Daily Market Commentary 17th July 2020

The ECB left rates unchanged and QE in place, while it ‘monitors the economic strength of the Eurozone’. This is in line with the progress the EU is making on re-opening the economy, which is reflected in the economic data emanating from there. Chinese GDP growth surged 11.5% for the quarter and jumped to an annual rate of 3.2%, reflecting the re-opening and the conquering of the virus. This was a boost to markets although it was tempered by the Chinese Retail Sales, which contracted 1.8%! The Fed’s Beige Book reported improved economic activity in most of it’s districts, while US Retail Sales jumped 7.5%, which follows the massive spike of 17.7% in the previous month.

The second wave surge of infections in the US continues and rising hospitilisation rates, dragged markets lower. Earnings season has also been mixed, with inflated share prices meeting an earnings reality. This allowed a rebound in the US Dollar, with the EUR falling to 1.1380, while the Yen moved back to 107.35. UK unemployment improved to 3.9%, despite large job losses (partially camouflaged by Government support programs), which drove the GBP back to 1.2550.

Australian markets were boosted by the strong GDP growth data out of China, while the headline local Unemployment rate rose to 7.4%. The Australian economy added 210,800 jobs, but the problem was ‘full-time’ jobs contracted 38,100, while ‘part-time’ added 249,000. This reflected employers uncertainty surrounding their future and the commitment to business expansion. The Government support programs have been successful, but are beginning distort the labour market. The AUD retreated back to 0.6970, while the NZD fell back to 0.6525, reflecting the rising reserve.

China and the coronavirus continues to drive markets, while the reopen as determined by economic data, has a daily impact.