The second quarter ended, which was a period of very large changes in the financial markets. It was also a quarter during which economies tried to recover from the serious crisis caused by the coronavirus epidemic. However, at the end of June new outbreaks appeared, which may complicate economic plans for the third quarter.
The second quarter undoubtedly belonged to oil. WTI oil contracts gained 98 percent in three months. This is an absolute record of the last decades. A futures contract for the American Nasdaq 100 index gained 36 percent and silver rose by 32 percent in the last three months. The German DAX index gained 29 percent and the American S&P 500 raised by 26 percent in the second quarter. Gold and the Australian dollar rose by about 13 percent and the New Zealand dollar by over 9 percent. As we can see, it was a quarter of solid price changes in various asset categories – from the commodities market through stock exchange indices to the Forex market.
What can the third quarter bring?
After periods of high volatility, the time of calm usually returns, so it is possible that the next three months, including the holiday period, may be a time of lower activity of investors in the market. This also comes down to the role of central banks to mitigate price fluctuations in financial instruments. Nevertheless, factors that may increase volatility do not go away. A potential second wave of infections, and thus the second wave of lockdowns, is still possible. Also, the upcoming U.S. presidential election, which Donald Trump may lose, and very high valuations of companies in historical terms, with a question mark over whether they will be able to deliver results in the coming quarters.
Waiting for data from the American industry
Returning to current events, investors will soon be able to react to incoming data in the form of PMI and ISM indicators from the US. The data published today indicates that the industry sector in China is rebounding. The PMI index rose to 51.2 points in June and was the highest since December last year. Production increased even further thanks to a renewed increase in new orders. Purchasing levels increased the most since January 2018. In Germany, the industry's PMI index was adjusted to 45.2 points in June 2020 and was well above 36.6 points in May. Production and new orders fell at a milder pace as more companies started to open their businesses after weeks of closure due to the coronavirus pandemic.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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