Market Report 13th July 2020
This week my focus has been on China. They are in the news for a variety of reasons. The interesting thing with China is they are like magicians in that they draw your attention to one area when they are trying to distract you from seeing what is really going on. Reading between the lines is key to understanding what they are doing and what impact that has on the financial markets. Generally, the markets seem to go with what seems the least noxious.
In the news this week with China:-
· They have again raised using the Yuan as a counter currency to the US Dollars. This was first raised during the 2008 credit crunch; when they started the silk road project they raised it again and again they are raising the issue possibly due to all the bad news stories hitting the headlines
· US Congress passes legislation requiring Chinese companies on the NYSE to be delisted due to their failure to allow US regulators to audit the companies. A requirement of all companies on the US Markets
· Fake Gold worth 22% of China’s annual production, held in storage as security for Kingold loans is found to be guilded copper rather than gold bullion.
· The crackdown in Hong Kong has resulted in many countries withdrawing political connections with China including withdrawal of extradition orders
· Reports indicate the incredible growth in the Chinese Share Market is being manipulated by the Chinese government with major concerns being raised internationally through various organisations including the IMF.
· China has created friction on several borders with multiple countries sending military into the region this includes the Indian border, and the Chinese sea borders where new military bases are being established. Hong Kong is a major concern.
UK economy is faltering with the country facing major business closures and redundancies. The incentives from the government to secure jobs is being turned down by major companies. Primark announced the incentive was worth £30 million but the cost to the company during coronavirus was £800 million.
Boots, John Lewis, M&S and a host of pubs, restaurants are all indicating they will be closing stores and it is likely there will be 250,000 redundancies.
Gold – has remained fairly flat this week with a 1.36% increase to $1799.74
Silver – continues it’s upward trend reaching $19.07 before dropping back to $18.75 but even at this price it has gone up 3.73% in one week.
Gold:Silver Ratio – is reducing down from a high of 125 to this week being 95.93 indicating silver is still the best investment opportunity.
Oil – Arab Countries are struggling with the drastic cuts in oil production which has results in a severe drop in oil dollars affecting the liquidity of Middle East Banks. Governments are encouraging mergers to keep some banks afloat with reports that $440 billion in deal mergers is currently on the table.
Natural Gas – Egypt has issued a decree for all new cars in the country to be run on Natural Gas.
Alternative Energy – Scientists find a way to harvest water droplets and converting them into electricity. This means the new method can generate electricity from rain and other sources using a system of converting mechanical energy to electricial energy. The stability of the system allows the energy to be stored in excess of 100 days with little degradation.