Weekly Market Wrap 24-26/June/2020

 Marius Paun | London, UK | Senior dealer | Friday 26th June 2020

 

Markets Concerned About The Second Wave Of Covid-19 And Global Trade Tensions

As if worries of a second wave was not enough, the US government is to suspend certain non-immigration work visas through to the end of 2020 and to extend bans on certain green cards. The Trump administration said the move will open up 525,000 jobs as a consequence.

Early on Tuesday, the White House trade adviser Peter Navarro sent the world markets crushing after declaring the trade deal with China is over. It appears that was not the case… President Trump weighed in later tweeting ‘China Trade Deal is fully intact’. A bit embarrassing, especially when later on Navarro dropped another one ‘Trump may impose retaliatory tariffs if China is not buying enough… US lobsters’ ?!!!

The US markets are on alert despite the ongoing good run for technology stocks as coronavirus hospitalizations surged to record highs for a few days in a row this week. What is more worrying for the markets is that the US wants to impose tariffs on over $3 billion worth of exports from EU.

A private survey of more than 3000 firms called China Beige Book showed it expects a contraction for China’s economy for 2020. One of the main points was that slow global demand still weighs on growth.

Bank of England governor Andrew Bailey defended the central bank easing of monetary policy saying on Sky News that the UK government would have struggled to fund itself without expanding the quantitative easing. He explained the situation in March was more severe than the credit crisis of 2009.

Elsewhere, the UK Prime Minister Boris Johnson announced on Wednesday that the lockdown measures will be further relaxed. Starting with 4th of July, a whole set of industries like hospitality, tourism, pubs, cinemas, libraries will reopen.

Meanwhile, in Europe, the German central bank released its monthly report saying they expected the German economy to shrink by nearly 10% in the second quarter of 2020. The stimulus package prepared by the government should help the economic recovery and at the same time boost consumer and business sentiment. Nonetheless the Eurozone flash services PMI for June came in at 50.3 surpassing expectations for 45.2.

After a few weeks of going back and forth, gold prices finally broke higher early this week and reached a fresh seven year high at $1779.35. It could not test the $1800.00 mark,  so retraced slightly, but remains within reach of that important hurdle. Gold-backed ETFs holdings have now reached a new all-time high of 3,510 tonnes.

The US crude inventories data showed a build of 1.75 million barrels for last week surpassing expectations for +1.5 million barrels. WTI futures were trading just above $38.00 mark going into the weekend after reaching a weekly high of $41.61 on Tuesday.