Monday, May 25, 2020

Asia Times: Equity market kept steady ahead of holidays while trade war and virus risks may return afterwards

Tags
  • China
  • Dollar
  • Gold
  • Stocks
  • Oil

05252020a

Market Recap: Equity market kept steady ahead of holidays while trade war and virus risks may return afterwards

US stocks market ended with little change ahead of a three-day weekend last Friday, while indexes ended with strong gains for the whole week in the view of reopening of the economy and a slow but steady rebound in economy activity. President Donald Trump said Thursday that he would not move to shut down the economy again to stem the potential spread of second wave of coronavirus.

US equity market will be closed on Monday for Memorial Day holiday, S&P and Nasdaq futures gained with little changes this morning, it is expected that traders may maintain wait-and-see attitude within the day as market spotlight changed to be pessimistic ahead of the long weekend as holidays tempts Americans to go outdoor, raising the second wave fears in the market.  Furthermore, new tensions between the US and China have risen, as the White House said on Sunday that the U.S. may sanction China if the enactment of Hong Kong National Security is approved. The Hang Seng Index has cascaded 1,349 points (5.6%) last Friday and tumbled further this morning.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -0.04% -8.96 24,465.16
S&P500 +0.24% +6.94 2,955.45
Nasdaq +0.43% +39.71 9,324.59
*Source: Bloomberg

The dollar strengthened on Friday for a second day as traders sought havens on growing tensions between the US and China. China Foreign Minister Wang Yi warned that some in America were pushing relations to a “New Cold War”. The Norwegian krone was the worst performer amongst the G10 peers. 

PBOC set the interbank transaction midpoint of the Chinese Yuan to 7.1209 this morning, sharply down 270 bps from the last trading day, the weakest since the 2008 global financial crisis, reflecting the fears in the spot yuan on Friday after the proposal of new national security law on Hong Kong. Currencies with strong correlation with the Chinese economy, including the Aussie and the Kiwi, also weakened on Friday and continued to slump this morning.

05252020a

Safe haven assets inched higher on Friday, the Japanese yen strengthened versus its G10 peers and reached 107.58 against the dollar. Gold price rallied on Friday as well, cutting the week’s earlier 1.5% drop to around 1%. The gold futures for June delivery rose to settle at $1,735.50 an ounce on Friday. In contrast to gold however, the sliver price rallied with a solid weekly gain up at $17.19 an ounce on Friday. US Treasury bond yields ended lower, with the 10-year Treasury note dropped down 1.8 basis point at 0.659%. Bond prices move inversely to yields. The bond market closes at 2 p.m. Eastern on Friday and will remain closed on Monday due to the Memorial Day.

Safe Haven Assets Daily Change (bps) Net Change Closing Price
Gold +0.44% +7.68 1,734.68
Silver +0.62% +0.11 16.73
JPY -0.03% -0.03 107.64
*Source: Bloomberg
US Treasury yields Daily Change (%) Yield (%)
2-Year +0.2 0.17%
10-Year -1.3 0.66%
30-Year -1.6 1.37%
*Source: Bloomberg

Crude oil led Friday's retreat in natural resources prices, cutting almost 5% off the last month's 80% rebound. US Crude Oil for July delivery slid down sharply to $33.25 last Friday. Despite the price rising almost 13% last week as producers around the world continued to cut output, it is expected that a quick rebound may not occur in the short period of time. Oil price continued to fall in Asia time as an escalating war of words between the US and China added to caution over the prospects for a global recovery in demand.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -2.58% -0.93 35.13
WTI Crude -1.98% -0.67 33.25
*Source: Bloomberg

In global equities, the Stoxx Europe 600 index closed less than 0.1% lower, while the FTSE 100 ended the session down 0.4%. The FTSE 100 will also be closed on Monday for a holiday. In Asia, Japan’s Nikkei rose 0.8%, while the Shanghai Composite Index closed down 0.5% last Friday.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.45% +294.62 20,682.78 10:35:03 AM
KOSPI Index +0.62% +12.17 1,982.15 11:08:50 AM
ASX200 Index +1.51% +83.27 5,581.10 11:08:44 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.31% +75.00 24,496.00 10:58:53 AM
S&P500 Futures +0.28% +8.25 2,961.25 10:58:49 AM
Nasdaq Futures +0.31% +29.00 9,434.25 10:58:55 AM
*Source: Bloomberg

 

Companies reporting earnings for the week ahead include:

  • HP (NYSE: HPQ): closing bell on Wednesday
  • Salesforce (NYSE:CRM): Thursday afternoon session
  • Costco (NASDAQ: COST): closing bell on Thursday
  • Dell Technologies (HYSE: DELL): closing bell on Thursday

 

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany GDP (Final) (14:00)
  • Germany IFO Business Climate (16:00)
  • US Memorial Day Holiday
  • UK Spring Bank Holiday
  • Singapore Hari Raya Puasa Holiday