Thursday, July 9, 2020

Covid-19 Woes Lift Silver to 10-Month High

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News shaping
the markets today

     

What’s happening: Silver prices closed higher on Wednesday, surging to a new ten-month high.

What happened: With uncertainties over the pace of economic recovery due to rising coronavirus cases in the US, precious metals have recently been on uptrends due to their safe-haven appeal.

Silver futures have been tracking gold prices and breached the $19 mark yesterday as a loosening of monetary policies by governments around the world sparked inflation concerns. Defying their historical inverse correlation to stocks, metal prices have recently been rising with stock market rallies.

Why it matters: As covid-19 cases continue to rise across several US states, there is a great deal of uncertainty around the pace at which the restrictions on businesses will be eased. Moreover, higher stimulus packages announced by central banks have fuelled inflation concerns.

Investors typically increase safe-haven assets in their portfolios in the event of economic uncertainties. While this is typically indicative of a lower risk appetite, the pandemic seems to have altered investor behaviour. Metal prices rose yesterday alongside global stock market rallies that took US, Chinese, and European indices higher.

Chinese stocks climbed to new highs, led by Alibaba and Futu Holdings. US stock indices also closed higher amid a volatile session due to an alarming spike in covid-19 cases in the country. The US recorded a new daily record of 60,000 infections on Tuesday, while President Donald Trump continues to pressure state governors to reopen public schools in the fall, albeit with a “blended learning” model.

Interestingly, no safe-haven demand was seen for the US dollar, with the dollar index trading broadly trading flat versus a basket of foreign currencies.

Silver prices settled at $19.161 an ounce on Wednesday, marking its highest level since 2019. Gold futures also surged to another nine-year high in the previous session, with August gold gaining 0.6% to settle at $1,820.60 an ounce.

What to watch: Investors will continue to focus on covid-19 numbers, with the case-count crossing the 3-million mark in the US. Uncertainty may continue to support silver prices in the days ahead. Silver futures traded higher by 0.7% to $19.285 an ounce in today’s European session.

The Markets Today

     

US stocks will be in focus today, ahead of initial jobless claims data scheduled for release later in the day.

Context: US stocks closed higher on Wednesday, with the Nasdaq 100 climbing to another record high, despite an acceleration in coronavirus cases in around 30 states in the country.

Details: Equity markets recorded gains in yesterday’s session, as expectations of prolonged restrictions in the US gave a boost to tech stocks.

The US reported the highest single-day figure of 60,000 new covid-19 cases on Tuesday. The country has the highest number of infections and death toll in the world, with Florida and Texas becoming the new hotspots of the latest resurgence. Florida recorded over 7,300 cases, with the case-count in Texas exceeding 10,000.

After falling 1.5% on Tuesday, the Dow Jones index gained 177.10 points to close at 26,067.28 on Wednesday. The index traded as high as 26,109.49 earlier in the session but is still down 8.66% year to date. The S&P 500 rose 0.8% to close at 3,169.94.

The Nasdaq 100 gained 1.4% to a new record close of 10,492.50 on Wednesday. The tech-laden index has gained around 17% year to date.

Shares of Slack Technologies spiked around 9% after the company reported the acquisition of Rimeto for an undisclosed amount. Biogen’s stock gained close to 5% after the pharma company submitted the marketing application for its experimental Alzheimer's disease therapy, aducanumab. Shares of National General Holdings jumped almost 65% on news of being acquired by Allstate Corp for about $4 billion.

What to watch: Investors await data on initial jobless claims and wholesale inventories from the US. Initial jobless claims, which eased to 1.427 million in the week ending June 27, are expected to decline to 1.375 million in the recent week. US wholesale inventories are likely to decline 1.2% in May, versus a 0.2% rise in the prior month.

Markets will continue to keep an eye of coronavirus cases, with the US surpassing 3 million infections and over 132,000 deaths.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.3%, 0.5% and 1.1%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Canada’s housing starts, minutes of the Eurogroup meeting as well as the US EIA’s natural gas stockpiles.