Market Briefing: Global markets higher on improved economic data despite pandemic fears

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Vrasidas Neofytou
Head of Investment Research

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Global financial markets edged higher this morning following the strong overnight gains in Wall Street and in growth-sensitive assets that was mainly fuelled from the improved US retails sales in May. However, the rally has paused on concerns for a second wave of infections in Beijing and the growing tensions in the Korean peninsula and recent clashes between Indian and Chinese troops.

Coronavirus Update:

Global cases: More than 8.15 million
Global deaths: At least 441,407
U.S. cases: More than 2.13 million
U.S. deaths: At least 116,905

Market Reaction:

US markets rose 2% on Tuesday after retail sales jumped by a record 17% in May, increasing the hopes for an economic recovery after the pandemic. In addition, markets celebrated the report that President Trump's administration was preparing a $1 trillion infrastructure project to support the economy.

Fig.01: Dow Jones index, 2-hour chart

The Dow Jones index climbed 2% at 26.289, while the S&P 500 and Nasdaq Composite rallied 1.9% and 1.75%, respectively. The Dow Jones futures added another 200 points this morning, implying an opening near 26.500 or up 0.7% amid the improved risk sentiment.

However, the Asian markets ended with mixed results this morning, failing to follow the overnight gains from the US markets. The market sentiment deteriorated after China announced tightening of lockdown measures and raising the alert level in Beijing, to contain the renewed coronavirus outbreak in the city.

Precious Metals:

Gold price trades near monthly highs of $1.730/oz on Wednesday, gaining support from the fresh coronavirus outbreaks in China and the USA, the escalating geopolitical tensions between South Korea and North Korea and the recent clashes between Indian and Chinese troops.

According to reports, 20 Indian soldiers had been killed in clashes with Chinese troops at a disputed border site, while North Korea rejected a South Korea offer to send special envoys and vowed to send back troops to the border.

Silver price trades near $17.50/oz, receiving support from safety bids and higher industrial demand as the Chinese manufacturing activity resumed after lockdowns. Palladium price trades just above the $1.900/oz level, failing to break above the key resistance level of $2.000/oz.

Crude oil:

Crude oil prices surged 1% this morning adding to Tuesday’s 3% gains after the International Energy Agency raised its oil demand forecast for 2020. The WTI crude oil price climbed near $38.50 per barrel, while Brent crude trades above $41 per barrel.

Fig.02: Brent crude oil price, 2-hour chart

The IEA forecasted that the global oil demand would be at 91.7 million barrels per day in 2020, some 500,000 bpd higher than what it cited for May. However, it warned that a slump in air travel due to the coronavirus means the world will not return to pre-pandemic fuel demand levels before 2022.

Forex Market:

The DXY-US dollar’s index rebounded yesterday near the 97 level, in response to the better than expected US retail sales, while it also received safety bids amid growing geopolitical tensions and the virus outbreak in China.

Fig.03: DXY-US dollar’s index, 2-hour chart

However, the US dollar’s rally lost some steam this morning on improved risk sentiment and stock market rebound from the night losses, with investors rotating to more riskier currencies such as the Euro, Australian and New Zealand dollars.

Economic Calendar for June 17, 2020 (GMT+ 3:00):

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