The major US indices ended the week with further steep losses on Friday, after some states reinforced fresh restrictions to curb coronavirus outbreaks that have pushed daily infections in the US to new record highs, with 40,000 new cases having been reported on Thursday. Falls of around 2.5% were seen as investor hopes of quicker economic recovery were dealt a blow after parts of the US were forced to wind back efforts to reopen the economy.
The FX markets were mostly choppy and the UD$ index, the DXY, saw gains of just 0.1% as major pairs generally traded sideways. Sterling was the main mover on Friday in falling by around 100bp, with the move being put down to repositioning ahead of this coming week’s Brexit talks. Otherwise there was little interest although the Aud$ finished a little lower as risk sentiment wilted under the weight of the stock market moves.
Gold rose for a third week in a row, up by 0.4% on the day, despite a nasty $15 spike lower from which it recovered equally quickly, as traders look to the chance of a run up to $1800oz amid renewed safe haven demand to the surge in coronavirus cases. Oil fell by 2.2% on Friday and by around 3% over the week due to the fears of further economic disruptions and the increasingly pessimistic growth outlook.
Looking ahead, it will be a short week, at least for the US who will be celebrating the July 4 holiday, meaning that the US unemployment report and NFP figures will be released on Thursday, and which will be the main focus in coming days. That aside, the focus on Monday will be the German CPI/HICP (CPI, exp 0.3%mm, 0.6%yy; HICP, exp 0.6%yy), the US Pending Home Sales (exp +19.9%mm, -44.6%yy) and the Dallas Fed Mfg Business Climate (exp -59; Previous -44.2). Tuesday will see the China Official Mfg/Non-Mfg PMIs, the Australian Private Sector Credit, and then later on from Europe, the UK GDP, and the EU CPI, while the main events of the day will come from the testimony of Fed Chair Powell to Congress as well as a speech from the US Treasury Secretary, Mnuchin. Also from the US we can expect the Case Shiller House Price Index and the API Weekly Crude Oil Stock Inventory. Wednesday will be busy, beginning with the monthly Building Permits from both Australia and NZ, to be followed in Asia by the Japan Tankan while the global monthly manufacturing PMIs will also be released through the session, including those of Australia, China, Japan, EU, UK and the US. Along with the PMIs, Europe will deal with the German Retail Sales and Unemployment figures, while the US will also have the FOMC Minutes, the ISM Mfg PMI/Prices Paid, Total Vehicle Sales and the EIA Weekly Crude Stocks Change. Ahead of the US Unemployment report on Thursday, the only items on the calendar are the Australia Trade Balance and the EU PPI, while the only feature on the aelendar for Friday will be the Services and Composite PMIs to come from Asia (Australia, China Japan) and from the EU, while the US will be very quiet ahead of Saturday’s July 4 holiday. Have a good week.
Economic data highlights will include:
Mon: NZ Total Jobs Filled, Japan Retail Trade, UK Consumer Credit, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate,, German CPI, US Pending Home Sales, Dallas Fed Mfg Business Climate, Fed’s Williams Speech
Tue: NZ Business Confidence, Activity Outlook, Australian Private Sector Credit, China Mfg/Non-Mfg PMIs, Japan Preliminary Industrial Production, Unemployment, Housing Starts, Construction Orders, UK Current Account, Total Business Investment, Q1 GDP, German Import/Export Index, EU CPI, US Fed Chair Powell Testifies, Treasury Secretary Mnuchin Speech, Case Shiller House Price Index, Consumer Confidence, Chicago Purchasing Managers Index, API Weekly Crude Oil Stock Inventory
Wed: NZ Building Permits, Australian AIG/CBA Mfg PMIs, Building Permits, Japan Tankan, Japan Mfg PMI, China Caixin China Manufacturing PMI, Japan Consumer Confidence, German Retail Sales, Unemployment , EU/UK Mfg PMIs, US ISM Mfg PMI/Prices Paid, ADP Jobs data, FOMC Minutes, EIA Weekly Crude Stocks Change
Thur: Australian Trade Balance, EU PPI, Unemployment, US Unemployment, NFP, NY Business Confidence, Factory Orders,
Fri: Australian AIG/CBA Services/Construction PMIs, Retail Sales, China Caixin Services PMI, EU Services/Composite PMIs
Market moves, in brief:
FX: DXY 97.50 (+0.11%)
Bonds: US10Y; 0.642% (-6.66%), German 10Y; -0.480% (+4.34%), UK 10Y; 0.172% (+11.48%), Australian 10Y; 0.878% (-1.68%), NZ 10Y; 0.952% (-1.07 %), China 10Y; 2.898% (0.00%)
Stock Indices: DJI; -2.48%, S+P; -2.42%, NASDAQ; -2.59%, EUStoxx50; -0.46%, FTSE100; +0.20%, Shanghai Composite; +0.30%, ASX200: -1.30%
Metals: Gold $1771 oz (+0.44%), Silver $17.80 oz (-0.04%), Copper $2.6525 lb (-0.39%), Iron Ore $100.80 per tonne (NYMEX) (-2.21%),
Oil: WTI $38.17 pb (-2.28%)
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Stocks took a 2.5% hit on Friday and further losses appear to be in store according to the heat map. Both the S+P and, domestically, the ASX are pointing sharply lower over the next couple of sessions so I would still prefer to play it from the short side.
The FX markets are pretty much neutral although Sterling is heavy ahead of the resumption this week of the Brexit negotiations. EurGbp looks particularly well bid and may be a safer trade than GbpUsd. Otherwise the FX markets are showing us little but out of choice I prefer to be long of the safe haven currencies (Jpy, Chf, US$) and short of risk currencies (Aud, Nzd, Euro).
Gold currently looks good but is showing some bearish divergence on the daily charts and is overbought on the weeklies.
Oil – I think we are in a $35-$40 range, but will ultimately head higher. Not yet though.
|1 Hour||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Lower||Turning Neutral||Turning Neutral||Turning Neutral|
|4 Hour||Neutral – Turning Lower?||Turning Neutral||Turning Lower||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Lower||Neutral – Turning Higher?||Neutral – Turning Lower?||Neutral – Turning Higher?||Turning Lower||Turning Lower|
|1 Week||Neutral – Turning Higher?||Neutral||Turning Neutral||Neutral – Turning Lower?||Turning Higher||Turning Higher|
|1 Hour||Turning Neutral||Down||Turning Lower||Turning Higher||Turning Neutral||Neutral – Turning Lower?|
|4 Hour||Neutral – Turning Higher?||Turning Lower?||Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Neutral – Turning Higher?||Down||Turning Lower?||Bearish Divergence||Turning Neutral||Neutral – Turning Lower?|
|1 Week||Turning Lower?||Turning Higher||Up||Up – Overbought||Neutral – Turning Higher?||Up|
|1 Hour||Neutral||Up – Overbought||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|4 Hour||Turning Neutral||Turning Higher?||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Neutral – Turning Lower?|
|1 Day||Down||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Lower?||Neutral – Turning Higher?||Turning Neutral|
|1 Week||Turning Neutral||Turning Higher||Turning Lower||Turning Higher||Down||Neutral – Turning Higher?|