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.
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.
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.