Brexit is back, Economies are restarting and Tech stocks lead the wayCreated: 2nd Jun 2020
The US Stock Market recovered 6% in May, but is all as rosy as it seems? Brexit is back on the agenda in the UK and lockdown lifts again as Primary schools, car showrooms and market stalls re-open. Impacts on the stocks and FX markets are likely this week, especially ahead of a MASSIVE ECB meeting on Thursday and Nonfarm payroll on Friday, where 8 million job losses are expected. We hope you enjoy the session.
New month. positive outcome for stocks in May (S&P up 6%), as risk recovery continues, aided and abetted by central banks and governments throwing the kitchen sink at it.
Whit Monday Holiday in Europe today with many markets closed. Dax shut although Eurostoxx open apparently
Generally Far East markets recovered overnight, with US indices indicating an unchanged opening this afternoon.
US / China relations were on the front pages last week but despite all that equities continued to move forward.
Trump announced Friday that the US would remove Hong Kong’s special status as a semi-autonomous region in China, following the move to implement a new security law in the province.
Hang Seng overnight actually jumped 3% as investors were relieved the US did not impose sanctions on China as some feared.
Probably also due to the oversold state of the Hong Kong index following the drubbing it got last week.
Seems Hong Kong residents are either battling Covid-19 (which they have done very successfully)or the Chinese government ( the protests are a symptom of the feeling towards Beijing)
FTSE +83 +1.4% DOW +917 +3.75% S&P +889 +3% DAX +512 +4.63% Nikkei+14.8
Despite US / China tensions over Hong Kong the recovery in equities continues, with UK lagging as Brexit talks seem to be stalling. More on that later.
EURUSD +200 +1.83% GBPUSD +1.85 +1.52% USDJPY unch
USD fell across the board as risk on recovery takes another leg higher.
Sentiment and positioning turns positive for first time since March, as Eurozone eases lockdown measures and the prospect for the €500 bln fund to help struggling regions within the bloc.
Sterling held in there last week. With Brexit talks looming there is not much positive sentiment from that built into Sterling right now.
UK and EU have until July 1 to decide on this extension that would grant Britain continued frictionless trade with the bloc beyond the end of this year.
GOLD -4 -0.23% UK OIL +2.23 +6.31% US OIL +1.62 +4.82%
Gold fell as equities legged higher albeit the fall was offset by a weaker US Dollar. Oil continues to trade higher reflecting the optimism in the equity markets despite a sudden jump in inventories last week, due to higher imports. A sign perhaps that domestic production is slowing. .
Topics for podcast
Technology stocks continue to provide the momentum in US markets. Technology sector is the largest sector by market cap in the S&P 500 and the Russell 3000, a very broad index
A third remain down at least 30 per cent and half are down 20 per cent or more. Just a third have matched or outperformed the index
In fact technology and healthcare Stocks have been be by far and away the best performers as the market is split into the successful mega cap stocks and the rest.
For all those Tesla sceptics, Elon Musk has just triggered a bonus payment of 1.7 million shares as the surge in price triggered the award of $775 million worth of stock. More than the aggregate value of all the profits to date that Tesla has generated.
I.e. if you sum the net income from all of the electric carmaker’s profitable quarters dating back to the fourth quarter of 2008, you’ll find that the company has made just $748m, according to S&P Capital data
Seems the sun continues to shine on Mr Musk.
His Space X company, following the successful launch of the manned Falcon rocket with the Dragon module, has just secured its longer term future in transporting NASA astronauts and other private space travellers into space.
His Space X company will now be valued at more than $40 Bln – not bad for a 100 million initial investment in 2012 albeit others have invested along the way. Space X is one of the world’s most valuable private companies.
Data / events
Big week for data this week. ECB and NFP.
Europe Whit Monday. Public holiday
US ISM Manufacturing PMI
Slight improvement from May’s number but still well below 50
Australia RBA policy meeting.
Unlikely any change in policy as Australia comes out of lockdown
US ADP Non Farm payroll
US Non Manufacturing PMI
CAD BoC monthly policy meeting
No change in policy ahead of any moves by federal reserve
Eurozone ECB monthly policy meeting
Big week with the Eurozone and the EURO. Anticipation about QE and whether the bank will increase the 750 Bln previously announced, which runs out in October. Speculation that ECB will announce a further 250 Bln, possibly 500 Bln. A bigger dose of QE and we could see Euro move lower, especially after the gains in last few days.
Also Lagarde will give latest economic projections for the trading bloc. They wont be pretty.
US NFP. Aggregate fall in employment in May expected to be 8 million with unemployment rate forecast to rise to 19.5% from 14.7% in April.
Truly horrendous numbers….bearing in mind we had multi decade low levels of unemployment in February at 3.5%.