Now about the economic recovery hopes to become a theme of market transactions, investors largely ignored the influence of violent protests in the United States, risk sentiment continues to rebound, U.S. stocks rose across the board yesterday, near record highs, gold and the dollar plunging, gold prices fell below $40 to 1690, at the same time, beauty refers to the continuous decline, on the 7th of non-us currency big counter-offensive. It’s worth noting, though, that renewed tensions between China and the U.S. could turn sentiment upside down after the U.S. Department of Transportation announced that it would suspend flights to and from the U.S. starting June 16. For the day, the focus was on the ECB decision.
The global market counterattack! At one point, gold plunged more than $40
Risk sentiment in global financial markets continued to rally on Wednesday as global stocks hit a three-month high as hopes of more global stimulus measures and further easing of social restrictions outweighed concerns about everything from the outbreak to protests in the US.
The Nasdaq, S&P 500 and Dow have rebounded sharply from lows hit in March when the novel Coronavirus related shutdown hit the market. The three indexes are now 1.4%, 7.8% and 11.1% below the record closing high hit in February, respectively.
The Dow Jones Industrial Average closed up 527.24 points, or 2.05 percent; The S&P 500 rose 42.05 points, or 1.36 percent. The Nasdaq closed up 74.54 points, or 0.78 percent.
Stan Shipley, research analyst at Evercore ISI, said the trading showed investors were increasingly hopeful about an early U.S. economic recovery. “The market is saying it’s not the end of the world.”
Jim Paulsen, chief investment strategist at Leuthold Group in Greenwich, Connecticut, said that despite the turmoil and the unresolved outbreak, the main reason stocks have rallied is that the market is focused on one thing: the resumption of U.S. and global economic activity. Since April and May, as the global epidemic has eased and countries have returned to work, the market has become increasingly optimistic that the worst of the economic impact caused by the epidemic has passed, risk appetite has increased and the stock market has continued to rise.
“The good times continue in the risk asset market,” TD Securities senior currency analyst Mazen Issa wrote in a report. Given the strength of the rally, which is expected to continue, the gains have spread from the U.S. to other regions.”
“There is growing confidence that the U.S. economy can safely restart, just as other economies such as China and Italy have successfully done,” said David Carter, chief investment officer at Lenox Wealth Advisors. Risk appetite in the stock market is helped by economic optimism and investors have few other options.”
The string of dismal economic data was not as bad as economists had feared, with the ADP report showing private payrolls fell far less than expected in May.
Private employers cut another 2.76 million jobs last month from a record 19.9557 in April, the ADP national Employment Report showed. Private sector jobs had been expected to fall by 9 million in May.
Jim Vogel, interest rate strategist at FHN Financial in Chicago, said the data sent a mixed message about the state of the economy because it came in well short of expectations. “People had given up on May, but now we have to look more closely at the details of the report to see what happened,” he said.
Market participants now await the Labor Department’s more comprehensive employment report for May, which is expected to show the unemployment rate has surged to a record 19.7 percent.
Gold plunged more than $40 to below the 1,690 level before returning to near the 1,700 level in Asian trading on Thursday, as expectations of more government stimulus and a global economic recovery emboldened investors to increase their holdings of riskier assets and sell off safe-haven assets.
“Momentum now appears to be in play,” Wells Fargo analysts said in a report on Wednesday. We see a broad pullback in the DOLLAR as an attractive buying opportunity, but acknowledge that there is room for further near-term weakness.”
Blackrock, the world’s largest asset manager, said on Wednesday it expected the dollar to weaken over the next two quarters, creating a better environment for emerging markets, particularly as global economic activity recovers, which should lure U.S. investors back to higher-growth regions such as Asia.
New news from China and the United States alert market sentiment to change
While the market is basking in the euphoria of a resurgent trade and stocks near record highs, it’s worth noting that escalating tensions between China and the U.S. could be a stumbling block to further gains.
The US Department of Transportation (DOT) announced Wednesday that it will suspend flights to and from the US by Chinese airlines due to China’s failure to allow them to provide services to and from China.
The decision involves Air China, Capital Airlines, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Xiamen Airlines and other airlines.
The order states that the US Department of Transportation will suspend all scheduled flights from and to the US by Chinese airlines because of Beijing’s “failure to allow US carriers to achieve scheduled passenger air service to and from China and to exercise all aspects of their bilateral rights”. The order will take effect on June 16, 2020. The order will affect beijing-Los Angeles routes operated by Air China, Guangzhou-Los Angeles routes operated by China Southern Airlines and Shanghai-New York routes operated by China Eastern Airlines, according to flight plans previously issued by Chinese airlines in June.
The DOT’s claim that China has failed to allow U.S. airlines to operate passenger routes to and from China refers to China’s civil Aviation Administration’s “five-one” policy, which began March 29. (One airline company per country maintains only one route, up to one a week.) U.S. airlines had suspended all flights between China and the United States before the policy, which called for a benchmark for international flight plans released On March 12.
Separately, the US Commerce Department said on Wednesday that restrictions on 33 Chinese companies and institutions listed last month will be put into effect on Friday, Reuters reported.
The US Department of Commerce has placed Chinese agencies on an economic blacklist for possible involvement in government operations in Xinjiang or military affairs. The forthcoming measures would restrict us companies, including overseas production of content involving US technology, from selling to them. Even if us companies can apply for special permits, they may still be refused.
Renewed tensions between China and the United States will add to the already shaky market. Relations between the world’s two largest economies have soured again in the past month, with the US blaming China for the spread of the disease and US President Donald Trump directing his administration to start lifting exemptions for Hong Kong’s special treatment policy.
Erin Browne, portfolio manager at PIMCO, said sino-U.S. tensions are one of the big market risks in the second half of 2020. She says she is hedging her portfolio accordingly.
Browne said tensions between China and the United States could put pressure on the first phase of a trade agreement. “The risk that scrapping the first phase of the CHINA-US trade agreement will hit market sentiment in an important election year for President Trump is rising,” she said.
This trading day, in addition to the epidemic, the United States riots, the Situation in China and the United States, the market also need to be alert to the European Central Bank decision. The European Central Bank will issue a policy decision at 19:45 (Beijing time) and European Central Bank President Christine Lagarde will hold a press conference at 20:30.
Investors are focused on whether the European Central Bank will expand its 750 billion euro ($669 billion) emergency buying program, or PEPP, when it meets on Thursday.
Overnight implied volatility in the euro jumped to 12 percent, its highest in a month, suggesting traders are bracing for more volatility in the currency than usual.
A bloomberg poll last week showed an overwhelming majority expected the ECB’s governing council to increase its asset purchase programme by 500 billion euros.
The European Central Bank seems almost certain to increase the size of its emergency buying program for the outbreak at its June 4 meeting, Bloomberg economists said. The current pace of purchases, government funding needs and brewing Italian woes mean the programme needs to be raised to more than €1tn.
Berenberg economist Holger Schmieding said the arguments for and against more stimulus are almost evenly balanced and overall we see a 60% chance on Thursday of the ECB raising its asset purchase target, with a good chance of an increase of 500 billion euros.