News & Analysis

Overnight on Wall Street: Thursday 14 May 2020

May 14, 2020

By Deepta Bolaky
@DeeptaGOMarkets

Equity Markets

After the health officials reiterated the need to proceed with caution, Federal Reserve Chair, Jerome Powell is now warning of the economic risks and how the coronavirus crisis raises longer-term concerns that could leave behind lasting damage to the productive capacity of the economy:

“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased.”

World Equity Indices (% Chart)


Source: Bloomberg

Risk sentiment took another blow as the Fed stated that the downturn is significantly worse than any recession since World War II. All three major US benchmarks ended deep in the red for a second consecutive day.

  • Dow Jones Average Industrial lost 517 points or 2.2% to 23,248.
  • S&P500 fell by 50 points or 1.8% to 2,820.
  • Nasdaq Composite erased 139 points or 1.6% to 8,863.


Source: Bloomberg

Currency Markets

In the FX space, the US dollar strengthened against major currencies in the European and US session. As risk sentiment deteriorates, safe-haven currencies like the greenback and Japanese Yen gained momentum.


Source: Bloomberg

The Fed Chair was the main event for the forex market in the US session on Wednesday. As of writing, the US dollar index, which tracks the performance of a basket of currencies against the greenback, rose to 100.24.

US Dollar Index  (Hourly Chart)


Source: GO MT4

The New Zealand dollar emerged as the worst performer, dragged by the RBNZ’s monetary policy statement:

  • The RBNZ left the OCR unchanged at 0.25% but is prepared to reduce the OCR further if and when needed.
  • The central bank also surprisingly announced to significantly expand quantitative easing programme potential to $60 billion, up from the previous $33 billion limits.
NZDUSD (Hourly Chart)


Source: GO MT4

Commodities

The oil industry remains driven by an oil glut and prospects that productions cuts and reopening plans will slowly bring some stability. After the API report showed that inventory fell to 7.6M on May 8 from the previous 8.44M, another bullish weekly report helped oil prices to edge higher.

According to the Energy Information Administration (EIA), crude oil inventories in the United States decreased by 0.7 million barrels in the week ending May 8th. This reading came in lower than the market expectations for an increase of 4.1 million barrels.

As of writing, WTI Crude oil (Nymex) is currently trading at $25.45 while Brent Crude (ICE) is trading at 29.32.

Gold

The precious metal also received the classic haven boost amid uncertainties and warnings from policymakers. As of writing, the XAUUSD pair is trading in the vicinity of $1,717.

XAUUSD (Hourly Chart)


Source: GO MT4

By Deepta Bolaky
 @DeeptaGOMarkets

Key upcoming events

  • Budget Release (New Zealand)
  • Gross Domestic Product (Japan)
  • Consumer Inflation Expectations, Full Time Employment, Employment Change, Participation Rate, and Unemployment Rate (Australia)
  • Harmonized Index of Consumer Prices (Germany)
  • Economic Bulletin (Eurozone)
  • Initial Jobless Claims (US)

 

Friday, 15 May 2020 
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
0.07600.310.2151.06801.12
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
00008.02100


Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs. Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

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