News & Analysis

Geopolitical tensions, Brexit, and Tech Sell-off

September 11, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

A volatile week dominated by geopolitical tensions between the US and China, Brexit woes, the US political gridlock and the nervousness in the stock market.

Stock Market – Wild Swings

Global equities went on a wild ride throughout the week after a muted start to the week due to the public holiday in the US. The tech rout which started last week caused frictions in the markets. While some investors were concerned about the correction in the technology sector, many also saw it as a buying opportunity which briefly pushed bid technology stocks higher.


Source: Bloomberg

Major US equity indices fell the most compared to its counterparts. At the start of the week, the sell-off caused the Nasdaq Composite to officially drop in correction territory. 


Source: Bloomberg

Wall Street recovered some ground on Thursday when the major equity gauges rallied in unison for the first time since July. However, the momentum was weak as the rebound in the tech sector was feeble.


Source: Bloomberg

The standoff over the US stimulus and weak jobless claims report halted the rebound seen mid-week in the US share market. The labour market remains the struggling part of the US economy. Jobless Claims reports released on Thursday show that claims are not falling as expected.


Source: Bloomberg

Forex Market

In the forex market, major currencies were mixed against the US dollar. The greenback found some ground on the back of the overall risk-off environment.

Source: Bloomberg

The British Pound was among the worst-performing currencies dragged by Brexit-related headlines. The focus was on the 8th round of negotiations between the European Union and the United Kingdom and the controversial Internal Market Bill published on Wednesday. The planned law dealing with Northern Ireland has compromised the negotiations and instilled more distrust between the two sides. 

As of writing, the GBPUSD pair fell from a high of 1.32 to 1.28 level.

I 
Source: GO MT4

Commodity-linked currencies also struggled to climb higher. The Canadian dollar came under pressure after the BoC’s interest rate decision. As widely expected, the BoC maintained its target for the overnight rate at the effective lower bound of 0.25%. The Bank is also continuing its quantitative easing program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds

The Euro gained some upside traction on better-than-expected economic data in Germany and the Eurozone:

Germany’s Retail Sales 

Exports, July 2020

  • 102.3 billion euros
  • +4.7% on the previous month (calendar and seasonally adjusted)
  • -11.0% on the same month a year earlier

Imports, July 2020

  • 83.1 billion euros
  • +1.1% on the previous month (calendar and seasonally adjusted)
  • -11.3% on the same month a year earlier

Foreign trade balance, July 2020:

  • 19.2 billion euros
  • 18.0 billion euros (calendar and seasonally adjusted)
GDP growth in the euro area and EU

In the second quarter of 2020, still marked by COVID-19 containment measures in most Member States, seasonally adjusted GDP decreased by 11.8% in the euro area and by 11.4% in the EU compared with the previous quarter. The figures came better-than-expected.

Oil Market

Crude oil prices have been under significant selling pressure this week over the fears of the demand outlook, risk-off environment and bearish weekly reports:

  • API reported an increase in the weekly crude oil stock from previous -6.36M to 2.97M in September 4.
  • EIA crude oil stocks change came in at 2.032M, above forecasts (-1.335M) in September 4.

As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading lower around $37.29 and $39.98 respectively.

Gold

The precious metal has been trading in a range throughout the week. Gold briefly broke through a key resistance level but retreated back to below $1,950. On the weekly chart, the XAUUSD is currently supported by the deterioration in risk sentiment, geopolitical tensions and a weaker US dollar. 

Source: Bloomberg

Key Upcoming Events

  • Business NZ PMI (New Zealand)
  • Eurogroup Meeting (Eurozone)
  • Manufacturing & Industrial Production and GDP (UK)
  • Harmonized Index of Consumer Prices (Germany)
  • Consumer Price Index and Monthly Budget (US)

By Deepta Bolaky
 @DeeptaGOMarkets

Monday, 14 September 2020 
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
0.3266.7111.0540.3211.2100
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
00002.61700.511


Disclaimer:  The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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