Dude, Where’s My Bitcoin?

Twitter overshadowed the headlines on an otherwise positive New York session overnight, but for all the wrong reasons. An alleged hack of the Twitter accounts of the titans of the political and corporate world, saw a diverse array from Barrack Obama, to Bill Gates, to Apple Inc. all generously offering to double your bitcoin holdings. Just send your initial investment to this link first. Elon Musk will probably be happy that, for once, a controversial tweet by his account won’t result in a phone call from the SEC.

Bitcoin marketing usually leaves one feeling like they’ve bought a used car with not-so-genuine low mileage and needing a shower, but it won’t be Bitcoin that suffers. Twitter stock was only down by around 4.0% in after-market trading. But depending on where in the tweeting food chain the security breach came, Twitter could face some vast issues. The wealthiest corporations and people in the world have bottomless legal pockets. Notably, President Trump wasn’t amongst the hacked. Perhaps the hackers thought the bitcoin fraud would be too mainstream and unbelievable for the Presidential account, given its usual fare?

Tweets aside, market sentiment was dominated by vaccine positivity. Wall Street stocks continued to climb even as the Covid-19 count in the United States rose faster. Risk sensitive currencies also rallied, although the euro paused for breath ahead of the ECB meetings today and the EU summit tomorrow to thrash out the details of the European pandemic recovery fund. I do believe that there are grounds for optimism on the vaccine front though, simply because of the number of pharma heavyweights across the world moving to Phase 3 clinical trials. One of those compounds will float to the top, and a Q4 vaccine remains my Black Swan for 2020.

OPEC+ eases production cuts

OPEC+ has decided to pause its headline 9.6 million barrel per day cuts at the end of the month. OPEC+ will engage the pre-agreed tapering phase, which sees the headline cuts fall to 7.7 million barrels a day. Initially, though, that number will be just over 8 million barrels per day, as Iraq and Nigeria make up for their earlier compliance failures. Oil has held up remarkably well and can probably thank the positive vaccine sentiments boosting financial markets generally for that.

Asia has already had a hectic morning on the data front. Australia added a much higher than expected 210,800 jobs in June. On the surface, it implies that Australia is bouncing back rapidly from its Covid-19 lockdowns. The headline though flatters to deceive. Full-time employment fall by 38,000 jobs, with part-time accounting for the entire increase, rising by 249,000 jobs. The unemployment rate also rose to 7.40%. Australia may be recovering, but the rise is uneven and seemingly limited to those part-timers quickly cast aside when the shutdown began.

The Bank of Korea (BOK) left rates unchanged this morning at 0.50%. The BOK had already signaled that it was done with easing, having one eye on the politically unpopular spike in Seoul housing prices. The decision should not be market moving.

China released its Q2 GDP, which showed a surprise jump of 3.20% YoY. Well above the market’s forecast of 2.50%. Industrial Production rose 4.80%, slightly better than expected. Worrying, however, Retail Sales fell unexpectedly to -1.80%. Again, the headline number flatters to deceive. GDP rose, as did Industrial Production, but the Chinese domestic consumer appears to be more reluctant than anticipated to go outside and consume. China’s export markets are its crucial challenge. The question being, is China ramping up production of export-related goods, that end up stored on the docks awaiting a new overseas home? The price action on mainland stock exchanges today suggests that these concerns may have solid foundations.

Bank Indonesia will announce its latest rate decision at 1530 SGT today, with the market near-universally expecting a further 0.25% cut to 4.0%. The Indonesian rupiah (IDR) has fallen this week from 14,400 to 14,610 this morning, even as the US dollar has weakened elsewhere. Part of that may be related to the BI’s directly monetising part of recent government bond issues. More likely, the IDR has fallen in anticipation of the cut in rates by the BI. The IDR has fallen from 13,900 to 14,610 since mid-June. But the scale of its overall rally since the mid-March collapse to 16,800, is enormous. The market’s faith in the quality of its finance ministry and central bank team has kept the sharks at bay. That will give the BI room to cut today, and in the months ahead.

Thailand’s finance minister has announced his resignation with immediate effect. Although that appears to have been anticipated, the Thai baht has come under direct pressure, falling 0.50% versus the US dollar.

Apart from the ECB, where no change to its -0.10% benchmark rate of guidance is expected, today’s international highlight will be US Retail Sales at 2030 SGT. After May’s virus-induced rebound by 17.70%, Retail Sales are expected to climb by a more modest, but still impressive, 5.50% in June. Worries will temper any exuberance on concerns that the explosion of Covid-19 across the US sunbelt, will materially impact the July number. Well-founded, in my opinion. Also, Initial Jobless Claims and Continuing Claims, also released tonight, stubbornly remain around 1.3 million and 18 million respectively.

Friday’s focus will be the European Union leaders summit, with the details of the EUR 750 pandemic recovery fund expected to be finally hashed out and agreed. Markets have already priced a positive outcome into the EUR/USD this week, with an expected agreement likely to boost EUR/USD through 1.1500. The critical risk being that European squabbles between the Frugal Four and the Club-Med Massive result in no agreement. Like a bad Enid Blyton book titled, The Frugal Four Go To Brussels, it would set up a potentially nasty downward correction for the euro currency into the week’s end.

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