It has been a damaging “risk-off” session on Wednesday, with the major US indices seeing their biggest decline in almost two weeks as a surge in US coronavirus cases intensified fears of another round of government lockdowns and increasing concerns of even greater economic damage.
The mood was not helped by the statement from the IMF who predicted a deeper global recession due to the pandemic and added that further policy measures will be needed to contain economic damage from the virus in order to set the stage for a return to economic growth.
The US$ was a beneficiary, acting as a safe haven which has allowed gains against all the other majors, with the DXY ending the day 0.6% higher. Not helping the Euro or Sterling on Wednesday were comments from a US Trade Representative who said that the administration wants to impose new tariffs on US$3.1bio of exports from France, Germany, Spain and the UK, raising investor concerns over the chance of a transatlantic trade war.
God made a new high at1780, last seen in Sept 2012 but, unable to benefit from the increased safe-haven demand, it finished on the day’s lows, down by 0.35%, and some choppy sideways action now looks likely. Further upside momentum will face increasing headwinds if the US$ continues to strengthen.
Oil was the biggest loser on the day though, falling around 6% after weekly data from the EIA showed that drillers in the US shale fields added to production for the first time since March as crude prices averaged $40 a barrel. US crude output was estimated at 11 million barrels per day for the week ended June 19, versus the estimate of 10.5 million bpd the previous week.
Looking ahead, Thursday will kick off with the NZ Trade Balance for May although there is then very little on the agenda, as there is no meaningful data out until the US session. This will focus on the release of the US Q1 GDP, Personal Consumption/Expenditure figures and the Durable Goods Orders for May (exp +10.6%; previous -17.7%). The GDP will be the main event of the week with expectations of a 5% contraction already priced in. Also due for release will be the Kansas Fed Mfg Activity and the weekly Jobless Claims, which have taken on increasing importance in recent times (exp Initial; 1.4 mio, continuing; 19.97mio). There are plenty of central bank speakers today as well: Schnabel/Mersch (ECP), Haldane (BOE), Bostic, Kaplan (Fed). Have a good day.
Economic data highlights will include:
Thur: China Holiday, NZ Trade Balance, German Consumer Confidence, ECB Monetary Policy Minutes, US Durable Goods Orders, Q1 GDP, Personal Consumption/Expenditure, Jobless Claims, Kansas Fed Mfg Activity, US Bank Stress tests, Central Bank Speakers: Schnabel/Mersch (ECP), Haldane (BOE), Bostic, Kaplan (Fed).
Market moves, in brief:
FX: DXY 97.23 (+0.57%)
Bonds: US10Y; 0.682% (-5.15%), German 10Y; -0.472% (-6.54%), UK 10Y; 0.189% (-9.62%), Australian 10Y; 0.932% (+2.22%), NZ 10Y; 0.966% (+3.55 %), China 10Y; 2.898% (-0.46%)
Stock Indices: DJI; -2.72%, S+P; -2.59%, NASDAQ; -2.19%, EUStoxx50; -3.11%, FTSE100; -3.11%, Shanghai Composite; +0.30%, ASX200: -1.53%
Metals: Gold $1761 oz (-0.34%), Silver $17.50 oz (-0.34%), Copper $2.645 lb (-0.55%), Iron Ore $103.15 per tonne (NYMEX) (+0.25%),
Oil: WTI $38.05 pb (-4.80%)
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