DAILY MARKET COMMENTARY 9TH JUNE 2020

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The broad-based rally on equity markets continued, despite the obvious challenges, building confidence across markets in the economic reopening. The major threats to the recovery are the virus, China trade developments and the riots engulfing US cities. Tensions with China are rising across the world, as they flex their economic and military muscle. The Chinese have removed autonomy rights from Hong Kong, threatened in the South China sea and invaded the Indian border with their troops. This confirms their aggressive actions, post the launch of the pandemic, is the biggest Geo-Political threat to the world. There will be trade repercussions for China’s role in the pandemic and the US has already announced sanctions.
 
The USD has been in a steep downward trend, due to the growing confidence in the global economy, reflecting the safe-haven status. The EUR broke back above 1.1300, while the GBP has surged through 1.2700, confirming the transition in their economies to re-opening. Market now await the FOMC meeting, which is expected to reinforce their extremely generous monetary policy.
 
The surge in sentiment and economic activity has shocked US pundits, with the turnaround in employment. The Non Farm Payrolls was expected to show an 8,000,000 loss in jobs, but shocked all analysts, by adding 2,500,000 jobs! This was a huge reversal and confirms the ‘V shaped’ recovery. The falling reserve allowed the AUD to regain 0.7000, while the NZD has looked to regain 0.6550, but both remain extremely trade exposed. The Chinese developments will be key to their performance.