By Deepta Bolaky
It was an eventful week with many dominant headlines that took the markets on a wild swing. The week kicked off with the news that Pfizer and BioNTech granted FDA fast track designation for two investigational mRNA-based vaccine candidates against SARS-CoV-2 followed by Moderna Inc announcement that its potential COVID-19 vaccine has produced antibodies in an initial safety trial.
The positive vaccine-related updates have fueled the optimism seen in the financial markets this week. However, the significant spike in the number of infections, and geopolitical tensions remain the elements of caution. The brewing tensions between the US and China over Hong Kong took another dangerous turn – China vows to retaliate after the US ends its special status with Hong Kong earlier this week. Towards the end of the week, we take note that the US might be considering to ban travel on China’s communist party members.
The promising progress towards a potential vaccine has steered the equity markets during the first half of the week. The momentum paused on Thursday following key earnings reports, growing number of COVID-19 cases and US labour data.
On the earnings front, big banks and Netflix reported the quarterly earnings reports. JP Morgan, Citigroup, Wells Fargo, Goldman Sachs, Bank of America and Morgan Stanley all made substantial provisions for loan losses.
JP Morgan, Goldman Sachs and Morgan Stanley reported earnings exceeding expectations. Banks like Goldman Sachs and JP Morgan managed to offset the loss in loan provisions with bond or stock trading:
Netflix was among the first to issue quarterly updates among the big tech stocks. The streaming giant reported a positive second-quarter earnings after the market close on Thursday but the warnings came from the predicted paid subscribers which is forecasted to be only 2.5m in the third-quarter. The Company fell by 10% or so in after hours trading.
In the forex market, major currencies were mixed against the US dollar. Amid the broad optimism related to the vaccine updates, safe-haven currencies struggled to edge higher. Commodity-linked currencies and the Euro were among the best performers.
Source: Bloomberg Terminal
The Aussie dollar was mostly driven by the broader positive sentiment in the markets as mixed economic data failed to support the local currency:
As of writing, the AUDUSD pair is still navigating in a familiar range just below the 0.70 level.
Similarly, the Euro performed relatively well across the week despite the dismal ZEW surveys and an on-hold ECB. As widely expected, the central bank kept the interest rate and the emergency coronavirus stimulus program unchanged. The EURUSD pair has retreated from this week high but remains in the green for the week. As of writing, it is currently trading at 1.1385.
Crude oil prices found some support on the weekly reports despite the spike in coronavirus cases threatening some kind of more lockdowns to come in the coming days or weeks and speculations that OPEC and Russia might start scaling back the production cuts:
As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading lower at $40.78 and $43.36, respectively.
On Thursday, the precious metal pared all the gains made earlier this week and dipped below the $1,800 level. Central banks like the ECB are staying on hold for some time which prompted some dollar strength on Thursday. As of writing, the XAUUSD pair is trading at $1,798.
By Deepta Bolaky
|Monday, 20 July 2020 |
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