Market Commentary - July 21, 2020
Tech stocks pull ahead with Nasdaq closing at record highs. Tech giants Amazon and Zoom announced robust growth, benefiting greatly from economic dislocation resulting from COVID19. Usage in e-commerce and video conferencing soared as people are less reluctant to go outside and working-from-home becomes the norm. Wall Street and global markets followed suit on the back of a series of positive developments. Oxford University led research showed promising results of a potential vaccine, US senate moving forward with an additional rescue package as previous benefits are set to expire and EU’s recovery fund now closer to an agreement. The deadlock broken on conditions rebates being provided to so called frugal members.
Figure 1 (source: IS Prime): IDX.US.100 hits record highs and continues to climb
- Japan’s National Core CPI, which includes oil products but excludes volatile fresh food prices, was changed to flat from -0.2% as the energy prices fall slower in June that help the increase of CPI. The economy in Japan was contracted more than 20% from April to June as the government shut down the economy since April. The recovery is expected to be modest as there is hit on exports, jobs and business activity.
- EU leaders look close to an agreement on the 750 billion euro stimulus plan. The agreement on the stimulus plan improves the economic outlook in global and underwrites growth in Europe.
- Trials of COVID-19 vaccines from Oxford University and Wuhan both show early positive results. It is too early to assume that these trials are effective to patients. It takes time to see how patients are recovered from having COVID-10.
US Senate banking committee votes on new members to join the Federal Reserve Board today. Nominee’s include Judy Shelton and Christopher Wall. Both of whom considered to be unorthodox picks, seen favoring much of the current White House administrations narrative. Not only is Shelton a pronounce advocate for reintroducing the gold standard, her views of closer co-operation between central banks and governments concerns both lawmakers and economist. As it diminishes the Fed’s authority and independence from political frays. Waller, a research director at St Louis Fed is a strong figure in committing to low interest rates alluding to further rate cuts once onboard. A view which dissents from existing Federal Open Market Committee members.
Headliner to Watch
- Pent up demand sees Canadian retail sales expected to rebound from June lows to 20.2%. Previous month’s figures were disastrous with consumer spending plunging during the lock down.
- Australia retail sales expected to continue record MoM growth. Previous months figures saw 16.9% and 16.3% increases respectively. However future forecast is uncertain as Victoria’s renewed stay-at-home policy and NSW considers the same amid rising infections.
- Manufacturing in Japan still stalling as PMI expected to remain in contractionary phase.
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