Market Commentary - July 14, 2020
Risk-off as US investors prepare for earning seasons. Wall Street for the most of it, has remained remarkably upbeat amid economic damage wrought by the pandemic. Not unsubstantiated as recent economic data revealed stark contrast to March and April gloomy figures. Yesterday’s volatile rejection from fresh highs however suggest sentiment waffling. Unlike before, this earnings season will offer an insight as to whether companies are resilient to and how they have coped with a once in a lifetime crisis.
Figure 1 (source IS Prime): Nasdaq tumbles on back of virus concerns and newly re-instated lockdown rules.
- S&P 500 hit the strong resistance at 3200, failed to break it and returned to 3155, closing on the down 1%. Nasdaq hit record high but closing on the lows down 2%. Dow Jones had no change on Monday.
- China announced sanctions against US Senators. The tensions between US and China has been increasing for some time. While it will not have a strong impact on the business, it shows that both China and US are prepared to take new steps in the battle against each other. It would be a risk factor other than the main economic issue from coronavirus pandemic.
- Andrew Bailey from The Bank England said BoE is considering creating a digital currency, which would have huge impact on the nature of payments and society. Bailey said that he hoped that the digital currency will be on the central bank’s agenda in few years and that will be a big issue for the society.
French banks take the day off in observance of National Day. Markets await key economic announcements from Japan, AU and North America later this week. Covid19 tightened lockdowns continue to drive headlines globally.
- Expect no surprises from Bank of Japan and National Bank of Poland today, as both central banks have already implemented drastic monetary measures. BOJ had increased the purchasing program from 75 trillion to 110 trillion yen. NBP had cut rates three times, lowering the benchmark 140 basis points. Both authorities are currently in wait-and-see mode.
- Out of the US inflation set to rebound back into positive territory after 3 months of disinflation. Market consensus forecast 0.5%. A similar picture expected out of the UK. Deflationary pressures to stall with YoY CPI to decline to only 0.4% from 0.5%.
- Economic sentiment highly positive, already surpassing pre-pandemic levels. Analyst predict levels to stay above 50, at 55.8.
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Topics: Market Commentary