Morning Minutes June 30, 2020

Morning Minutes

China, Energy and Theatres in Focus as Q2 Ends Today

June 30, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

It’s the last day for trading for the month and quarter and so far, overnight trading has been relatively quiet but news flow has sparked some action in specific areas.

Asia Pacific markets had a positive day with Sydney rallying 1.4%, Tokyo gained 1.3%, Shanghai was up 0.8% and Hong Kong rose by 0.5%. Asia markets received a boost from Chinese manufacturing (50.9 vs street 50.4 and previous 50.6) and Chinese non-manufacturing PMI (54.4 vs street 53.6), which remained in expansion territory above 50 and improved over last month. This news helped propel the price of copper to a 1.2% gain.

US index futures are essentially flat this morning, while European markets are missed with the Dax up 0.5% and the FTSE down 0.5%.

With the quarter ending and the start of earnings season only a couple of weeks away, we have moved into confession season where pre-announcements could pop up at any time. A busy three days for economic news kicks into gear today with US Chicago PMI due at 9:45 am EDT (street 45.0 vs previous 32.3) plus testimony and speeches from Fed Chair Powell, Fed Governor Brainard, and US Treasury Secretary Mnuchin. Tomorrow brings US ADP payrolls and manufacturing PMI reports from around the world, then on Thursday, US nonfarm payrolls and jobless claims take the stage.

Speaking of the stage, developments this week in the entertainment sector provide a reminder that the road to rebound is likely to be uneven with some sectors potentially recovering slower than others. For example, while retailers and restaurants have been reopening at various speeds across North America, in the US AMC Theaters announced it will not be reopening until July 31 and the tourism-dependent Broadway theaters announced they will not be reopening until 2021. Meanwhile in Canada, Cirque Du Soleil filed for bankruptcy and Cineplex received $250 million in new debt financing after its deal to be purchased by Cineworld fell apart and it posed a $178 million loss for the March quarter.

The price of oil is under pressure again today with WTI and Brent both falling 1.0%. The impact of lower energy prices on companies continues to emerge. Earlier this month BP wrote down its oil and gas assets by $17.5B and this morning, Shell announced it plans to write down its asset base by $15B-$22B when it reports Q2 results.

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