Cautious Fed & Second Wave Fears Drag On Sentiment
Fiona Cincotta June 11, 2020 2:13 AM
Wall Street closed mixed, Asian shares fell overnight and Europe is pointing to a lower start following a reality check from Federal Chair Jerome Powell
Wall Street closed mixed, Asian shares fell overnight and Europe is pointing to a lower start following a reality check from Federal Chair Jerome Powell. The gloomy outlook from the Fed combined with fears of a second wave of coronavirus in the US is keeping the lid on risk sentiment.
The dovish comments from the Fed, coupled with the depressing outlook came hot on the heels of the OECD’s dire forecasts yesterday. The OECD predicted that the UK will suffer the worst damage from the coronavirus crisis from any country in the developed world, with GDP expected to contract -11.5% in 2020, outpacing falls in the US and among European peers such as Germany, France, Italy and Spain. The more draconian measures implemented to curb the coronavirus and the more dependent an economy is on the service sector, the longer the road to economic recovery.
Whilst economies across the states continue to reopen fears are growing of a second wave of the virus in the world’s largest economy. Hospitalisations are rising in California, adding to worrying trends in Florida and Texas.
The economic calendar in Europe is light. The group of Euro Finance ministers will meet today to discuss the EU recovery package. The frugal four are reportedly ready to climb down, potentially offering support to the Euro.
Other than that attention will be on US jobless claims data for further signs of recovery in the US labour market. Continuing applications could give further insight as to the speed at which people are being hired and therefore the strength of the recovery. Disappointment could heighten risk off trading pulling stocks lower whilst boosting US Dollar.
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