Market Briefing: Global markets retreated from highs on risk aversion mood

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Vrasidas Neofytou
Head of Investment Research

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Global financial markets retreated from their recent highs during Tuesday’s trading session as the weaker German and French Trade Balances removed the risk appetite from the market. The US dollar and other safety assets recovered from multi-months lows, while crude oil extended yesterday’s losses.

Coronavirus Update:

Global cases: More than 7 million
Global deaths: At least 404,413
U.S. cases: More than 1.96 million
U.S. deaths: At least 110,990

Market Reaction:

US futures fell 1% on Tuesday’s early US trading session, on a general risk aversion sentiment driven by weaker European economic data and profit taking.

Fig.01: S&P 500 index, Daily chart

The losses in the futures market are coming after US stock markets climbed to multi-month highs on Monday on rising optimism about the prospects of a global economic recovery from the pandemic. The S&P 500 index returned to positive territory for the year supported from Friday’s strong US job report.

Crude oil:

Crude oil fell 2% on Tuesday for a second day in row, after Saudi Arabia, UAE and Kuwait said they would not extend the additional output cuts of 1.2 million barrels per day on top of the planned OPEC+ cuts in July.

Fig.02 WTI crude oil, 2-hour chart

The WTI crude price fell at $37.30 per barrel while Brent trades at $40, almost 7% lower from their 3-months highs.

Forex Market:

Growth-related Australian and New Zealand dollars retreated on Tuesday from their monthly highs amid risk-off mood and profit taking actions.

Fig.03: AUD/USD pair, 2-hour chart

The Australian dollar climbed to a 10-week high at 0.702 against the US dollar on improved Chinese economic data and rising commodity prices, before retreating at the 0.69 level.

The New Zealand dollar hit 5-month highs of 0.66 since the country ended all social restrictions as it declared the nation Coronavirus free.

The DXY-US dollar’s index trades near the 97 level, bouncing off its 3-month lows of 96.50, gaining some support from the safety flows amid sell-off in riskier currencies and the stock market.

Fig.04, DXY-US dollar’s index, 2-hour chart

The US dollar was pushed to levels we haven’t seen since early March, as the dovish policies of the Federal Reserve, the strong NFP report, the ongoing rally in the stock markets and the violent protests in major US cities, weighed on the demand for the greenback.

Economic Calendar for June 09, 2020 (GMT+ 3:00):

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