Stocks Start Week With Gains

Economic recovery optimism is in full swing as the new week kicks off, driving Asian and European markets firmly higher whilst overshadowing concerns of rising covid numbers and second wave fears.

According to the Word Health Organisation a record 212,000 new daily coronavirus cases were reported, with US, Brazil and India reporting the largest number of increases. However, the US reported 53,000 which is a slight improvement on the 57,000 daily cases reported on Friday. Still with July 4th celebrations dominating across the weekend, there is a good chance that this number will rise again in the coming weeks. What is clear is that the US never got the outbreak under control before reopening the economy, putting the world’s largest economy in the firing line for a second wave.

China blue chips at 5 year high
Even as the coronavirus statistics show concerningly high increases the mood in the market remains bullish as investors place firm belief in the view that a revival in Chinese activity will help sustain global economic growth.

Chinese blue chips soar almost 5%, adding to a 7% jump last week, taking the stocks to a 5 year high. High volumes suggest that investors are tactically opting for a stronger and speedier recovery in Asia over the US.

This week as a whole is relatively quiet on the economic data front, compared to last week. Today German factory orders showed that the largest economy in the Eurozone was rebounding with orders increasing +10% short of the 15% forecast, but still a vast improvement on May’s -28% decline. Looking ahead Eurozone investors sentiment and retail sales will be in focus.

GBP under pressure amid negative rates talk
The Pound is a notable decliner versus the Euro in early trade after a report surfaced that BoE Governor Andrew Bailey and Co are still seriously considering negative interest rates in the UK in order to boost the economic recovery. Negative rates would pressurise already squeezed lending margins at the banks. The banks could lag other sectors on the open.

This weekend saw the UK hospitality sector reopen with pubs, restaurants and har dressers among those that could reopen. With more and more of the economy reopening the economic rebound should start to gather pace in the UK after a very slow few month.

UK construction PMI is due to show that the contraction in the sector slowed, increasing from 28.9 to 47.
The final US service sector PMI is also due late today. Expectations are also for the contraction to have slowed. Meanwhile the closely watched ISM non manufacturing PMI is expected to reach 50, the level which separates expansion from contraction.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.