Morning Minutes

Renewed COVID Concerns and China Cybersecurity Crackdown Weigh On Markets




Stock markets around the world have gone into retreat overnight after Tokyo announced a new state of emergency running through to August 22nd, blaming increasing COVID cases in the region. The Nikkei fell 0.9% on the news. This also appears to have sparked concerns that a new wave could slow down the reopening recovery. In Europe, the Dax is down 2.2% while the FTSE is down 2.0%. US index futures are under pressure this morning with Dow Futures down over 500 points and all three main contracts diving 1.6%-1.7%.

The impact of this week’s Chinese cybersecurity crackdown, particularly on some of its companies interlisted in the US continues to widen. Overnight the Hang Seng plunged 2.9% while Shanghai lost 0.8%. Recently listed ride sharing company Didi Global, which was at the epicenter of this debacle, is down another 5.7% premarket today after dropping 5.4% yesterday.

Capital appears to be starting to rotate away from risk markets into defensive havens. The VIX volatility index and the Japanese Yen have both started to creep back upward. Meanwhile, gold is up 0.6%. US bond prices have also started to rise with the 10-year treasury note yield falling below 1.30%.

In economic news today, the European Central Bank changed its inflation target from a cap of 2% to an average of 2% allowing overshoots, which brings it closer in line to the practice of other major central banks. US jobless claims were similar to last week but slightly worse than the street had hoped (373K vs street 350K and previous 371K). Tonight inflation numbers are due from China. Tomorrow morning brings Canada’s June employment report. Analyst expectations (jobs street 195K vs previous -68K, unemployment rate street 7.7% vs previous 8.2%) suggest that the street is expecting June reopenings in some provinces to have a positive impact.  

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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