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Beyond the Numbers

Russian Claims About Coronavirus Vaccine May Generate Early Buying Interest
8/11/2020 9:01 AM

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to extend the upward trend seen in recent sessions.

Early buying interest may be generated in reaction to news that Russia has approved a coronavirus vaccine, with Russian President Vladimir Putin claiming the vaccine works “quite effectively.”

“It forms a stable immunity and, I repeat, has passed all the necessary checks,” Putin said at a meeting with members of the government, according to RIA Novosti.

The speed of the development of the vaccine has raised questions about its safety, although the news is still likely to generate optimism the coronavirus pandemic can be contained in the relatively near future.

Reflecting the optimism about a potential vaccine, airlines and cruise operators are seeing significant pre-market strength.

The markets may also benefit from recent upward momentum, as the Dow and the S&P 500 have closed higher for seven consecutive sessions. The advance has lifted the S&P 500 within striking distance of its record high.

Stocks moved mostly higher during trading on Monday, with the Dow and the S&P 500 climbing to their best closing levels in over five months. However, weakness among technology stocks contributed to a continued pullback by the Nasdaq.

While the Nasdaq fell 42.63 points or 0.4 percent to 10,968.36, the Dow jumped 357.96 points or 1.3 percent to 27,791.44 and the S&P 500 rose 9.19 points or 0.3 percent to 3,360.47.

The strength on Wall Street came after President Donald Trump signed executive orders aimed at extending coronavirus relief to Americans.

The executive orders include an extension of expanded unemployment benefits, a deferral of student loan payments through 2020, a federal moratorium on evictions and a payroll tax holiday.

Trump signed the orders as lawmakers continue to struggle to reach an agreement on a new coronavirus relief package.

However, the orders are likely to face legal challenges, as Congress controls the funding needed to continue the programs.

Concerns about rising tensions between the U.S. and China also helped to keep buying interest somewhat subdued on the day.

Airline stocks showed a substantial move to the upside on the day, driving the NYSE Arca Airline Index up by 5 percent.

The rally by airline stocks came as federal data showed the number of people passing through Transportation Security Administration checkpoints at U.S. airports rose to the highest level since March 17 on Sunday.

Considerable strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for September delivery climbed $0.72 to $41.94 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 3.8 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index jumped by 2.9 percent and 2.7 percent, respectively.

Steel, transportation and computer hardware stocks also saw notable strength on the day, while weakness was visible among software, gold, and biotechnology stocks.

Commodity, Currency Markets

Crude oil futures are advancing $0.82 to $42.76 a barrel after climbing $0.72 to $41.94 a barrel on Monday. Meanwhile, after jumping $11.70 to $2,039.70 an ounce in the previous session, gold futures are plunging $66.10 to $1,973.60 an ounce.

On the currency front, the U.S. dollar is trading at 105.94 yen compared to the 105.96 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1794 compared to yesterday’s $1.1738.

Asia

Asian stocks ended mixed on Tuesday as investors kept an eye on rising U.S.-China tensions and ongoing stimulus talks in Washington.

Chinese stocks ended sharply lower as investors awaited a meeting between top U.S. and Chinese trade officials on Saturday to review the first six months of the Phase 1 trade deal.

The benchmark Shanghai Composite Index tumbled 38.96 points, or 1.2 percent, to 3,340.29, while Hong Kong's Hang Seng Index surged up 513.25 points, or 2.1 percent, to 24,890.68.

Japanese shares posted strong gains as traders returned from a holiday. The Nikkei 225 Index jumped 420.30 points, or 1.9 percent, to 22,750.24, while the broader Topix closed 2.5 percent higher at 1,585.96.

Exporters Canon, Toyota Motor, Panasonic and Honda Motor surged 3-6 percent as the yen softened despite rising U.S.-China tensions. Market heavyweight SoftBank Group fell 2.5 percent.

In the tech space, Advantest rose 2.5 percent and Screen Holdings advanced 4.3 percent. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial climbed 4-5 percent.

In economic news, Japan had a current account surplus of 167.5 billion yen in June, down 86.6 percent year-on-year, a government report showed. That beat expectations for a surplus of 110 billion yen following the 1,176.8 billion yen surplus in May.

Exports were down 25.7 percent on year to 4.793 trillion yen, while imports sank an annual 14.4 percent to 4.870 trillion yen. The trade deficit was 77.3 billion yen in June following the 556.8 billion yen deficit in May.

Australian markets hit a three-week high before ending off their day's highs. The benchmark S&P/ASX 200 Index ended up 28.50 points, or 0.5 percent, at 6,138.70, as the country's second-most populous state reported only a small rise in new Covid-19 infections. The broader All Ordinaries Index rose 25 points, or 0.4 percent, to 6,272.10.

Australia's largest lender, Commonwealth Bank of Australia, gained 1 percent ahead of its annual results due on Wednesday. The other three major banks ended up between 1.8 percent and 2.7 percent.

Mining heavyweights BHP and Rio Tinto rose about 0.9 percent. Gold miner Evolution Mining slumped 5.3 percent, Newcrest lost 2.8 percent and Regis Resources gave up 3.4 percent as bullion prices retreated from a record high hit in the previous session.

Building materials giant James Hardie Industries soared 6.8 percent after it forecast a potential rise in full-year profit.

Energy companies ended broadly higher after crude oil prices advanced overnight. Sydney Airport shares entered a trading halt after the company initiated a A$2 billion equity raising.

Seoul stocks rose sharply to their highest level in over two years, as investors shrugged off bleak export data and shifted focus to signs of a slowdown in new coronavirus infections in several countries. The benchmark Kospi rallied 32.29 points, or 1.4 percent, to 2,418.67, led by technology stocks.

Earlier in the day, customs official data showed that exports contracted 23.6 percent from last year in the first 10 days of August, while imports declined 24.3 percent.

Europe

European stocks have risen for a third consecutive session on Tuesday, with signs of an economic rebound and hopes for a U.S. stimulus package helping underpin investor sentiment.

While the French CAC 40 Index has soared by 2.8 percent, the German DAX Index is up by 2.5 percent and the U.K.’s FTSE 100 Index is up by 2.1 percent.

BP Plc and Royal Dutch Shell have moved sharply higher as oil prices rise on signs that the surge in coronavirus cases in the southern U.S. is slowing.

HSBC Holdings has also moved to the upside as it announced the anticipated launch of nine separate offers to purchase for cash any and all of the outstanding series of notes.

Automaker Renault and Peugeot have also spiked after data showed Chinese auto sales rose by an annual 16.4 percent in July in a sign of sustained recovery for the industry's biggest global market. German automakers BMW, Daimler and Volkswagen have also jumped.

Vivendi has also moved notably higher. The mass media conglomerate and Amber Capital have agreed to sign a pact regarding Lagardère.

The companies will initiate steps in this framework with Lagardère to each seek a minority Supervisory Board representation of three members for Amber Capital and one member for Vivendi.

Pharmaceutical and life sciences company Bayer has also advanced after it agreed to acquire KaNDy Therapeutics Ltd., a U.K.-based private clinical-stage biotech that was founded in 2017 as a spin-off from NeRRe Therapeutics Ltd.

Zalando, an e-commerce company, has also shown a strong move to the upside after its quarterly net income jumped to 123 million euros from 46 million euros in the prior-year period.

In economic news, German economic confidence improved notably in August, survey data from the ZEW - Leibniz Centre for European Economic Research showed.

The ZEW Indicator of Economic Sentiment increased unexpectedly to 71.5 in August from 59.3 in July. The score was forecast to fall to 58.0.

Around 730,000 people have lost their jobs in the United Kingdom since the Covid-19 lockdown began in March, the biggest drop in quarterly employment since the 2009 financial crisis, official data showed.

Separately, monthly data from the British Retail Consortium revealed that U.K. like-for-like retail sales increased strongly in July as lockdown measures were eased and demand gradually began to return in some places.

U.S. Economic Reports

Partly reflecting a notable increase in prices for services, the Labor Department released a report on Tuesday showing U.S. producer prices climbed by more than expected in the month of July.

The Labor Department said its producer price index for final demand rose by 0.6 percent in July after dipping by 0.2 percent in June.

The rebound in producer prices reflected the largest increase since October of 2018 and exceeded economist estimates for an uptick of 0.3 percent.

Excluding food and energy prices, core producer prices still climbed by 0.5 percent in July after falling by 0.3 percent in June. Economists had expected core prices to inch up by 0.1 percent.

At 12 pm ET, San Francisco Federal Reserve President Mary Daly is due to speak in a fireside chat at a Professional Business Women of California annual conference event.

The Treasury Department is scheduled to announce the results of its auction of $48 billion worth of three-year notes at 1 pm ET.

Stocks In Focus

Shares of Canada Goose (GOOS) are moving sharply lower in pre-market trading after the outerwear maker reported a narrower than expected fiscal first quarter loss but said the negative financial impacts of COVID-19 have continued in the current quarter.

Cannabis producer Tilray (TLRY) is also likely to come under pressure after reporting weaker than expected second quarter results.

Shares of IAC (IAC) are also seeing significant pre-market weakness after the digital media company reported an unexpected second quarter loss on revenues that missed analyst estimates.

On the other hand, shares of Tencent Music (TME) may move to the upside after the music streaming service reported better than expected second quarter revenues.
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