Daily Market Commentary 22nd June 2020

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Markets were lower, to close out a very strong week on equity markets, highlighted by developments in the treatment of the coronavirus and global control and containment. The other major boost to markets was the Federal Reserves expanding their ‘QE Infinity’ to include the purchase of individual corporate bonds. Markets surged earlier in the week, to post big gains on stock markets , but there were ‘ebbs and flows’ to close out the week. China is now looking to step up US purchases in accordance with ‘Stage One’ of the US/China Trade Deal.

The Dollar staged a bit of a recovery rally, as risk appetite rose and fell, reversing recent trends. The EUR fell back below 1.1200, while the GBP retreated to 1.2350, amidst mixed economic numbers. The UK was hit late and hard by the virus and is way behind the curve, coming out of the lock-down much more slowly and later than Europe and the USA. UK Retail Sales contracted 13.1%, much better than expected and lower than the previous number, which had contracted 22.7%! UK Public Sector debt has blown past total GDP, which is the worst ratio since 1963, but fiscal prudence is a thing of the past?

The rising reserve dampened enthusiasm for the trade exposed commodity currencies, with the AUD falling back to 0.6850, damaged by the week labour market numbers released during the past week. The NZD dropped to 0.6400, hit by the rising USD and surprisingly weak GDP numbers, confirming the dire economic situation facing the country.

The coming week will probably be dominated by the virus containment, trade and Geo-Political issues. China’s aggressive actions in India, Hong Kong, Taiwan and the South China sea have frightening potential to light up the region. This will directly impact global markets and the existing supply chain.

Dates & Headlines

22/6 Chicago Fed National Activity Index, UK Industrial Orders
 
23/6 EU Consumer Confidence, US Existing Home Sales, Australia Services/Manufacturing/Composite PMI, Japan Services/Manufacturing/Composite PMI, UK/France/German/EU Services/Manufacturing/Composite PMI, US Services/Manufacturing/Composite PMI
 
24/6 US New Home Sales, Richmond Fed Manufacturing Index, RBNZ Rate Decision and Press Conference, ECB Meeting, German IFO Business Climate, Bank of England Meeting, US Weekly Mortgage Applications, US House Price Index
 
25/6 NZ Trade Exports/Imports, German Consumer Confidence, ECB Minutes, US Durable Goods Orders, US GDP, US Weekly Jobless Claims
 
26/6 Kansas City Fed Manufacturing Index, NZ Consumer Confidence, US Personal Income/Spending, University of Michigan Sentiment