Markets managed to rebound again, living the pattern of Monday sell off, Tuesday & Wednesday recovery which we have seen for the past month. Overall markets are just treading water, the recovery in the US was a little too quick considering the Virus may delay the reopening of world economy.
Data in the background suggests that parts of the economy in the US are still recovering well, with pending homes sales jumping much stronger than expected in the US.
We need to remain focused here on the big picture. This recession is vastly different to others in that interest rates are at record lows, with Central banks and Governments stimulating economies like never before.
So the battle continues between the Corona Virus lock downs and Stimulus measures. Locally we are expecting the government to extend Keepers and Seekers allowance in one form or another. In the US they are voting in July on another round of fiscal stimulus.
Low earnings sentiment continues to be the theme as we edge closer and closer to US reporting season in July. The market is generally expecting low earnings this year, so we will be looking at reports through a different lens. We will be looking to see if companies will report better or worse than expectations. Reporting season as always can be volatile for individual companies so keep an eye on the reporting dates.
With the U.S holding key support and rallying last night, and their futures strongly in the green our market is set to open higher this morning. The open should put us around 5950 at this stage, but if things remain positive, we should go on to test the 6000 key resistance today and likely hold it.
We managed to just hold the uptrend line and 100 Day MA yesterday, and this morning will show a bounce from these support levels. The bounce should be the beginning of a move back to our highs, but we will need to see continued positive leads from the U.S for us to get there. We didn’t fall as hard as they did recently, but we also didn’t rise as much either.
US stocks pushed higher overnight, recovering some of their losses from Friday. US stocks were already looking fairly green, but their gains were certainly helped by positive economic data in the US and Europe. The most notable release overnight was the US pending home sales data for May which jumped 44 percent and was much higher than expected.
There are still concerns weighing on the market however, with the US ending its special classification for Hong Kong due to the new Chinese security bill, as well as persistently high virus infections, with more than 10 million confirmed cases and more than 500,000 deaths as of last night. Every major sector pushed higher in the US overnight, with telecoms and basic materials the strongest performers. Healthcare stocks saw the smallest rise.