Hi all Smart Investors out there! I hope that the Weeklies, even though quite compound, do provide value for you in terms of updating you on major market drivers and cutting out the noise. Remember a Smart Investor has an investment perspective way beyond current little ups and downs, as much important as they may seem right now!
Equity markets stories:
-> Major markets remained under pressure this week mainly due to renewed fears of the impact of slow and gradual reopening of the business-as-usual activity on new Covid-19 cases . Small increases were seen in countries like Germany for instance at the start of the week.
-> Fed Chair Jerome Powell also warned on Wednesday that without further fiscal stimulous the virus-related economic downturn can become long-lasting. He also admitted that the Fed possibly did not use all possible tools to fight the weakness as well, but denied traders’ speculations (at leats for now) that Fed is considering chasing negative rates at the moment, but stopped short of of ruling it out in the future (Fed Funds futures already do show some small possibility of negative rates in US ino 2021 though, hence the speculation on the market).
-> Another major theme of the week was the boomerang story of tensions between US and China, which are on the rise again as Trump administration keeps making increased efforts to blame China for Covid-19 and follwed with further restrictive steps, like delaying moving federal savings plan funds into chinese equities index. Additionally on Friday morning president Trum announced he is planning to ban exports of US semiconductors- and chipmakers’s productucts to China’s Huawei. The story goes on….And will continues for a loooong time…
-> A few Wall Street heavyweights like Mr.Tepper and others also sounded out fears of equity markets being most expensive in decades after the massive 30%+ rally from the recent mid-March bottom, given where real economy is right now (these are just opinions still, so take such calls as a fact never and remember every market participant mostly makes calls accordindly to his/her positioning). Remember I wrote about it while describing SIA. Always better to listen to yourself and fact rather than opinions of others.
-> Also on Friday the Fed released its twice-a-year report on market risks and hazards stating that “asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse, or financial system strains reemerge” and added that commercial real estate assets are particularly susceptible to falling valuations because “prices were high relative to fundamentals before the pandemic”, whilst disruptions in the hospitality and retail sectors now are severe.
-> Effective weekly index changes: S&P500 -2.3%, EuroStoxx50 -4.8%, DAX-4%, Nikkei225 -0.7%.
Other markets events:
-> Commodities (ex oil): Copper -3.5% as most utility metals stayed under pressure due to recession conserns, whilst Gold +2.9% on increased safe have demand.
-> Oil: surged again ending the week at +20.5% (WTI) as news about continous resurgance of oil demand kept the commodity well bid.
-> Currencies: not much action on the CCY front, most major pair stayed stable. EURUSD ended flat, the Dollar Index gained 60bps.
-> the US bonds (10y-2y) yield curve stayed relatively stable around 50-60bps positive.
Major macro events:
-> US Initial and Continous Jobless Claims continued to surge to unprecedented levels, leaving way over 20 million Americans unemployed (bear in mind the peculiarities of forloughs while watching the stats):
-> On Friday US Retail Sales plummeted 16,4% MoM for the month of april vs. expectations around a 12% drop. Remember that in US 68% of GDP is made by consumption.
Next Week’s major macro events:
JP: Industrial Production MoM Final MAR (previous:-0.3%, exp: -3.7%)
EA: ZEW Economic Sentiment Index MAY (previous: 25.2, exp: 29) (for Germany: 28.2/32 respectively)
EA: Inflation Rate YoY Final APR (previous: 0.7%, exp: 0.4%)
EA: Consumer Confidence Flash MAY (previous -22.7, exp: -23.4-26)
US: Fed Chair Powell Speech
US: MAY Markit PMIs
EA: MAY Markit PMIs
all details here: https://tradingeconomics.com/calendar
Best of luck!
Disclaimers: None of the ideas, views and thoughts presented here shall ever be taken as a recommendation to buy or sell stocks,bonds,FX,commodities or any other financial instruments as stated in REGULATION (EU) No 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC or the Regulation of the Polish Minister of Finance of 19 October 2005 on information constituting recommendations regarding financial instruments, their issuers or exhibitors (Journal of Laws of 2005, No. 206, item 1715) or the Polish Act of 10 February 2017 amending the act on trading in financial instruments and some other acts. The article is for educational reasons and purely presents private views of the author, thus the author shall not be claimed eligibile for any losses of a third party resulting from trading activities based upon this article. The author uses his best knowledge and data from sources believed to be reliable, but makes no representations as to the accuracy of the data. Full Disclaimers&Liability Limitations page.