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Top 5 Things to Know in the Market on Monday, August 10th

imageEconomy7 hours ago (Aug 10, 2020 06:35AM ET)

(C) Reuters.

By Geoffrey Smith — China cracks down in Hong Kong and sanctions U.S. officials. President Trump signs four executive orders to try to bridge the gap left by lawmakers on extending unemployment benefits. German firms see disruptions to public life lasting another 9 months, and crude oil bounces as Saudi Aramco (SE:2222) gives an upbeat outlook. Here’s what you need to know in financial markets on Monday, August 10th.

1. China cracks down in Hong Kong, sanctions U.S. pols

China arrested Jimmy Lai, one of Hong Kong’s richest and best-known publishers, on suspicion of collusion with foreign agents, in a stark illustration of the new realities of power in the former U.K. colony since the introduction of a new security law earlier in the summer.

Shares in Lai’s company Next Digital Ltd (HK:0282), which had already collapsed in anticipation of government action against him, more than quadrupled on the news.

Beijing also said it will sanction 11 U.S. politicians, including Senators Ted Cruz and Marco Rubio, in response to U.S. sanctions announced on the same number of Chinese officials last week.

The U.S. sanctions are likely to be followed in the next month or two by a list from the Treasury identifying all the entities currently in breach of them, a list that Autonomous Research says may well include China’s state commercial banks and policy banks.

2. Trump tries to bridge the gap

President Donald Trump issued four executive orders to partially extend the payment of enhanced unemployment benefits, in order to bridge a gap left by the failure of Congressional Republicans and Democrats to agree on a new package of economic relief measures.

However, uncertainties over the legality of the orders mean that their impact both on the lives of ordinary Americans and on the psychology of the market may be limited, analysts warned.

Trump’s orders would extend the weekly checks sent to households under the CARES act, but cut the amount to $400 from $600. In addition, Trump wants states to foot one-quarter of that bill.

“We still expect a package worth at least $1.5 trillion to become law by the end of August, but the risk of no further legislative action has increased and could pose a threat to the budding recovery,” Goldman Sachs (NYSE:GS) analysts led by Jan Hatzius said at the weekend.

3. Stocks set to open mixed amid stimulus bill guesses

U.S. stock markets are set to open mixed as the market tries to guess where the stimulus package goes from here. The dollar, meanwhile, bounced after heavy losses.

By 6:30 AM ET (1030 GMT), the Dow futures contract was up 104 points or 0.2%, while the US 500 Futures contract was up 0.2% and the Nasdaq 100 futures contract was down less than 0.1%, retracing a little after another week of outperformance.

Earnings season continues with updates from Barrick Gold, Duke Energy, Tencent Music Entertainment, Marriott, WorldPay, Liberty Media Sirius and two canaries in the coronavirus coal mine, Occidental Petroleum and Royal Caribbean.

Another stock likely to be in focus is Warren Buffett’s Berkshire Hathaway (NYSE:BRKa), which said at the weekend it bought back a record $5.1 billion in stock in the second quarter.

4. German companies see 9 more months of disruption

How long will it take life to return to normal after the coronavirus? Around 9 months, according to a survey of German firms by the Munich-based think-tank Ifo.

Ifo said the sports and leisure industry, along with the arts and other entertainment-related businesses, face the longest disruption, stretching all through next summer. Drinks and pharma companies see things back to normal within seven months, while the key automotive sector estimates eight months.

The survey reinforces perceptions that industry will lead the way out of recession, while the outlook for service sectors is much bleaker.

5. Upbeat Aramco puts a floor under crude

Crude oil prices stabilized after Saudi Aramco chief executive officer Amin Nasser gave an upbeat forecasts for demand, saying he expected it to continue rising through the end of the year.

Aramco also stuck to its promise to pay around $75 billion in dividends this year, despite a sharp drop in profits. That distinguishes it from the bulk of its rivals in the oil and gas major sector, who have had to reset their dividend payouts at lower levels in expectation of a lengthy period of low prices.

Aramco is the world’s most profitable company, thanks to its extraordinarily low marginal production costs.

U.S. crude futures were up 1.4% at $41.80 a barrel, while the international benchmark Brent was up 1.0% at $44.83 a barrel

Top 5 Things to Know in the Market on Monday, August 10th