· Dollar slows slide as U.S.-China tensions escalate
The dollar crept off milestone lows against other majors on Thursday, and held on to gains against the yuan, as heightened Sino-U.S. tensions kept currency markets cautious.
The United States gave China until Friday to close its consulate in Houston amid accusations of spying, and President Donald Trump said it was “always possible” other Chinese missions could be ordered to close as well.
China has vowed to respond, and the escalation in tension between the world’s two largest economies sent the yuan on its sharpest slide in nearly two months on Wednesday and helped the greenback find support in Asia on Thursday.
The euro sat at $1.1580, about 0.2% below a 21-month high of $1.1601, which it hit overnight in the wake of Europe’s leaders agreeing on a coronavirus rescue package.
The Australian dollar pulled back from a 15-month peak and drifted around $0.7151, while the kiwi was a touch below Wednesday’s six-month top at $0.6678.
Moves were slight and volumes were lightened by a public holiday in Japan.
· Treasury yields fall as investors watch stimulus talks, jobs data and U.S.-China tensions
U.S. government debt prices fluctuated Thursday morning as optimism over a fresh government coronavirus response bill failed to offset concerns over rising tensions between the U.S. and China.
At around 2:15 a.m. ET, the yield on the benchmark 10-year Treasury note was lower at 0.5905% and the yield on the 30-year Treasury bond fell to 1.2848%. Yields move inversely to prices.
U.S. jobless claims data for the week ended July 17 will be in the spotlight Thursday and will be released at 8:30 a.m. ET. Economists expect another 1.3 million workers to have filed initial claims for state unemployment benefits last week.
Senate Republicans late on Wednesday said they had reached accords in principle over portions of a potential aid package, which may be presented to Democratic counterparts this week as lawmakers look to rush legislation through before the end of the month.
CNBC reported Wednesday, citing sources, that Republicans are considering an extension of unemployment insurance benefits through to year-end, at a dramatically reduced level of $400 per month.
· Trump announces new coronavirus measures to protect nursing homes
President Donald Trump announced actions to protect people in nursing homes during Wednesday’s coronavirus task force briefing.
The president said the government will require increased testing of the nursing personnel in states where the outbreaks are the worst, adding it will distribute 15,000 rapid point-of-care diagnostic devices to support this effort.
· President Trump touts Pfizer and BioNTech coronavirus vaccine: ‘We think we have a winner’
President Donald Trump applauded the federal government’s $1.95 billion deal with Pfizer and biotech firm BioNTech, calling it “a historic agreement” that will help the country distribute a coronavirus vaccine in record-breaking time. Germany-based BioNTech and Pfizer, which are jointly developing four potential vaccines, announced the deal earlier in the day that will give the U.S. 100 million doses of their potential vaccine if it proves safe and effective.
“Hopefully the approval process will go very quickly, and we think we have a winner there. We also think we have other companies right behind that are doing very well on the vaccines, long ahead of schedule,” Trump told reporters at the White House on Wednesday.
· U.S. agrees to pay Pfizer and BioNTech $2 billion for 100 million doses of coronavirus vaccine
The U.S. will pay Pfizer and biotech firm BioNTech $1.95 billion to produce and deliver 100 million doses of their Covid-19 vaccine if it proves safe and effective, the companies announced Wednesday.
It was the largest such deal between the government and companies racing to develop a coronavirus vaccine.
Under the agreement, the U.S. can acquire 500 million additional doses, the Department of Health and Human Services said. Germany-based BioNTech and Pfizer are jointly developing four potential vaccines.
If one of the vaccines proves safe and effective in a large phase three trial and receives regulatory approval, HHS said Pfizer will begin to deliver doses to locations across the U.S. at the government’s direction. The vaccine would then be made available to Americans “at no cost,” HHS said. It’s unclear who the first doses of the potential vaccine would go to and how that decision would be made.
· Market risks are rising as US, China tensions escalate toward new cold war
The growing divide between China and the U.S. is expected to accelerate, disrupting long-running economic ties and forcing investors to reassess their view of global markets.
Tensions escalated this week after the U.S. claimed two Chinese hackers were targeting American companies working on virus research and were stealing information from companies around the world, both for profit and on behalf of the Chinese government. Then, the U.S. ordered the shutdown of China’s Houston consulate, claiming it was a necessary step to protect intellectual property and the data of private citizens.
“Given, the Covid-19 crisis, how China handled the early stages of it and now the imposition of the national security law on Hong Kong, it’s really difficult to see how the U.S. and the West and China can get back to normal,” said Jimmy Chang, chief investment strategist at Rockefeller Asset Management. “The decoupling will only gain momentum in the coming year, unless there are major policy shifts within China. At this point, it doesn’t look likely.”
· France expects economic growth of 8% for 2021: minister
France expects economic growth of 8% for 2021, French Finance Minister Bruno Le Maire said on Thursday.
Le Maire told the National Assembly that the government wants economic activity to return to pre-crisis levels from 2022.
He also said that recent data was “satisfying but too fragile” to change forecasts for an economic contraction of 11% this year.
· Australia, facing 'harsh reality' of pandemic, braces for biggest postwar deficit
Australia’s budget is set to plunge into its biggest deficit since World War Two this year as the coronavirus crisis knocks the country into its first recession in three decades and forces policymakers to roll out hundreds of billions of dollars in stimulus.
In a special announcement on Thursday, Treasurer Josh Frydenberg said the budget swung into a massive deficit of A$85.8 billion ($61.3 billion) in the year-ended June 2020 compared with an earlier forecast for a surplus.
· The Philippine government is planning more support for the economy
The Philippine government will be announcing more support to its economy which has been weighed down by the rapid spread of the coronavirus disease, said Karl Kendrick Chua, acting secretary of the country’s National Economic and Development Authority.
He told CNBC’s “Capital Connection” that there would be more fiscal stimulus and capital support for the banking sector to help individuals and businesses financially affected by the virus outbreak.
· Taiwan proposes $7 billion extra budget to stimulate economy
Taiwan proposed a second supplementary budget for 2020 worth T$210 billion ($7.13 billion) on Thursday to ease the impact of the coronavirus outbreak as the trade-reliant economy is expected to slow to a five-year low this year.
· Thailand is losing key economic ministers as country tries to recover from coronavirus-induced slump
Thailand has over the past week lost several government ministers — including those holding crucial economic portfolios — as the coronavirus pandemic slams the tourism-dependent Southeast Asian economy.
Political uncertainty ‘not new’
The Thai economy, which is heavily dependent on tourism, is expected to register the worst economic contraction in Asia this year, according to forecasts by Capital Economics. The consultancy projected Thailand’s gross domestic product to slump by 9% in 2020.
Analysts from Japanese bank Nomura said in a note last week that they don’t expect changes in the cabinet to substantially alter the government’s spending plans. But “there may be some concerns over the execution of fiscal measures,” they added, pointing to the departure of the former Deputy Prime Minister Somkid.
“The resignation of Somkid, who was the architect of Prayut’s economic policies, causes some policy uncertainty at a critical time when the economy is going through a deep recession,” read the note.
But analysts from Australian bank ANZ said in a note last week that “political uncertainty is not new to Thailand.” They added that despite the departures of key economic ministers, they expect Thailand’s policy to “remain focused on engineering a recovery.”
· Oil inches up, but concerns over demand recovery cap gains
Oil prices edged higher on Thursday, although gains were capped by a surprise build in U.S. crude oil inventories, while a persistent surge in new coronavirus cases continued to dampen a recovery in fuel demand.
U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped in the most recent week, the Energy Information Administration said on Wednesday, as a sharp rise in coronavirus cases starts to hit U.S. consumption.
Brent crude LCOc1 rose 7 cents, or 0.2%, to $44.36 a barrel by 0545 GMT while U.S. West Texas Intermediate (WTI) crude CLc1 gained 8 cents, or 0.2%, to $41.98 a barrel.
Prices have been marking time since hitting a four-month high earlier in the week on hopeful news about a coronavirus vaccine.
Reference: CNBC, Reuters
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