DAILY MARKET COMMENTARY 2ND JUNE 2020

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Markets began the week on a positive note, as equities added to the gains in May, supported by rising confidence as global markets re-open after the ‘virus lock-down’. This comes despite the massive disruption across US cities, as protesters riot and loot, adding further hardship on business coming out of lock-downs. Share markets continue to reflect improving sentiment that is being echoed in economic data releases, over the world. There are serious risks to the ’V-Shaped’ economic recovery. The immediate risk to the economic recovery would be a significant ‘second wave’ of the virus. The growing threat to global markets is also the reaction to China and their role in the spread of the virus, while their aggressive activities towards Hong Kong, Taiwan etc., have not been helpful. The US have announced sanctions on China, for their legal power-grab in Hong Kong, but stopped short of withdrawing from the US/China trade deal.
 
The growing economic confidence has seen the Dollar resume it’s downward trend, with the EUR rising to 1.1120, while the GBP has rallied to 1.2475! European markets are also benefiting the re-open and economic data confirms stabilization. The Chinese economy is back in growth mode with manufacturing expanding strongly. This has allowed the trade exposed commodity currencies to rally strongly, supported by the weakening reserve. The AUD has spiked to 0.6775, as manufacturing showed strong signs of recovery, while the NZD rallied strongly to 0.6270.
 
Markets continue to rally strongly, despite the plethora of risks facing markets, but attention must be paid to the overvaluation of stock prices.
 

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