Dollar Posts Biggest Monthly Drop Since 2010
The dollar index reversed early losses to trade above 93 on Friday as investors took profits and closed short positions. Still, for July, the index was down 4.1 percent, the most in percentage terms since September 2010 as recent data showed US recovery was losing steam as more states have to reimpose lockdown restrictions due to surge in COVID-19 cases. President Trump's suggestion to delay the election in November also weighed on investors' mood. Meanwhile, the number of coronavirus infections in US is approaching 4.5 million and the death toll surpassed 150K. Also, on Friday, data showed inflation-adjusted consumer spending rose but remained below its pre-pandemic level.
S&P Changes Republic of Congo’s Outlook to Stable
S&P Global Ratings revised on Friday 31 July 2020 the Democratic Republic of the Congo’s sovereign credit rating outlook to stable from positive and affirmed the debt grade at CCC+, citing as main trigger behind the change the adverse effects of COVID-19 on DRC's economy, budget, and balance of payments, with substantial emergency financial support expected from partners and relatively solid medium-term prospects, on the back of higher mining production, lower domestic tensions, and renewed relations with the international community. Moody's credit rating for Republic of the Congo was last set at Caa2 with stable outlook. Fitch's credit rating for Republic of the Congo was last reported at CCC with n/a outlook.
Fitch Revises United States’ Rating Outlook to Negative
Fitch Ratings changed on Friday 31 July 2020 the United States’ sovereign rating outlook to negative from stable and affirmed the debt grade at AAA, citing as main trigger behind the revision the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan, issues that were highlighted in the agency's last rating review on March 26, 2020. Standard & Poor's credit rating for the United States stands at AA+ with stable outlook. Moody's credit rating for the United States was last set at Aaa with stable outlook. DBRS's credit rating for the United States is AAA with stable outlook.
Mexican Stocks Drop 0.3%
Mexico’s IPC lost 117 points or 0.3% to 37,020 on Friday, as policy debates continued in Washington as the pandemic continues to intensify. On the domestic side, the Ministry of Finance cut its 2020 GDP estimate to -7.4% from -3.9%. On Thursday, data showed the economy shrunk by a record-breaking 17.3% during the second quarter. On the policy side, President AMLO announced an MXN 20 billion investment (or USD 1 billion) to finish the Mexico-Toluca train project. Meanwhile, WTI oil prices climbed 0.9% on Friday to $40.3 per barrel. For the month, the IPC lost 1.8%.
Brazilian Equities Plunge on Friday
Brazil’s Ibovepsa retreated 2096 points or 2% to 102,912 on Friday, amid concerns over rising daily coronavirus cases, weak growth across the globe, and policy uncertainty in the US. On the domestic side, the Brazilian real weakened after central bank figures showed a record rise in national debt. Brazil opened its borders for tourists arriving by plane. The decision will be valid for at least 30 days. During the week, the Ibovespa was little changed.
Colombia Cuts Interest Rate to 2.25%
The central bank of Colombia cut its benchmark interest rate by 25 bps to a record low of 2.25 percent during its 31 July 2020 meeting, as widely expected. The move follows a 25-bp cut in June and 100 bps in May and April, as the coronavirus crisis intensifies. Policymakers noted that the annual inflation fell to 2.19 percent in June from 2.85 percent in Mayl. They also underscored that inflation expectations continued to decline and stood below 3% as a reflection of a weak aggregate demand. The Committee added that the risk balance suggests the convenience of providing an additional boost to the economy. The decision was unanimous following a split vote in the June meeting.
TSX Closes Lower
Canada’s TSX lost 130 points or 0.8% to 16,169 on Friday despite a new gold record of $2005 an ounce. On the macro side, building permits in Canada increased 6.2 percent from a month earlier to CAD 8.1 billion in June 2020, following an upwardly revised 21.6 percent gain in the previous month nudged by the Oakridge Centre mixed use redevelopment project in the city of Vancouver. Meanwhile, a CAD 43.93 billion budget deficit was recorded in May 2020 and was the largest government budget gap on record. During the week, the TSX lost 0.9%.
US Stocks Close Higher Nudged by Earnings
Wall Street closed in the green on Friday nudged by a 10% jump and a new record of Apple shares after the company reported a blowout quarter, as investors shrugged off policy uncertainty in Washington. Stocks tanked early in the session to later come back, as emergency unemployment benefits are set to expire today and Congress and the White House still seem far apart. On the macro side, consumer confidence in the US fell to 72.5 in July from 78.1 in June amid a resurgence in coronavirus cases. Investors continued to flock to safe-haven assets and gold hit a new all-time high of $2005 an ounce. The Dow Jones added 115 points or 0.4% to 26,429. The S&P 500 climbed 25 points or 0.8% to 3271. The Nasdaq jumped 158 points or 1.5% to 10,745. During the month, the Dow gained 2.3%, the S&P 500 added 5.5% and the Nasdaq Composite climbed 6.8%.
Dollar on Track to Suffer Biggest Loss in a Decade
The dollar index reversed early losses to trade above 93 on Friday but was on track for a near 4.2% drop this month, its steepest monthly fall since September 2010, amid renewed concerns about the strength of the economic recovery in the US and the country's ability to control the pandemic. The economy shrank at a record pace in Q2 and initial jobless claims increased for a second week. President Trump's suggestion to delay the election in November also weighed on investors' mood. Meanwhile, the Fed is expected to leave rates near 0% for a while, saying the pandemic poses risks to the outlook. In fact, the number of infections is approaching 4.5 million and the death toll surpassed 150K. On Friday, data showed inflation-adjusted consumer spending rose but remained below its pre-pandemic level.
Ukraine Current Account Balance Swings to Surplus
Ukraine posted a current account surplus of USD 773 million in June of 2020, compared to a USD 783 million deficit in the corresponding month of the previous year, as the goods and services gap narrowed sharply to USD 215 million from USD 2,923 million. Meantime, the primary income surplus fell to USD 692 million from USD 792 million and the secondary income surplus went down to USD 296 million from USD 848 million. Considering the second quarter of 2020, the country’s current account surplus declined to USD 3,481 million from USD 4,304 million a year ago.
Canada Building Permits Rise for 2nd Month
The value of building permits in Canada rose 6.2 percent from a month earlier to CAD 8.1 billion in June 2020, following an upwardly revised 21.6 percent gain in the previous month, as the CAD 687 million Oakridge Centre mixed use redevelopment project in the city of Vancouver helped raise the total national value of building permits to a level comparable to pre-COVID levels. The total value of residential permits increased 7 percent to CAD 5.3 billion, with gains posted in six provinces. The value of permits for single-family homes advanced 6.6 percent to CAD 2.1 billion and for multi-family dwellings rose for the third consecutive month (7.3 percent to CAD 3.2 billion) due to major projects in the census metropolitan area of Vancouver. Also, non-residential permits went up 4.6 percent to CAD 2.7 billion, boosted by institutional permits (47.7 percent to CAD 841 million). On a quarterly basis, the value of permits dropped 17.4 percent compared to the same period of 2019.
Spanish Shares Down by Over 5% in July
The IBEX 35 declined 5.1% to 6,877 in July, its lowest close since May 25th, slipping 5.8% this week alone dragged down by a new surge of coronavirus cases in the region and doubts over an economic recovery. On Friday, the IBEX 35 lost 119 points, or 1.7%, after recent data showed Spain’s economy shrank by a record 18.5% on quarter in the three months to June, compared to market expectations of a 16.6% contraction, a preliminary estimate showed, as the coronavirus pandemic led to Europe's strictest coronavirus lockdowns. Spanish Prime Minister Sanchez said that the country must focus on its economic recovery after data was released.
Brazilian Real Depreciates
The Brazilian real was trading around 5.19 against the USD, after latest data showed the country’s national debt rose to a record 85.5% of GDP in June, the nominal budget deficit widened to a record BRL 210.1 billion, and the primary budget registered an all-time high shortfall of BRL 188.7 billion shortfall, as the coronavirus crisis hammered the government’s finances. The real has been under pressure amid worries over a deep economic recession, deteriorated fiscal position and political uncertainty.
FTSE 100 Hits New 2-1/2-Month Low
The FTSE 100 closed down 1.5% at 5,898 on Friday, its lowest level since May 15th, as hopes for a "V-shaped" economic recovery in the UK faded after Prime Minister Boris Johnson announced the country will slow down its reopening efforts. Last night, parts of northern England were forced to re-impose some lockdown measures due to a spike in coronavirus infections. On the corporate front, British bank NatWest posted a second-quarter loss due to the pandemic. For the month, the FTSE 100 lost 4.4% as the latest rounds of Brexit negotiations came to an end without any development.
Colombia Exports Continue to Drop in June
Exports from Colombia dropped 26.4 percent year-on-year to USD 2.28 billion in June 2020, following a 40.3 percent plunge in the previous month, amid the coronavirus crisis. Sales declined for fuels & mining products (-50 percent), in particular oil & oil products (-62.3 percent); and manufacturing goods (-4.3 percent), namely chemical products (-17.8 percent). In addition, sales of agricultural goods, food & beverages rose 2.9 percent, driven by coffee (31.4 percent); and those of other sectors increased 5 percent. In June, Colombia sold 14.8 million barrels of crude oil, a 25.8 percent drop compared to June 2019. Main export partners were: the US (31.4 percent of total sales), India (4.7 percent), Panama (4.5 percent), the Netherlands (4 percent) and Italy (3.9 percent).
European Stocks Fall, DAX Ends at 4-Week Low
Stock markets in Europe closed in the red on Friday as investors continue to monitor the spike in coronavirus infections and its impact on the economic outlook. At the same time, data showed the Eurozone suffered the worst contraction on record due to the pandemic, with all major economies reporting record slumps in output. On Thursday, global market sentiment was hit by weak GDP data from the US, as well as US President Donald Trump's suggestion of delaying the next US election scheduled for November. The DAX 30 fell 0.5% to 12,313, erasing all July gains. The FTSE 100 slumped 1.5%; the CAC 40 dropped 1.4%; the FTSE MIB declined 0.7%; and the IBEX 35 slid 1.7%.
French Shares Drop to 2-Month Low
The CAC 40 fell 69 points, or 1.4% to 4,784 on Friday, its lowest close since June 1st and extending a 2.4% loss in the previous session, dragged down by poor GDP data and doubts over the economic recovery. The French economy shrank by a record 13.8% on quarter in the three months to June, less than market expectations of a 15.3% contraction, as consumption, investment and trade slumped due to coronavirus lockdown restrictions. Early in the day French shares were rising after BNP Paribas earned a higher-than-expected profit, due to a surge in fixed income trading and strong demand for corporate finance. The CAC 40 lost 3.1% on the month and retreated 3.5% in the last week alone.
Brazilian Shares Extend Losses
The Ibovespa index fell more than 1% on Friday, extending previous session losses after latest data showed Brazil's nominal budget deficit widened to a record BRL 210.1 billion in June, well above market expectations of a BRL 164.1 billion gap. The country’s national debt also rose to a record 85.5% of GDP and the primary budget registered a record BRL 188.7 billion shortfall, as the coronavirus crisis hammered the government’s finances. Investors remain concerned over surging COVID-19 infections, as the country reported 57.8 thousand new cases. Traders will keep an eye on a new round of corporate earnings.
Italian Stocks End at 1-1/2-Month Low
The FTSE MIB gave up gains to fall 137 points, or 0.7% to 19,092 at the end of the trading session on Friday, its lowest close since June 15th as recent data showed Italian economy shrank by a record 12.4% on quarter in the three months to June as the country was hit by the coronavirus pandemic. Also, the London Stock Exchange (LSE) said on Friday it may consider selling part or all of its Italian stock exchange group to help get its planned $27 billion takeover of data and analytics group Refinitiv. Still, UBI Banca shares remained up more than 5% after Intesa Sanpaolo concluded its takeover battle securing 90.2% of UBI'S shares to create Italy’s biggest bank which will own a fifth of the loan market. Italian shares retreated 1.5% on the month and were down 4.9% for the week.
Canada Posts Largest Budget Gap on Record
Canada's government posted a CAD 43.93 billion budget deficit in May 2020, compared to a CAD 0.71 billion surplus in the same month of the previous year. It was the largest government budget gap on record, reflecting the severe deterioration in the economic situation and temporary measures implemented through the government’s Economic Response Plan to support Canadians and businesses facing hardship as a result of the pandemic. For the first two months of the 2020-2021 fiscal year (April and May), there was budgetary shortfall of CAD 86.77 billion, compared to a CAD 1.4 billion deficit in the corresponding period of 2019-2020. Revenues plunged by CAD 24.1 billion, or 42.6%, due to decreases in tax revenues and other revenues. Program expenses jumped by CAD 62.4 billion, or 117.4%, reflecting transfers to businesses and individuals under the Economic Response Plan
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