· Dollar gains, yuan slumps on rising Hong Kong tensions
The dollar edged higher on Wednesday as worries about the U.S. response to China’s proposed security law for Hong Kong supported safe-haven demand for the greenback.
The yuan fell to the lowest in more than eight months after a media report that Beijing planned to expand the scope of its security legislation, which is likely to increase concerns about civil liberties in the former British colony.
The euro held gains against the dollar and the pound but faces a severe test when the European Commission is expected to release details of a financial rescue fund for the bloc later on Wednesday.
Financial markets have been caught in a tug-of-war between optimism and pessimism about the global outlook.
Some investors are betting on a resumption of business activity following the crippling coronavirus pandemic that brought the global economy to a standstill, but others worry the threat of U.S. sanctions against China for its treatment of Hong Kong could easily worsen risk sentiment yet again.
The dollar edged up to $1.2322 against the pound on Wednesday in Asia, pulling away from its lowest level in two weeks.
The dollar rose to $1.0961 per euro, also pulling away from a one-week low.
It bought 0.9665 Swiss franc in Asia, following a 0.6% loss in the previous session.
The Australian dollar fell 0.17% to $0.6645, while the New Zealand dollar eased to $0.6191 as worries about U.S.-China tensions hurt demand for riskier assets.
The dollar remained locked in a narrow range at 107.49 yen, but the yen rose against the euro and the antipodean currencies on increased safe-haven demand.
Onshore, the yuan fell to 7.1591 per dollar, the lowest since September 2019.
· Treasury yields edge lower as US-China tensions cool investor optimism
U.S. government debt prices inched higher Wednesday morning as U.S. concerns on new Hong Kong security laws cooled investor sentiment over economic reopening and a possible coronavirus vaccine.
At around 2:20 a.m. ET, the yield on the benchmark 10-year Treasury note was down at 0.6900% while the yield on the 30-year Treasury bond was fractionally lower at 1.4379%. Yields move inversely to prices.
· Fears of coronavirus second wave prompt flu push at U.S. pharmacies, drugmakers
U.S. pharmacy chains are preparing a big push for flu vaccinations when the season kicks off in October, hoping to curb tens of thousands of serious cases that could coincide with a second wave of coronavirus infections.
CVS Health Corp (CVS.N), one of the largest U.S. pharmacies, said it is working to ensure it has vaccine doses available for an anticipated surge in customers seeking shots to protect against seasonal influenza.
Rival chain Rite Aid Corp (RAD.N) has ordered 40 percent more vaccine doses to meet the expected demand. Walmart Inc (WMT.N) and Walgreens Boots Alliance (WBA.O) said they also are expecting more Americans to seek these shots.
Drugmakers are ramping up to meet the demand. Australian vaccine maker CSL Ltd’s (CSL.AX) Seqirus said demand from customers has increased by 10 percent. British-based GlaxoSmithKline (GLAX.NS) said it is ready to increase manufacturing as needed.
Pharmacy shares rose in Tuesday trading, with CVS up 2.5% and Rite Aid and Walgreens up 4.5%.
“We’re in for a double-barreled assault this fall and winter with flu and COVID. Flu is the one you can do something about,” Vanderbilt University Medical Center infectious disease expert Dr. William Schaffner said.
· Europe is about to announce a new coronavirus stimulus package and it could move markets
The European Commission will unveil Wednesday a new coronavirus-related stimulus package and expectations are that it could boost markets across Europe.
· French economy could contract 20% in second quarter: INSEE
France’s economy is on course to contract 20% in the second quarter from the previous three months as the country emerges from a nationwide coronavirus lockdown, the INSEE official statistics agency estimated on Wednesday.
That would mark a sharp deterioration in France’s recession after the euro zone’s second-biggest economy contracted 5.8% in the first quarter.
INSEE said the economy could contract 8% for the whole of 2020 in the unlikely scenario that activity returned to pre-crisis levels by July.
INSEE estimated that France’s economic activity was running at 21% below normal levels after the lockdown in place from mid-March was lifted on May 11. Activity was down 33% in early May.
Consumer spending was only 6% below normal levels since most stores were allowed to re-open after nearly two months, a sharp improvement from the 33% seen in early May.
A monthly survey from INSEE showed consumer confidence continued to weaken in May, falling to its lowest level since January 2019 when the country was in the grip of anti-government protests.
· German employment outlook improves slightly: Ifo
German companies expect their total number of employees will continue to shrink, though the outlook for hiring has improved slightly in May after collapsing the previous month as a result of the coronavirus crisis, according to an Ifo institute survey.
The institute’s employment barometer rose slightly to 88.3 points, up from 86.3 in April, helped by improving sentiment in the services and trade sectors. The manufacturing sector continued to report shrinking employment numbers.
· The German constitutional court’s ruling against the European Central Bank’s bond-buying scheme will not directly affect the ECB and will not lead to the Bundesbank having to exit the scheme, ECB Executive Board member Isabel Schnabel said.
“We are not adjusting our monetary policy in any way in response to this ruling,” Schnabel said in an interview with the Financial Times published on Wednesday.
· Decline in China's industrial profits slows in April, outlook still gloomy
Profits at China’s industrial firms fell at a slower pace in April, helped by improvements in automobiles and electronics, but the damage wrought by the coronavirus crisis is set to keep the economy and businesses under pressure for most of this year.
Earnings fell 4.3% year-on-year to 478.1 billion yuan ($67 billion) last month, after plunging 34.9% in March, the statistics bureau said on Wednesday.
China’s economy has shown patchy signs of recovery as it reopens after several weeks of tough virus containment measures.
But fallout from the pandemic, which paralysed business activity and triggered the first quarterly economic contraction on record, is expected to crunch earnings for many more months as demand at home and abroad remains weak.
For the first four months, industrial firms’ profits fell 27.4% year-on-year to 1.26 trillion yuan, compared with a 36.7% slump in the first three months.
Automobiles, special-purpose equipment, electrical machinery and electronics industries notched up significant recoveries in profits in April. Twenty three out of 41 sectors surveyed posted growth last month versus eight in March.
However, the overall profit outlook is still not optimistic as demand has still not recovered, industrial goods prices remain low, and pressure from costs are still high, Zhu Hong, an official at the statistics bureau, said in a statement.
Recent data from factory activity to trade have underscored a weak outlook for China and the global economy.
· Japan to compile $1.1 trillion second extra budget: draft
Japan’s government will compile a second extra budget worth 117.1 trillion yen ($1.1 trillion) to cushion the economic blow from the coronavirus pandemic, a draft of the budget obtained by Reuters showed on Wednesday.
The budget, which will be finalised later on Wednesday, will include 72.7 trillion yen in direct spending, according to the draft.
Combined with the first extra budget, the size of stimulus to combat the virus fallout would total 233.9 trillion yen, the draft showed.
· Hong Kong police fire pepper pellets to disperse protests over security bill
Hong Kong riot police fired pepper pellets to disperse protesters in the heart of the global financial centre on Wednesday, as new national security laws proposed by Beijing revived anti-government demonstrations.
Police also surrounded the Legislative Council where a bill was due to be debated that would criminalise disrespect of the Chinese anthem, amid soaring tensions over perceived threats to the semi-autonomous city’s freedoms.
People of all ages took to the streets, some dressed in black, some wearing office clothes, and some hiding their identities with open umbrellas in scenes reminiscent of the unrest that shook the city last year.
· IEA says the coronavirus crisis has set in motion the largest drop of global energy investment in history
The International Energy Agency believes the coronavirus pandemic has paved the way for the largest decline of global energy investment in history, with spending set to plummet in every major sector this year.
In the group’s annual World Energy Investment report, published on Wednesday, the IEA said that the unparalleled decline in worldwide energy investment had been “staggering in both its scale and swiftness.”
It warned the economic impact of the public health crisis could have “serious” implications for energy security and clean energy transitions.
· Oil slips on demand worries, Hong Kong tensions
Oil prices fell on Wednesday on revived concerns over how quickly fuel demand will recover even as coronavirus lockdowns begin to ease in many countries, while U.S.-China tensions added to negative sentiment.
Brent crude futures fell 21 cents, or 0.6%, to $35.96 by 0120 GMT.
U.S. West Texas Intermediate (WTI) crude futures were down 31 cents, or 0.9%, at $34.04 a barrel.
The Organization of the Petroleum Exporting Countries and producers including Russia, a grouping referred to as OPEC+, are cutting their output by nearly 10 million barrels per day in May-June to buttress prices as measures to rein in the coronavirus pandemic have slashed fuel demand.
In the United States, where some states are opening up after lockdowns, optimism about an increase in demand has supported sentiment, but the recovery is fragile, analysts caution. The Memorial Day holiday just passed typically heralds the start of the peak U.S. demand season.
Reference: CNBC, Reuters, Worldometers
Thai
Eng