A strong start of the week for the risk trade across Asia and Europe equities with any negative news shrugged off and positive news (or news that was better than expected) embraced.
Dr Anthony Fauci the White House health advisor, said that the coronavirus may have mutated to become more infectious and that he is very concerned about the rise in new cases. However, some signals of Market recovery such as the expansion of the Nonfarm payrolls by 4.8 million in June and the increase of 10.4 % on new manufacturing orders in Germany have outperformed the worries of a slower global economic growth. The CSI 300 index, which consists of the 300 largest and most liquid A-share stocks, settled at a 5 year high today morning. Following the strong risk vibes, European equities also trading higher continuing the economic optimism from Asia. At the time we write this article, DAX is up 1.44% from Friday’s closing, the Euro Stoxx 50 is up 1.64% while the UK based index FTSE 100 grew 1.77%.
In other markets, the EUR/USD posted gains trading closer to 1.13 helped by signals of a German economic recovery, and the increasing confidence in the equity markets which may have weighed against the safe-haven dollar. The dollar index, which tracks the performance of USD against six other currencies, was lower 0.5% from Friday settlement while investors leaving the safe-haven currency for some more risky positions amid optimism for a faster global economic growth.
Although the market sentiment is still unclear, the question remains is the latest recovery confidence the outcome of a cautious optimism or data-driven overaction of some risk tolerated investors? The concerns for a new spike on coronavirus cases are real and last week we have already seen some increase in worldwide daily cases reaching a little bit more of 200,000 new cases per day. In addition, we should not forget the continuing tensions between U.S. and China which are deteriorating over time. On the other hand, global monetary policy participants are pushing a lot of cash in the market which means that markets at some time may have to catch up and start showing increasing demand for their products.
The list of good news and bad news could go on forever during this period. However, the markets choose today to look at the good ones, uncertainty though remains the biggest player.
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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