Europe Lower As Second Wave Fears Grow, UK GDP Misses

European markets are looking to extend losses by around 0.5%, however US futures are pointing to a more upbeat start. UK GDP -20.4% VS -18.2% forecast.

Downtrend 2

After Thursday’s seismic risk off selloff, which saw stocks and oil crash, and safe havens rally, markets are trying to stabilise. European markets are looking to extend losses by around 0.5%, however US futures are pointing to a more upbeat start. 


Stocks finally experienced that hefty correction that had been expected the whole run higher. A cautious Fed, gloomy projections and growing fears of a second wave of coronavirus saw European stocks drop the most in two months.

The “only way is up” philosophy that the markets had been following for the past 2 months, which saw the Nasdaq rally to a fresh all time high, the S&P wipe out losses for the year and the Dax come within a few percentage points of the same achievement was contradicted with a massive sell off. The big question now is whether this was just a natural correction is an impressive bull run or whether this is the start of something more sinister – a new bear trend.

Grim milestone & 2nd wave?
Coronavirus numbers are still elevated, with the grim milestone of 7.5 million cases globally being breached. Concerns are growing of a second wave in the US where over 20 states have started to see an increase in covid-19 cases following 5 weeks of falling numbers. Local officials have mention restarting lockdown measures. However, US Treasury Secretary Steve Mnuchin has warned that there won’t be a repeat of the stay at home order, given the impact that it would have on the US economy. The very prospect of another round in the ring with covid-19 sent investors rushing for cover in safe haven assets. The threat of a second wave could dampen the prospect of any push higher in riskier assets and promote a period of consolidation whilst trades wait to see how it plays out.

UK GDP
The UK economy contracted by a worst than -20.4% mom in April versus -18.4% expected and down from -5.8% in March. Unsurprisingly retail, travel and hospitality were worst hit, although manufacturing and construction also see significant hits, as the data reflects a full month of lockdown and highlights the uphill struggle that the economy now faces to get back on track. The Pound has shrugged of the record break collapse in economic activity to a degree this is old news and finally marks the nadir.

US Consumer confidence
Looking ahead US consumer confidence data will be in focus as investors attempt to gauge whether US consumer are ready to get shopping to reigniting the US economy. Expectations are only for a slight lift in morale in June to 75, up from 72.3 in May. A much stronger reading could do some heavy lifting in the market. However, a weaker number could fuel fears over the economic outlook, dragging stocks lower and boosting the safe haven USD.



More from FTSE 100

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.