Market Commentary - July 7, 2020

Posted by Kevin Jock on Jul 7, 2020 6:32:11 AM

     US Dollar retreats Monday. Equities see mixed returns. GBP awaits the summer statement from Chancellor Sunak. CAD action suppressed by Oil pressure.

 

Figure 1 (source Refinitiv Eikon): Oil trades higher, touching prices last seen +4 months ago. OPEC members seen cutting further.

 

Headliner Review

  • The RBA is unchanged on its current policy settings, holding cash rate at 0.25%. The economy has underwent a massive downturn due to the coronavirus.
  • US ISM Non-Manufacturing PMI rebounds from 45.4 to 57.1, which is well better than the expected 50.0. US Final Services PMI rises from 46.7 to 47.9, which is significantly higher than 37.5 in May. The US PMI is a measure of activity in industries such as finances, consumer services and communications. 50.0 is the threshold between contraction and expansion in overall activity. The reopening of the economy will make the uptick of customer demand.
  • Japan Average Cash Earnings y/y decreases from 0.7% to -2.1%. Japan Household Spending y/y decreases from -11.1% to -16.2%. The drop of household spending dropped in record since people in Japan are staying home for the pandemic, pushing the economy to a decline. It may push policymaker to have some actions to restore the confidence among consumers.
  • Given the market optimism from the economic data and recovering environment, there is a boost for stocks in markets in Europe, US and Asia. The market right now is more focused on the economic recover.

 

Up Next
     For the lack of major economic data releases in the coming day, investor sentiment seemingly optimistic barring resurging Coronavirus cases worldwide. Treading carefully as economic data thus far continues to diverge from present realities. With US cities like Miami expected to roll-back re-opening and border closures amongst Australian states. The economic impact of re-entering lockdown has yet to reverberate in macroeconomic figures. Later we see US and UK central bank speeches. China sees FX reserve data.


Headliner

  • Relief for producers with oil rebounding strongly from April lows. Expectations still in favour of excess demand as markets forecast Crude Oil inventories at -3.2M from -7.2M. Aiding resurging prices, majority of OPEC members will seek to comply with output cut targets. Though efforts by Iran, Nigeria and Angola has been lacklustre thus far, Saudi Arabia, Kuwait and UAE compensated for slack via output cuts substantially exceeding agreed upon hurdles.
  • US job openings set to decline 4 consecutive months, from March highs of 6.96M to 4.70M weighed by down a lethargic labour economy.
  • Barring any surprises UK HPI m/m expected to decline further to -0.8%. Demand for housing still weak even as rates glued to historically low levels in the foreseeable future.
  • Canadian PMI expects to forecast industry expansion with index edging over to 50.2.
  • Out of the EU expect Italian retail sales bounce back to 15%, Swiss unemployment to rise to 3.6%, German industrial production to sharply increase to 11% from -17.9% and of particular interest the European Commission’s Forecast report.

 

 

 

 

 

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Authors:
Antony Tan
Ben Li
Kevin Jock

Topics: Market Commentary

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