DAILY MARKET COMMENTARY 18TH MAY 2020

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European markets continue to re-open and infection rates remain under control, thereby boosting market sentiment. The shocking economic data releases across the globe is being digested and interpreted. German GDP contracted 2.2%, while EU GDP contracted 3.8%, in the first quarter. The European markets rallied to close the week, despite the data, as viral infection rates appears to remain contained. The EUR held above 1.0800, reflecting the virus stability, while the GBP fell to 1.2115.
 
US markets were suffering similar data releases, with Retail Sales falling 16.4%, while Industrial and Manufacturing Production collapsed. The disastrous economic data have set devastating new lows, but it should improve, from here. University of Michigan Economic Sentiment hinted that the bottom may have been reached, rising from record lows, setting a precedent. The US Government has acted to ban the sale of semi-conductors to Huawei, perhaps the first step in a new US/China trade war? This is more concerning to markets than the historically terrible economic data releases.
 
The NZD collapsed to 0.5932, to close out the week, dragging the AUD back to 0.6015. The NZ Budget revealed a sea of red numbers, with massive blow-out deficits for the foreseeable future. This was not unexpected but has not been received well by international markets. The coming week has a lot of economic data releases, with key inflation numbers and PMI data. The Fed Chair Powell is testifying before the Senate in the coming week and also out making speeches, which may well influence market sentiment.
 
The key influence on market direction, in the coming week, will be the re-opening of economies and the resulting impact on infection levels.



Dates & Headlines

18/9 NZ Services PMI, Japan GDP, Bundesbank Report
 
19/5 NAHB House Market Index, RBA Minutes, Japan Industrial Production, UK Employment, German EU ZEW Economic Sentiment, US Building Permits/Housing Starts
 
20/5 Fed Chair Powell Testifies, NZ Inflation, UK Inflation, EU Current Account, US Weekly Mortgage Applications
 
21/5 EU Consumer Confidence, FOMC Minutes, Australia Services/Manufacturing/Composite PMI, UK Services/Manufacturing/Composite PMI, US Weekly Jobless Claims, Philly Fed Manufacturing Index, US Services/Manufacturing/Composite PMI
 
22/5 US Existing Home Sales, Fed Chair Powell Speaks, NZ Retail Sales, UK Retail Sales, France/German/EU Services/Manufacturing/Composite PMI