Thursday, June 18, 2020

France Trader Sentiment Turns Sweeter Than Macarons

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News shaping
the markets today

     

What’s happening: French stocks rose on Tuesday, extending gains for the second consecutive indices trading session.

What happened: Expectations of additional stimulus and hopes of the global economy recovering overshadowed concerns over new covid-19 cases in Beijing and rising infections in some US states to send the French CAC 40 higher on Wednesday.

French President Emmanuel Macron’s announcement related to helping the country’s medical research also lifted the market sentiment.

After recording gains of 2.7% on Tuesday, the French index extended its rally yesterday.

Why it matters: Investors shrugged off worries of rising covid-19 infection rates in some states of the US and a new outbreak in Beijing. In an attempt to curb the spread of the virus, China cancelled some domestic flights and raised the alert level, resulting in the cancellation of classes and expansion of lockdowns in certain areas.

Investor also dismissed concerns of rising tensions between China and India near the border area and frictions between North and South Korea.

News of a widely available steroid, dexamethasone, proving helpful in saving lives of some critically unwell coronavirus patients also cheered the markets and boosted forex and stock trading.

Leading French drug-maker Sanofi said it is working on two potential vaccines for covid-19 and announced plans to invest €610 million to turn its two French facilities for research and development of these vaccines.

Meanwhile, the French President pledged €200 million for research and development of vaccines and said the plans for reopening some pharmaceutical production facilities in the country will be disclosed on Thursday.

Reports of the Trump administration preparing for a nearly $1 trillion infrastructure plan provided support to market sentiment yesterday.

At the close of trading in Paris, the French CAC 40 index had risen 0.88%, while the SBF 120 index gained 0.71%. The CAC 40 VIX, the index measuring the implied volatility of index options, lost 2.64% to settle at 33.22.

Worldline SA was the best performer of the CAC 40 index, rising 4.4% on Wednesday. Renault SA bucked the overall market trend, falling 3.7% in previous session.

What to watch: Investors look forward to the French President’s plans of reopening pharma companies. Markets will also keep an eye on the European Council, which is expected to meet at the end of the week, to discuss a proposal for the economy’s recovery.

Investors continue to monitor covid-19 cases around the world. The total number of cases has surged past 8 million globally, with France reporting around 194,805 infections.

The Markets Today

     

The Swiss franc will be in focus today, ahead of the Swiss National Bank’s interest rate decision.

Context: The Swiss franc rose against the US dollar on Wednesday, with European indices closing mostly higher. Rising worries around geopolitical tensions lent support to the franc.

Details: The SECO (State Secretariat for Economic Affairs) said on Tuesday, that it expected Switzerland’s GDP to contract 6.2% this year, versus the 6.7% contraction projected by the Swiss government during its statement in April.

There has been a rise in geopolitical tensions with India and China clashing near the border area, resulted in the death of soldiers from both countries, and hostility growing between North and South Korea after North Korea bombed a joint liaison office.

The Swiss franc is expected to remain volatile in forex trading today as investors await the Swiss National Bank’s monetary policy meeting. The central bank had held its interest at -0.75% during its March meeting.

Markets will be also keeping an eye on the bank’s new growth forecasts during today’s meeting. Policymakers have lowered their growth projections for the year, expecting the Swiss economy to shrink, versus their prior forecast of 1.5%-2% growth.

The Swiss franc appreciated versus the US dollar on Wednesday, settling at 0.9487. the USD/CHF forex pair traded at 0.9495 during the Asian session today.

What to watch: Traders will focus on the Swiss National Bank’s monetary policy meeting today. The bank is widely expected to leave rates unchanged, while there are hopes of an announcement of additional monetary stimulus. Markets will also keep an eye on the balance of trade report from Switzerland. The country’s trade surplus had expanded to CHF 4.3 billion in April, from CHF 3.1 billion in the previous month.

Other Markets: US indices trading closed mostly lower on Wednesday, with the Dow Jones index and S&P 500 down by 0.65% and 0.36%, respectively. The Nasdaq 100 gained 0.15% in the previous session.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Italy’s balance of trade and construction output, Spain’s balance of trade, Saudi Arabia's annual inflation rate, UAE’s inflation rate, China’s foreign direct investment, Bank of England’s interest rate decision, Canada’s new housing price index, wholesale sales and ADP employment as well as US initial jobless claims, Philadelphia Fed manufacturing index, CB leading index and natural gas stockpiles.