5th August 2022: Yesterday closed orders given +0.207%; China increases pressure on Taiwan; Top European banks show good profits; Growth of the futures market
Symbol: EURGBP; Type: BUY; Open Price: 0.84151; Close Price: 0.84046; Profit: -0.125%.
Symbol: HK50; Type: BUY; Open Price: 20133.5; Close Price: 20200.6; Profit: +0.332%.
China increases pressure on Taiwan
China moves warships closer to Taiwan and terminates defense talks with the United States. Following House Speaker Nancy Pelosi’s trip to Taiwan, relations between the world’s largest economies have become increasingly strained. Pelosi and her immediate family are subject to further, undefined measures imposed by China. Antony Blinken, the Secretary of State of the United States, stated that China “has decided to overreact.” After Pelosi’s visit, Xi Jinping has increased the pressure he’s been putting on Taiwan over the past several years. A reorganization of the Communist Party is coming up, and Xi must project an image of strength while safeguarding the nation’s territorial interests.
The visit by the United States’ third-highest official has been criticized by China as a breach of the United States promise, made fifty years ago, not to recognize Taiwan. Since at least 1995, Beijing has not put on such a provocative display of force as it did during these drills. On Friday, Taiwan’s benchmark stock index saw a gain of 2.3 percent, completely erasing the index’s weekly losses. After receiving a signal from local officials that they were prepared to implement stabilizing measures if necessary, equity investors appeared to have quickly moved on. According to the Taiwanese Defense Ministry, the People’s Liberation Army (PLA) launched 11 missiles into military training zones throughout the island. It also flew 22 warplanes above the US-set median line on Thursday for the second day in a row, making this the highest since the island began reporting statistics in 2020.
Top European banks show good profits
As a result of improved net interest income and increased debt trading, 15 of the top 20 lenders in the region were able to outperform the profit predictions provided by experts. The total profits of the ten largest publicly traded banks in the European Union came in at 13.9 billion euros ($14.2 billion), making it the third-best performance in the previous decade. As investors and businesses struggled to adapt to tighter monetary policy, Europe’s investment banks reaped the benefits of increased trading activity in foreign exchange and interest rates. Trading made up for the lack of activity in advising on transactions and capital raising, which was restrained due to the uncertain outlook for the economy. Banks marking them down, the value of buyout loans was reduced by roughly $2 billion.
In preparation for an increase in the interest rate that the ECB would implement, European banks increased the interest rates on loans. Because of their variable interest rates, mortgage lenders in nations like Spain can make a profit earlier than in other countries. During the period under review, European banks set aside less capital for potentially risky loans. The inflation rate is increasing salary expectations for retail bank tellers or investment bankers. This quarter’s results for a few different banks had an unexpectedly positive contribution from Russia. As a result of the strengthening of the ruble, Raiffeisen Bank International AG saw an increase in both its loan book and its earnings in the country.
Growth of the futures market
While equity futures moved up before the monthly US employment data, which is sure to invigorate the discussion over the likelihood of a recession, Treasury rates and the currency remained stable. The futures market for the S&P 500 index showed small gains, while the futures market for the Nasdaq 100 index remained mostly unchanged and came within a hair’s breadth of a 20 percent comeback from its low point in June. In a comeback from bear-market lows, a global equity index is on track for a third weekly rise and is nearing a two-month top. This is being assisted by solid firm earnings in the United States. After falling from an 11-year high of about 3.5 percent, the yield on the 10-year Treasury note remained relatively unchanged at approximately 2.7 percent. This has caused a shift back into defensive stocks, particularly tech companies, which normally benefit from falling duration risk, pushing the shift. As a result of China’s announcement that it would stop cooperating with the United States in some different sectors, tensions between China and the United States continued to rise.
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