False dawn; Markets awaiting a cure

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Published Jul 27, 2020

New financial stimuli and vaccine – theoretically, major trigger for a rally. Weak, but expected, 2Q20 financials have been mostly ignored by investors. Markets continued to look for triggers for a rally and last week there were three: EU approved a new budget with a recovery fund, US Congress started to discuss Phase 4 of the $1tn stimulus package and progress in COVID vaccine testing had been achieved. Liquidity injections and more hopes for an early end of the pandemic were major catalysts, as a result, early last week, risk appetite increased, supporting crude prices and weakening demand for dollars. In this light, the deteriorating geopolitical backdrop vis-à-vis Russia was mostly ignored, although the markets did not find any particular drivers for a leg up. However, by the end of the week, optimism noticeably decreased – as many times before, the rise of enthusiasm turned out to be yet another false dawn.

Geopolitics and markets
• Geopolitics: US jousts with Moscow, Beijing; Donbass truce a relief
• Russian economy: Kremlin protects stability even at the expense of stagnation
FX and rates
• Ruble and CBR rate – Expected rate cut and weaker ruble
• Euro and ECB – Euro up on budget deal and weaker $
• $ and Fed – New relief package makes greenback less attractive
Commodities
• Oil – Downside risks are building
• Gold – Price continued to rise, expected
Key dates
• 27 July – US durable goods orders (June)
• 28 July – US CB consumer confidence (July)
• 29 July – Fed meeting; expect no change to key rate
• 30 July – US and Germany GDP for 2Q20
• 30 July – EU unemployment (June)
• 31 July – China manufacturing PMI (July)
• 31 July – EU inflation (July); expect 0.2% y/y

Kategorien: Corona Virus aktuelle Videos

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False dawn; Markets awaiting a cure

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