Economic Recovery and Stimulus Hopes Overshadow Covid Numbers

Optimism surrounding the economic recovery and more stimulus is overshadowing a record daily increase in US covid-19 numbers, the return to lockdown for 5 million Australians and elevated US – Chinese tensions.

Charts (4)

Following on from a fresh all time high for the Nasdaq, Asian markets pushed northwards, and Europe is set to open on the front foot. 

Optimism surrounding the economic recovery and more stimulus is overshadowing a record daily increase in US covid-19 numbers, the return to lockdown for 5 million Australians and elevated US – Chinese tensions. 

Data from China is keeping sentiment buoyed on Thursday. China’s factory gate inflation fell for a fifth straight month in June, as the coronavirus pandemic weighed on the industrial sector. However, signs of recovery are starting to emerge and with the market’s glass half full attitude today, that was enough to underpin sentiment. Chinese PPI -3% in June yoy, slower than the -3.2% decline forecast and an improvement from May’s -3.7%. In the manufacturing sector PPI rose 0.4%, up from -0.4% in May, fuelling hopes that the sector was turning a corner.

Eurogroup to agree on stimulus?
Investors are also hopeful of more government stimulus to support the recovery as the finance minister from the Eurogroup meet today ahead of the summit of leaders next week. 

Optimism is growing that a deal will be agreed over the European recovery Fund. The northern countries are pushing for recovery funds to be loans, the southern European countries and more fiscally challenged nations are pushing for the fund to be in the form of a grant.

Either way, the need for stimulus is becoming apparent. Whilst the region appears to have done a good job containing the virus, the EC has slashed its growth forecasts to -8.7% this year and lower 5.6% growth in the coming year.

US Jobless claims
Looking ahead US jobless claims are under the spotlight for further clues as to how the US labour market is healing. Expectations are for 1.37 million initial jobless claims, down from 1.46 the previous week. 

Continuing claims, which shed light on the rate of re-hiring are expected to be 18.95 million, down from 19.29 million. Whilst this appears to be a frustratingly slow process, taking a step back and looking at the bigger picture offers some perspective. Continuing claims are now down -24% from the peak.

FTSE Chart

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account