May 21, 2020 / 8:14 AM / 16 days ago

Daily Briefing: Glass half full or half empty

Read it whichever way you want it – things are bad but hey, there will be more stimulus. Lockdowns are easing so economic activity, including the battered airline and leisure industry, will get a boost.

Customers toast with beers across plastic screens on a table at Kichiri Shinjuku, a Japanese style pub known as an 'izakaya', in Tokyo, May 19, 2020. REUTERS/Issei Kato

U.S.-China tensions are flaring, but maybe it’s pre-election posturing? All the data is terrible, but it can only get better from here (hopefully) and there are bright spots within the numbers -- if you look really hard.

But markets seem to be taking a dim view of the world today, with world stocks sliding off two-and-a-half- month highs. Wall Street rose on Wednesday, led by tech giants Amazon and Facebook as well as hopes of more measures from the Fed and Congressional plans to extend the Paycheck Protection Program.

We got some ugly numbers from Japan showing exports fell 21.9% in April year-on-year as U.S.-bound shipments slumped 37.8%, the fastest decline since 2009, with car exports plunging 65.8%. Japanese shares have fallen 0.2% from two-and-a-half-month highs, on expectations the central bank will expand assistance to small firms.

Another dismal trade report came from Korea, where 20-day exports declined by 20.3% year-on-year and imports fell by 16.9%. But to illustrate why the worst could be behind us, Citi points out signs of improvement hidden deep within the data, such as a rise in per-day exports, higher exports to China vs a month ago and a rise in semiconductor exports. Korean stocks weren’t having any of that: they fell 0.6%.

There are more reasons to be risk-off today, not least a U.S. Senate bill that could block Chinese companies from listing in the United States. That will add to already simmering tensions with China over the origin and spread of the coronavirus pandemic. Earlier, Chinese shares retreated 0.7%.

Chinese President Xi Jinping and officials attend the opening session of the Chinese People's Political Consultative Conference at the Great Hall of the People in Beijing, May 21, 2020. REUTERS/Carlos Garcia Rawlins

European shares are starting the day with losses of around 1% while Wall Street futures are lower. The dollar index has firmed again and bond yields are broadly lower.

It’s a day for data and central bankers. – euro zone and UK flash PMIs give us the first indications of whether activity started picking up in May as lockdowns eased.

U.S. weekly jobless claims are expected at a seasonally adjusted 2.4 million for the week ended May 16, a Reuters survey showed -- high but well off the record 6.867 million in the week ended March 28.

A raft of Federal Reserve speakers will also be on the wires, including Fed chair Jerome Powell. And two big emerging- market central banks – Turkey and South Africa — are expected to cut rates.

In European corporate news, AstraZeneca received agreements to supply at least 400 million doses of the COVID-19 vaccine it is developing with the University of Oxford. GlaxoSmithKline has tied up with Mammoth Biosciences to develop a test for novel coronavirus infections.

Assicurazioni Generali first-quarter net profit fell 85% year-on-year after 655 million euros of impairments. Aviva's life new business sales rose by 28% in the first quarter and it will pay 160 million pounds in coronavirus-related claims. Whitbread will raise 1.01 billion pounds through a rights issue.

Lufthansa said it is in talks with the German government over a rescue deal of up to 9 billion euros, including the state taking a 20% stake.

Emerging markets are easily at the sharpest end of the crisis, especially those that were already fragile before the crisis. Lebanon, for instance, is at risk of a major food crisis, Prime Minister Hassan Diab warned.

Latin America is the COVOD-19 hotspot to watch, overtaking the United States and Europe in the past week to report the largest portion of new daily cases. Brazil now has the biggest outbreak in the world behind the United States.

In any case, emerging-market equities snapped a four-day winning streak. South Africa’s rand weakened 0.7% on expectations the central bank will trim rates by 50 to 100 basis points from the current 4.25%.

More focus is on the central bank’s bond-buying programme — it’s already rejected calls for a bigger role backstopping a government debt splurge to fund stimulus.

Turkey’s lira is steady before an expected 50-bps rate cut to 8.25%.

— A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own —

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