Tony Nash, CEO of Complete Intelligence speaks with BFM 89.9 about the US market rebound, what to expect in the third quarter of 2020, jobless claims and US unemployment, and Hong Kong amid the US-China cold war or trade war.
BFM Notes
It’s been an eventful weekend in politics, and all eyes are on whether markets will reflect the renewed uncertainty. We reached out to Tony Nash, CEO of Complete Intelligence, to help us break down Federal Reserve chairman Jerome Powell’s comments before the US Senate Banking Committee, data expectations, and what the potential impact of Hong Kong losing its special status might be on emerging market currencies.
Produced by: Michael Gong, Roshan Kanesan
Presented by: Noelle Lim, Roshan Kanesan, Lyn Mak
Listen to the BFM Podcast here.
Show Notes
BFM: Thanks for joining us, Tony. So now, Jerome Powells made some comments before the Senate Banking Committee pointing towards a cautious rebound in the US economy. But nevertheless, U.S. markets closed in the green on the back of some positive housing data. So could you help shed some light on what’s happening here?
TN: Sure. We had the positive housing data. We had a broad tech rally. We also had Boeing like 14 percent today on a test flight on the 737 Max. So it was simply a test flight and it was a successful test flight and Boeing rallied 14 percent. It’s a major component and it has an impact on broad market activity. So there are some good things happening, but certainly low expectations environment.
BFM: Do you expect end of quarter rebalancing by funds, would that costs significant market volatility? I mean, could you just give us some thoughts about this?
TN: As we’ve said before, we expect volatility to continue through probably mid-August. So we will see some rebalancing and we will see as these investors figure out what the right value is for the assets they’re invested in. So we’ll see some change. We’ll see a lot of people kind of take it in Q2. And Q3 is a brand new quarter, so they’ll wipe the slate clean. We’ve seen a lot of companies dump everything but the kitchen sink into the Q2 earnings. Well, but we expect them to. And so Q3 will be hopefully a whole new world. And and we’ll be approaching something more positive by then.
BFM: Right. And Tony, when we look at the every week, we’ve been paying very close attention to the jobless claims numbers, right? What are your expectations of the US Weekly jobless claims numbers this week and June Non-Farm payroll data that’s expected on Thursday or Friday overtime?
TN: Well, we saw a huge jump in non-farm payrolls in May of 2.5 million, which was pretty massive. Also, the unemployment rate improved from almost 20 percent to like 13 percent. So, we expect things to improve gradually. We don’t expect the two million, although I hope we do, but we don’t expect that magnitude. But we do expect jobs to continue to accumulate as companies gradually come back. So the initial wave of companies opening up in the US produced a lot of new jobs. But now we’re starting to see that continue, but not necessarily at the same magnitude. But again, if we see 2.5 million or more, that will be a delight, everyone.
BFM: So now, Tony, fluctuating crude prices and as well as bankruptcies like Chesapeake Energy make oil stocks seem like a bit of a risky proposition. Shouldn’t investors still be considering energy companies as part of their portfolio?
TN: Well, I think you have to do with caution. So we look at things like crude oil inventories in the US reached an all time high of something like 540 million barrels about a week and a half two weeks ago. So there’s plenty in storage. I think if you’re investing in energy companies, whether they’re the developers option companies or service providers or whatever, I think you just have to go in with your eyes open to know that the growth there and the draw down in inventories is not likely to be a quick one.
TN: So, again, it’s just you have to understand your own risk profile. You have to understand your own tolerance and then go in. I mean, when you look at something like Chesapeake, that was, it happened. And I don’t think it was a complete surprise. But you also look at BP. They sold off their chemical business to Eneos over the weekend. And so some of these companies are hiving off other businesses so they can focus on their core business.
BFM: So, now you know, the latest piece of news where US is going to revoke Hong Kong’s special status. So what do you make of this piece of news in the larger picture of the trade war, the Cold War between China and US?
TN: I think it puts Hong Kong… It’s another piece in the puzzle to put Hong Kong in a light that it doesn’t really want to be put in, which is one country, one system. Hong Kong has for the last 20, 30 years, been the special place where you can access China without all the baggage. But what we’ve seen with the security like coming in is if you’re in Hong Kong, you’re also accepting the China baggage, which means you have to self-censor your comments, which means you have to be really careful about everything you do and say. And if you’re an investor, that’s a pretty difficult place to be. And so I think, the announcements in the State Department of not selling this technically sensitive equipment there, it was inevitable.
I don’t necessarily think it’s a surprise. I think from the Chinese side, it may have been a surprise. But I think they were kind of deluding themselves if they didn’t expect it. So there is accountability for China’s actions and it’s been as they’ve moved into Hong Kong, there have to have been ramifications and were seeing those, and there will be more. And China will have to understand that if they want the benefits of open, say investment markets, they’re going to have to limit their desire to control a number of aspects around business.
BFM: Thank you very much for speaking with us this morning, Tony. That was Tony Nash, CEO of Complete Intelligence, giving us his insight into global markets.