US Stocks Sink to 4-week Low, Tech Rout Spreads

US stocks sank for a third day, with selloff in technology shares picking up steam as investors fled the high flyers who fueled a historic five-month rally. Oil plunged, while Treasuries rose with the dollar. The S&P 500 fell by 2.78% to 3,331.84 while Dow Jones was down 632.42 points (2.25%) to 27,500.89.

US Consumer Credit Extends Rebound as Auto Sales Increase

US consumer borrowing rose in July for a second month, reflecting an increase in nonrevolving credit such as auto loans as the economy reopened more broadly and spending picked up. Total credit advanced US$12.2bn from the prior month after an upwardly revised US$11.4bn June gain, Federal Reserve figures showed. The bounce back in consumer borrowing is in line with recent increases in retail sales, particularly purchases of motor vehicles. Still, consumer sentiment remains weak, and the expiration of the additional US$600 of unemployment benefits could impact spending.

EU’s Dombrovskis Presses US to Scrap Tariffs Over Airbus Aid

The European Union’s newly designated trade chief said the EU would hit American goods with tariffs as punishment for illegal aid to Boeing Co. unless the US removes duties imposed as retaliation over unlawful subsidies to Airbus SE. “We will if we will have to, but our preference would be to have an agreement with the US in between where they also withdraw their tariffs,” Valdis Dombrovskis said.

Bank of England chief economist warns against extending furlough program

The Bank of England’s chief economist has thrown his weight behind the government’s controversial plan to let its wage-support program end, saying that prolonging it could delay the economy’s much-needed restructuring. Calls have been mounting for the subsidies to be extended beyond next month, but Andy Haldane said a better way might be to let pay levels and working hours adjust to the market.

Scholz Says Germany Will Need Significant New Debt in 2021

Germany plans significant new borrowing next year to fuel the recovery of Europe’s largest economy from the fallout of the coronavirus and may continue to rely on debt spending in the future. The pandemic will put pressure on Germany’s finances next year, Finance Minister Olaf Scholz said. He indicated that the country could make broader use of borrowing limits in the coming years.

Bank of Thailand Governor Sees Stronger Fiscal Role for Recovery

Thailand’s outgoing central bank governor said public debt restrictions should be eased to allow the government to spend more as monetary policy options dwindle with interest rates already at an all-time low. Given the severity of the pandemic-driven downturn, Governor Veerathai Santiprabhob said his “personal view is that the 60% public debt-to-GDP limit can be relaxed.”

Philippine Central Bank to Make Bond Sales Main Liquidity Tool

The Philippine central bank said it’s on track to sell its maiden securities this quarter, a program that will become its main tool to control liquidity in the financial system.“The Bangko Sentral ng Pilipinas securities, over time, shall be considered the BSP’s main liquidity tool for locking in structural liquidity surplus,” the central bank said. Selling its own debt will allow BSP to better guide bond yields and improve loan pricing, it said.

Oil Extends Biggest Drop in 3 Months as Demand Worries Escalate

Oil extended its biggest decline in almost three months as increasing doubts over the strength of a demand recovery and falling equities soured market sentiment. Brent crude for November settlement lost US$2.23 to US$39.78 per barrel.

Source: Affin Hwang Research - 9 Sept 2020