Lockdown extensions to this “V” shaped recoveryCreated: 2nd Jul 2020

 

In today’s Podcast Adrian and Jerry review the markets since last week, looking at the US resuming Lockdown in republican Florida and Texas. We review the impact on the Risk-off markets as the stock markets fell at the end of the week and over the weekend, how the FX markets moved last week on great PMI data (relatively speaking) and what to expect on this Non-Farm Payroll week ahead of the extended Independence Day break.

 

In-depth market analysis 

Far East Mkts reacted to slump in US markets Friday as the increase in Covid-19 in several states in the US concerns investors.

Both Florida and Texas have reintroduced some lockdown measures, with both states closing bars and restaurants in an attempt to gain control of the spread.

The mood improved towards the close of Far East markets with most majors recovering some of the lost ground from their opening.

Comments from the US health and human services secretary on Sunday, rattled markets…..suggesting that the Trump administration of being “in denial about the covid-19 resurgence.

Many Southern states relaxed their lockdowns early, assuming that they had escaped the worst of the pandemic, that hit New York.

Cases are now accelerating, and it is something local authorities are grappling with to try and gain some control. The US looks in danger of having to extend its lockdown again for a number of weeks which will dent many analysts view of a V shaped recovery.

Stock markets valuations need to be backed up by a rebound in the US economy, a recovery which is looking less likely if lockdown measures are re-introduced.

 

UK, continues to ease its lockdown measures, with hospitality being given a big lift with pubvs and resaurants opening up again on Saturday.

Scientist remain nervous, with spikes in infection rates in a number of areas in Europe, albeit localized.

 

Review

FTSE  -133 -2.1%  DOW -855 -3.3%   S&P -89 -2.85%   DAX -241 -1.96%    
Nikkei unch

Most of the damage last week was done on Friday when US markets fell 2.4%.

Not just covid-19 infection rates but also news from the Fed which said it would limit share buybacks and dividends by America’s biggest banks.

Manufacturing and services PMI data was encouraging for both Eurozone and the UK, but still paints a sombre picture. Only data that disappointed WAS Japan’s manufacturing PMI data – but that was the only one.

The DAX might have lost one of its constituents over the past two weeks and the consequences reverberate as investors line up to join class action lawsuits, targeting anyone involved with deep pockets.

Auditors are required to verify a company’s statement of its accounts, but where fraud is encountered its not so easy. The fraud is designed to deceive – deceive investors, bankers and auditors and regulators.

BAFIN, the German regulator, does not come out of this particularly well. The FT, and two of its journalists, had been given a very rough ride and now enjoy all the plaudits for their investigation and concerns into the management of this company.

Hedge Funds, who shorted this “one of the most shorted stocks in Europe” have reaped huge rewards.

Other investors have likely suffered the greatest losses

 

EURUSD  +0.43 +0.38%  GBPUSD unch   USDJPY +0.25 +0.32%

Forex markets were relatively quiet. Even Sterling, that has erroneously been described as behaving like an emerging market currency, had an uneventful week.

GOLD +28 +1.6%  UK Oil -1.26 –3%   US Oil 1.26 -3.2%

Gold, often regarded a safe-haven play, continues to attract interest, as investors pushed the precious metal to levels last seen in October 2012.

Crude oil wilted along with equities Friday and has remained under pressure.

Chesapeake Energy, the biggest US oil producer went into chapter 11 on Sunday as the collapse in oil prices during the pandemic has rendered the producer unable to turn a profit, with unsustainable DEBT and unable to invest in new wells.

The Chapter 11 window should allow the company to reorganise itself. Shareholders have had a rough ride and have never got remotely close to the share price seen prior to 2015. Its been a long time coming for Chesapeake.

 

 

This week’s Data / Events

A light data calendar and a shortened week this week in the US, as markets are closed Friday in observance of the 4th July Independence Day celebrations.

 

Monday

UK                               BoE Bailey speaking at Climate Financial Risk Forum

Brexit talks               EU and UK talks start re post-Brexit relationship in-person meeting in Brussels between Michel Barnier, the EU’s chief negotiator, and David Frost

Tuesday

China                         Manufacturing and Services PMI data – state produced.

US                               Jay Powell testifies. before the House Financial Services Committee, in Washington DC.

 

Wednesday

EU                               Final PMI numbers

US                               ADP NFP

US                               ISM Manufacturing PMI

US                               The US-Mexico-Canada Agreement, replacement for the Nafta trade deal, comes into effect on Wednesday.

Trump will hope this might deflect some focus away from his disastrous handling of the pandemic and the George Floyd death and subsequent demos.

US                               Release of minutes from latest FOMC meeting. Pretty downbeat assessment by Jay Powell, following meeting. More insight into committee’s thinking. USD sensitive.

Thursday

Eurozone                  Unemployment data

US                               NFP – 3,000,000 (last 2,509,000) expect revisions.

 

Friday

US                               Independence Day celebrations - Federal holiday …...muted…. hopefully.

 

 

 

 

Category: Podcast

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