Weekly Market Wrap 21-September to 25-September/2020

Marius Paun | London, UK | Senior dealer | Friday 25th September 2020

Stocks Tank On Worries Of A Second Wave

By and large, the risk-off sentiment was predominant this week as renewed fears of a second wave of coronavirus weighed on the US stocks. As expected, the US dollar continued to strengthen on safe-haven buying.

The Fed Chair Jerome Powell testified before the US Senate this week and he said the economy has proved resilient so far. Meanwhile, Treasury Secretary Steven Mnuchin commented on Tuesday the country was in the ‘midst of the fastest economic recovery from any crisis in history’. Regardless if the markets believe him, all eyes are on the fifth stimulus package which so far remains elusive.

China’s Global Times said Beijing will not accept US demands regarding TikTok saga. It was meant as a reply for President Donald Trump who expressed conviction earlier on that Tik Tok will ‘be totally controlled by Oracle should the deal happen’. China’s PMI is due next week and the consensus points to improvement.

Back in the UK, Financial Times has reported that Chancellor Rishi Sunak is expected to announce the extension of 4 loans schemes. At the same time, Prime Minister Boris Johnson has asked people to work from home if they can. A rise in infection numbers is keeping the UK government on high alert who added they are ready to use the military to help efforts of containing the virus.

Meanwhile Bank of England Governor, Andrew Bailey said his central bank is as dovish as the Fed in attempting to return inflation to its target. Interestingly he felt the need to clarify last week’s comment on negative interest rates. He explained ‘they need to know how to implement negative rates but it does not mean that BOE would use negative rates’……..Hmmm!!!

President of the European Central Bank Christine Lagarde admitted they’re keeping an eye on the euro appreciation. The comments are a bit of a U-turn after recently ECB said their mandate is to watch inflation and less the currency exchange rate.

Gold moved firmly lower this week, dropping from a high of $1955 to as low as $1848 on Thursday on the back of a strong US dollar. Silver was battered even harder, nosediving from a high of $26.95 to reach $21.65 in the early trading session yesterday.

The US crude oil retraced slightly this week on the same  COVID concerns but largely swinging around a dollar and change around $40.00 mark. The race for green energy, well underway even before the pandemic seems to be restricting any rally in the energy sector. The US Department of Energy released its oil inventory on Wednesday showing a drop of 1.6 million barrels versus expectations for a decline of 2.5 million barrels.