawyers on Bay Street are hiring more restructuring experts as they brace for a wave of insolvencies to hit the Canadian economy when COVID-19 relief measures dry up. We’ve already observed a first wave of formal creditor protection filings, mostly from retailers and energy companies. According to Innovation, Science, and Economic Development Canada, 27 filings were made under a federal restructuring law for companies that owe more than C$5 million in 2Q20, up from 4 in the same period last year.
While overall sentiment regarding Europe’s economic recovery remains positive, the U.K. economy has been a standalone underperformer. GDP plunged 20.4% in Q2 while widespread damages included a 35% decline in construction, services down 20%, and industrial production plunging 17%. The Bank of England highlighted the labor market as a key concern. Officials fear a jump in unemployment when government job support is ultimately withdrawn later this year. Economists argue that it is more likely to see stimulus in early 2021 rather than the end of this year, pointing to a slowdown in recovery during the Fall. Diversion:
The last Blockbuster on earth has become an AirBnb
for three nights in September. Check out the actual Airbnb listing
. Oh, the nostalgia is running high.