Market Commentary - July 28, 2020
Confidence in the dollars continues to wane. An outbreak yet to be contained, a Fed in unprecedented supply of money and a Congress in talks to unleash a further $1 trillion top-up stimulus package. As investors seek a hedge against the inevitable inflation, Bitcoin broke past 11K heading towards 12K after a prolong period of consolidation. Alongside the digital currency, Gold continues its record-breaking highs.
Figure 1 (source: Refinitiv Eikon): Bitcoin settles above 10K, with the option market pricing in a 7% chance of hitting 20K by EOY.
Headliner to Review
Congress began negotiations on a compromise between Republicans $1 trillion stimulus bill and the $3.5 trillion brought forth by Democrats. With only two weeks till the Senate leaves for a session break, a return to business in September and elections in November, rhetoric on both sides is intensifying.
The GOP assuring “we’ve got some good numbers” about the plan with the Democrats denouncing “The Republican proposal is a punch in the gut and a slap in the face for 30M Americans relying on lifeline unemployment benefits”.
Other than the obvious size of the deal, key differences lay on Democrats wanting aid passed on directly to States while Republicans want to implement policy protecting businesses and smalls when they re-open from lawsuits stemming from Coronavirus related incidents.
- Whilst US durable goods exceeded expectations, posting a MoM gain of 7.3% (compared to a 7% consensus). Core durables fell short settling at 3.3% as opposed to the expected 3.5%. Nonetheless, both figures still above economic norms driven by an improving manufacturing industry and pent-up consumer demand following re-opening. Much of gains led by robust motor vehicle demands, however figures dragged down by aviation orders.
- German business outlook strengthens with the Ifo institutes index continuing its increase from 86.3 to 90.5. Since re-opening, German ever more confident in back to normality albeit with a below capacity workforce and travel restrictions.
Headliner to Watch
- All eyes on Australia’s as QoQ CPI figures expected to reveal the economy in a deflationary state. Figures expected to decline from 0.3% to -2.0%. Weighed down heavily by housing demand, steep rental reductions and rising vacancies. Other contributors include fuel and child-care.
- Advanced YoY GDP figures see Hong Kong continuing to shrink but improving. First hit by protests, then by a pandemic, has left the nation in tatters. Consensus predicts a -2.2% decline.
- Spain set to release unemployment figures for Q2. The full brunt of economic damage will reverberate in todays figures. Analyst forecast an increase from 14.4% to 16.7%.
- Even amid an ever improving though lethargic economy. American consumer confidence looking to decline from 98.1 to 94.
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