We are seeing a battle of the Bulls and Bears. This is making it very difficult to pick the market in the short term. The market is seesawing between Virus worries, China tensions and election worries, with stimulus holding everything together. The FED came out last night and confirmed that they have only used a only 6.2% of the 2.3 trillion available.
The underlying positive that we can take from this is that if things get worse with the Corona Virus the US government is willing to throw everything at the economy so expect more stimulus.
Given this rhetoric one would expect the medium to long term view to remain bullish, but in the short term anything is on the table.
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 expectation. Reporting season as always can be volatile for individual companies so keep an eye on the reporting dates.
Negative leads from the U.S last night have us opening lower, but their green futures this morning should help stem some falls. With our market set to open around 5900, like the U.S, the bearish move still does not show us breaking the uptrend line. The U.S broke out of their tight consolidation range last night, but if their futures remain in the green during our session today, we are unlikely to break ours. Both the support and the uptrend line should help keep our market from falling too hard today, provided the U.S futures remain flat to in the green during our session.
The pressure comes from both negative economic data and the fact the virus in the U.S is causing ill effects to both citizens and State’s abilities to re-open. The stimulus at this stage has stopped us from heading back to our lows of March but the recent consolidation has had some of the bullish sentiment pulled from the market. Investors are probably taking both profits and risk off the table.
Ultimately things continue to look dire with the IMF’s report last night, but the Fed should come out and reinforce previous statements of their willingness to continue to pump money into the economy. Expect to see Powel and Trump try keep the market elevated with promises and spending.
US markets plummeted overnight, with stocks closing significantly lower due to concerns about persistently high virus infections in many US states, with Florida and California both seeing record daily increases in cases overnight. The Trump administration also suggested that it was weighing new tariffs on $3.1 Bn of exports from Europe, which further spooked investors. Adding to the woes, the International Monetary Fund downgraded its outlook for global growth, they now expect a deeper global recession and slower recovery than they did two months ago. With these headlines dominating the financial pages, it was no surprise we saw some significant selling, although Fed Chair Jerome Powell did state that the central bank had 94% of its stimulus powder still dry and ready to go. Oil & Gas stocks were the weakest performers, followed by Financials and Basic Materials stocks; Utilities saw the lightest selling of the major sectors.