MTS Economic News_20200714

MTS News

MTS Economic News_20200714

14 Jul 2020

· Dollar grinds higher amid worries about U.S.-China tensions and virus cases

The dollar was marginally higher in narrow ranges against most currencies on Tuesday as renewed concerns about diplomatic tension between the United States and China and rising coronavirus cases put a dent in risk appetite.

The euro held onto gains against the greenback and the pound as investors await data on German investor sentiment to help gauge the pace of Europe’s recovery from the health crisis.

Currency trading has thinned out as a resurgence of novel coronavirus infections has caused some areas to place new restrictions on business activity.

Markets now face an additional threat from tit-for-tat retaliation between Washington and Beijing over access to U.S. financial markets, civil liberties in Hong Kong and territorial claims in the South China Sea.

“The focus has shifted to whether or not the next round of coronavirus lockdowns will be large enough to damage economic growth,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities.

“The Hong Kong problem could potentially lead to new trade friction. Negative developments on either front could cause stocks to adjust lower, and drive some safe-haven flows to the dollar and the yen.”

The dollar stood at yen on Tuesday in Asia following a gain in the previous session.107.180.4%

The euro was quoted at , resting below a one-month high reached on Monday. The common currency traded at pence, holding onto a gain from the previous session.$1.134490.400.9%

The United States and China are waging diplomatic battles on several fronts that have the potential to unsettle financial markets.

U.S. President Donald Trump’s administration plans to soon scrap a agreement between U.S. and Chinese auditing authorities, a senior State Department official told Reuters.2013

This could foreshadow a broader crackdown on Chinese firms listed on U.S. stock markets that are under fire for sidestepping U.S. disclosure rules.

In addition, the United States has hardened its stance against China’s claims in the South China Sea and is taking steps to end Hong Kong’s special legal status in protest against Beijing’s security law for the former British colony.

The onshore yuan fell to per dollar as worries about the Sino-U.S. relationship slowed the Chinese currency’s recent rally.0.2%7.0109

Investors are likely to avoid big positions before the release of China’s dollar-denominated trade data later today.

Data due later this week on Chinese gross domestic product (GDP), retail sales and industrial output, which are expected to show the world’s second-largest economy staged a V-shaped recovery in the second quarter.

The Singapore dollar and other Asian currencies fell after data showed Singapore’s GDP collapsed by a record in the second quarter, highlighting the carnage that the pandemic can inflict on small, trade-reliant economies.41.2%

Demand for riskier assets is likely to take a hit after California, the most populous U.S. state, placed new restrictions on businesses as coronavirus cases and hospitalizations soared.

· China says the latest U.S. move is aggravating tensions in the South China Sea

China said Tuesday that the latest U.S. rejection of Beijing’s claims in the South China Sea unnecessarily provokes tension in the region.

The highly disputed body of water — with its islands, fisheries, energy resources, military bases and trade routes — lies on the southern coast of mainland China and between Taiwan and Southeast Asian countries such as Vietnam, Indonesia and the Philippines.

In a rare move, the U.S. Navy sent two aircraft carriers to conduct operations and exercises in the region on July , America’s Independence Day. Beijing was already carrying out military exercises in the South China Sea from July to July 41 5.

· China says its dollar-denominated exports, imports jumped in June, beating expectations of a decline

China’s dollar-denominated exports and imports rose in June, as restrictions eased and countries started to reopen their economies.

The June customs data beat expectations of a decline, with exports posting a rise of as compared with a year ago, and imports jumping in the same period.0.5%2.7%

A Reuters poll had estimated that June exports contracted from a year earlier, bouncing from a decline in May. Imports were expected to fall from last year, as compared with a drop of in May, according to the poll. That could be attributed to higher purchases of crude oil and commodities.1.5%3.3%10.0%16.7%

Earlier, China published customs data that showed yuan-denominated exports in June rose from a year ago, while imports jumped in the same period.4.3%6.2%

The jump in imports showed that China’s domestic demand remained strong, analysts said.

It suggested that “domestic demand is holding up very well, and indeed accelerating,” Gary Dugan, CEO at investment firm the Global CIO Office, told CNBC’s “Street Signs.”

“It’s good news to commodities markets and good news to global growth,” he said.

· China says to sanction Lockheed Martin over Taiwan arms sale

China will put sanctions on Lockheed Martin (LMT.N) for involvement in the latest U.S. arms sale to Chinese-claimed Taiwan, China said on Tuesday, adding tension to its troubled relationship with the United States.

The U.S. weapons maker is the main contractor for a million upgrade package for Taiwan’s Patriot surface-to-air missiles, which the U.S. government approved last week.$620

Chinese foreign ministry spokesman Zhao Lijian called on the United States to stop selling weapons to Taiwan to “avoid further harming Sino-U.S. ties and peace and stability in the Taiwan Strait”.

“In order to safeguard the country’s interests, China has decided to take necessary steps, and put sanctions on the main contractor for this sale, Lockheed Martin,” Zhao told reporters, without giving details.

The company did not immediately respond to a request for comment.

· Huawei sees sharp growth slowdown as UK weighs ban on the Chinese giant from its G networks5

Huawei reported a sharp slowdown in growth for the first half of as the company continued to see the impact of U.S. sanctions and the global coronavirus pandemic. 2020

Meanwhile, the Chinese technology giant is also awaiting a decision, expected to be delivered on Tuesday, by the U.K. government on whether it will be allowed to participate in the country’s G networks.5

The Shenzhen-headquartered company reported revenue of billion yuan or $billion, according to the exchange rate on the company’s earnings release. That represents year-on-year rise and the slowest first half revenue growth since the first six months of 454 64.23 13.1% 2013.

· UK COVID- death toll nears including suspected cases: Reuters tally1956,000

The United Kingdom’s COVID- death toll has hit , including suspected cases, according to a Reuters tally of official data sources that underline the country’s status as one of the worst hit in the world.1955,873

The Reuters tally comprises fatalities where COVID-was mentioned on death certificates in England, Wales and Northern Ireland up to July , and up to July It also includes more recent hospital deaths.19 35.

· U.K. economy rebounded 1.8% in May as coronavirus lockdowns began easing

The U.K. economy grew by 1.8% in May as the country began to gradually ease lockdown measures, official figures revealed Tuesday.

Economists polled by Reuters had expected a rebound of 5.5% on the month.

The reading comes after a 20.4% monthly contraction in April, the country’s sharpest on record, during the height of its widespread coronavirus restriction measures which ravaged economic activity.

· Pfizer, BioNTech's coronavirus vaccine candidates get FDA's 'fast track' status

Pfizer Inc and partner BioNTech SE said on Monday two of their experimental coronavirus vaccines received 'fast track' designation from the US health agency, speeding up the regulatory review process.

The US-listed shares of the German firm climbed about , while Pfizer's stock rose about before the bell.10%2%

There are no approved vaccines for COVID-, and the United States and other countries have poured billions into their development as they seek to secure a safe and effective vaccine.19

The fast track status could potentially make Pfizer and BioNTech's vaccine candidates, BNTband BNTb, eligible for the US Food and Drug Administration's 'priority review', under which the agency aims to decide on an approval within six months.1621 1622

· Euro zone banks expect to tighten access to credit in third quarter, ECB says

Euro zone banks maintained relatively easy access to credit for firms in the second quarter with the backing of government guarantees, but they will likely tighten credit standards in the following three months, the European Central Bank said on Tuesday.

With a pandemic-induced crisis shutting much of the euro zone economy, firms rushed to tap bank credit to stay liquid and government guarantee schemes provided vital support for banks to keep cash flowing.

· South Korea to spend billion on green projects to boost economy$95

South Korea outlined a plan on Tuesday to spend trillion won ( billion) on a “New Deal” to create jobs and help the economy recover from the coronavirus fallout, anchored in part by “green” investment in electric vehicles and hydrogen cars.114.1$94.6

The six-year plan will build digital infrastructure and a stronger safety net for job seekers, but its “Green New Deal” aspects have drawn attention as they aim to cut heavy reliance on fossil fuels in Asia’s fourth-largest economy.

· Oil prices fall on demand recovery fears, OPEC+ easing expectations

Oil prices fell on Tuesday on worries that new clampdowns on businesses to stem surging U.S. coronavirus cases could threaten fuel demand recovery and expectations that OPEC+ might ease output cuts from August in an upcoming meeting.

U.S. West Texas Intermediate (WTI) crude CLc futures slid cents, or , to a barrel by GMT, while Brent crude LCOc futures fell cents, or to Both benchmarks lost more than in Asia morning trading before trimming loses.1511.27%$39.5906531431.01%$42.29. 2%

California’s governor on Monday ordered bars to shut and restaurants, movie theatres, zoos and museums to cease indoor operations as coronavirus cases and hospitalizations soared.

The most populous state’s two largest school districts, in Los Angeles and San Diego, also said they would teach only online when classes resume in August.

California’s moves follow the recent reinstatement of some restrictions in other states, such as Florida and Texas.

Reference: CNBC, Reuters,The Jakarta Post

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