Markets are enjoying some positive news as parts of the world economy continue to ease lock down restrictions. FED chair Jerome Powell indicated the economy could ‘recover steadily’ later this year. The quickly Lock down restrictions are removed quicker we can see the recovery begin, As long as we don’t undo what the lock down was there to achieve in the first place.
So, at this stage markets have what they need to remain stable.
- Low interest rates with the view they are going lower
- Bond buying, to keep the Credit markets ticking along
- Increased unemployment benefits and programs to help keep staff employed that would have lost their jobs otherwise
- Hints of further stimulus on the way.
Markets will remain tied to beliefs around stimulus and if current measures will be enough to get us through what is ahead. Markets will continue to watch and wait for further news on Fiscal and Monetary policies. Expect volatility to rise again if they start talking hawkish in any way, or if we see government support to the unemployed removed too quickly.
Earnings sentiment continues to decline as analysts downgrade their expectations for the upcoming August reporting. There is no doubt this year we will see bad numbers for many companies out there. But investors will be also looking for sign on how quickly they could recover, given a bad report has already been priced in for many.
The XJO is set to open higher following both strong leads on Friday from the U.S, and their futures this morning. The open seems a little too strong, and I suspect it wont it hold unless we see U.S futures push harder into the green during our session today.
US stocks pushed higher again on Friday, but last week was still the worst for the S&P500 since the extreme movements seen in mid-March. Friday’s rally came despite reports detailing the worst decline in retail sales and industrial production on record. Traders and investors are also weighing up the possibility of a further trade war between China and the US (and other western nations) due to China’s apparent willingness to respond to criticism with threats of trade retaliation. The strength on Friday came largely from tech stocks, healthcare, and materials, while utilities fell. Over the weekend Fed Chair Jerome Powell again spoke, suggesting that the post-COVID recovery could stretch until the end of next year, and be predicated on the discovery of a vaccine.