Macro economics

Analytics on 06/07/2020. Equities jump on recovery hopes, investors shrug off virus concerns

On Monday, investors managed to shrug off concerns over the coronavirus pandemic despite the World Health Organization said the global number of coronavirus cases was highest on record. Investor sentiment is supported by expectations of a rapid economic recovery amid strong incoming data out of major countries.

As such, the official report on Friday showed that US nonfarm payrolls expanded by 4.8 million in June, much better than the expected increase of 2.9 million. Today, Germany reported a 10.4% gain in new manufacturing orders for May. Eurozone May retail sales rose by 17.8% versus +15.0% m/m expected. On the negative side, Eurozone July Sentix investor confidence dipped by 18.2 versus -10.4 expected. Against this backdrop, the UK’s FTSE 100 adds 1.80 percent to 6,268. Italy’s FTSE MIB edges higher by 1.82 percent to 20,086, France’s CAC 40 adds 1.76 percent to 5,095, while German DAX 30 gains 1.75 percent to 12,747. U.S. stock index futures are rising as investors ignore another surge in coronavirus cases.

Meanwhile, the euro climbed at the start of the week and has settled around 1.13 in recent trading. The pair may need the additional catalyst to challenge this local barrier as positive risk sentiment is not enough to drive the prices higher from the current levels. The common currency barely reacted to mixed economic data out of the Eurozone and Germany and looks indecisive at this stage. If the pair struggles to overcome the mentioned barrier, a bearish correction could be expected in the short term.

In commodities, Brent crude rallied to the $43.70 area earlier in the day and has retreated partially since then. Despite the futures preserve the upside bias on the intraday timeframes, the current bullish momentum still looks unsustainable at this stage as the market remains vulnerable due to lingering doubts in energy demand recovery. On the positive side, Saudi Aramco raised pricing for August oil shipments to Asia, the U.S., and northern Europe, citing a further recovery in energy demand.

Meanwhile, gold prices are marginally higher on Monday after finishing unchanged on Friday. The bullion remains elevated, clinging to fresh long-term highs registered last week. Upbeat risk sentiment, however, caps its bullish potential today. On the other hand, the fact that the precious metal refrains from a bearish correction in a risk-on environment is pointing to strong positions in the market and investor readiness to push the prices higher once market optimism wanes.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates

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