News & Analysis

Overnight on Wall Street: Thursday 21 May 2020

May 21, 2020

By Deepta Bolaky
@DeeptaGOMarkets

Equity Markets

After risk sentiment took a beating from conflicting news regarding the vaccine results, investors shook off the immediate concerns and concentrated on the reopening economies and the receding number of COVID-19 cases. The optimism in the markets remains fragile as doctors warned that the new clusters of cases in China in the north-east appear to carry the virus for a “longer period of time” and “take longer to recover” compared to the original outbreak in Wuhan.

On the geopolitical front, the tensions between the US and China continue to escalate. The Senate has passed a bill that could potentially delist Chinese companies from the American stock exchanges. The bill would require Chinese companies to establish they are not owned or controlled by a foreign government. 

Global equities rebounded on Wednesday driven by a rally in the technology sector. Major US equity indices pared yesterday’s losses and rose above 1.5%: 

  • Dow Jones Average Industrial rose by 369 points or 1.5% to 24,576.
  • S&P 500 gained 49 points or 1.7% to 2,972.
  • Nasdaq Composite 191 points or 2.1% to 9,376.

World Equity Indices (% Chart)


Source: Bloomberg

Currency Markets

In the FX space, major currencies were stronger against the US dollar in the European and US session as risk appetite improved on the back of receding virus cases and reopening of economies. The US Senate bill and the escalating tensions between the world’s two powerful economies are weighing on the greenback. 


Source: Bloomberg 

Despite virus concerns that the second wave of an outbreak could be of a stronger mutation following reports on the new clusters of virus cases in China and trade tensions, the Antipodeans were among the best performers. AUD traders ignored the dismal economic data on retail trade and the deterioration in economic activity:

  • Preliminary Retail turnover falls 17.9 per cent in April: Unlike March figures which reflected the unprecedented demand in the food retailing industry and a mixed impact related to COVID-19 across industries, the figures have shown strong falls in almost every industry with no offsetting rises in the other industries.
  • Westpac Leading Index: The growth has collapsed from -1.06% to -5.16% in just two months. The speed of the collapse in the index is unprecedented as previous lows was a deterioration gathered over a period of six to twelve months. 

Both the AUDUSD and NZDUSD pairs closed higher for three consecutive days amid a weaker US dollar and a risk-on environment.

AUDUSD and NZDUSD (Daily Chart)


Source: GO MT4

The British Pound struggled to edge higher despite the US dollar weakness as investors take note of the possibility of negative interest rates in the UK. After growing speculations, the BoE’s governor stated that negative rates were under review.

Commodities

The oil market continues to find support from a combination of production cuts, buoyant inventory reports, and the prospects of increasing demand following the reopening of economies. After a buoyant API report, the Energy Information Administration reported a decrease of 5 million barrels in the week ending May 15th in crude oil inventories. The draw of crude oil inventories will slowly ease fears of storage problems. 

As of writing, WTI Crude oil (Nymex) is currently trading 0.4% higher at $33.61 while Brent Crude (ICE) is trading at 36.02, up by 0.8%. 

 

Gold

Despite positive headlines which are driving the markets, the virus concerns, uncertainties and geopolitical tensions are creating an environment of caution. After surging to more than 7-year high, the XAUUSD pair is currently trading in a tight range around $1,745.

XAUUSD (Daily Chart)


Source: GO MT4

By Deepta Bolaky
 @DeeptaGOMarkets

Key upcoming events

  • Commonwealth Bank Manufacturing PMI (Australia)
  • Merchandise Trade Balance, Imports and Exports (Japan)
  • Markit Manufacturing and Services PMI (UK)
  • Philadelphia Fed Manufacturing Survey, Jobless Claims, Markit Manufacturing, Services and Composite PMI and Existing Home Sales (US)

Friday, 22 May 2020 
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
06.9270.5020.039000
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
00004.57600


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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