DAILY MARKET COMMENTARY 22ND MAY 2020

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Markets drifted lower overnight, after posting record gains during a strong week supported by ‘vaccine progress’ and Central Bank support. Economies across the world are re-opening successfully, without any major outbreaks in the coronavirus. European markets were disappointed, when PMI data remained stubbornly low. European PMI data bounced off historical record lows, but only into the mid-30’s, well into contraction territory. US PMI data was slightly better, but still only in the late 30’s, reflecting the varied spectrum of State lock-downs. The EUR drifted back to 1.0950, while the GBP stabilised at 1.2235,
 
US Existing Homes Sales fell 17.78%, while the Philly Fed survey went backwards. The FOMC minutes were released and supported the Chairman’s recent support for the US economic recovery. US/China trade tensions are on the rise, as the US levels blame on the Chinese for the global pandemic, with the US Senate passing a law restricting Chinese companies listing on US exchanges. The Chinese are retaliating selectively and globally. The Chinese are threatening to impose tariffs and import bans on cars from Germany and barley from Australia. Escalating trade laws will lead to great concerns over the existing supply chain.
 
Growing trade tensions have hurt the trade exposed commodity currencies. The NZD fell back to 0.6115, while the AUD slipped to 0.6560, damaged by extremely weak flash PMI data. Global Chinese trade tensions and their aggressive response, is driving uncertainty and could damage market recovery.
 
 

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