Wednesday, June 24, 2020

Signs of Business Rebound Send European Shares Higher

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News shaping
the markets today

     

What’s happening: European shares gained on Tuesday to close at their highest level in around two weeks.

What happened: Signs of business activity rebounding at a stronger-than-expected pace, after the coronavirus-led decline, provided a boost to the markets yesterday.

Gains were also bolstered by White House trade advisor Peter Navarro’s comments on the trade deal between the US and China still being on the table. Investors remained concerned, however, about the rising coronavirus cases around the world.

Why it matters: Eurozone’s purchasing managers indexes pointed towards a further easing of the region’s economic crisis. Eurozone’s composite PMI jumped to a four-month high of 47.5 in June, from May’s reading of 31.9. The IHS Markit’s report exceeded the consensus view of 42.

Germany re-imposed lockdown restrictions in a district of its most populous state following a virus outbreak in the area. A number of states in the US also continued to record a spike in new infections and hospitalisations. Moreover, the WHO (World Health Organization) revealed a record rise in cases in various countries over the past few days.

The pan-European Stoxx 600 closed higher by 1.3% in Tuesday’s session, with auto stocks leading the rally. All major sectors closed in the positive territory.

The German DAX 30 index gained 2.1%, while the French CAC 40 added 1.4% following strong PMI readings. The UK's FTSE 100 closed higher by 1.2% after the country’s manufacturing activity returned to growth in June and Prime Minister Boris Johnson announced some relaxation of covid-19 restrictions in the country.

Shares of Wirecard rose more than 19% on Tuesday, after plummeting on news of the German payments company said around €2 billion had vanished from its balance sheet.

Aegon’s shares rose 9% after the Dutch life insurer appointed Duncan Russell as its Chief Transformation Officer. Kloeckner & Co’s stock surged around 17% after the German metals trader issued a positive profit forecast for the second quarter.

What to watch: Investors will focus on the ECB’s non-monetary policy meeting. Markets also await France’s manufacturing industry climate indicator and business climate indicator reports. Germany is also scheduled to report the Ifo business climate indicator today.

Investors will continue to access the coronavirus numbers globally, with the total cases climbing past 9.2 million. Meanwhile, Germany has confirmed around 192,480 cases.

The Markets Today

     

Gold trading will be in focus today, after the yellow metal closed yesterday’s session at its highest price in over seven years.

Context: Gold futures settled higher on Tuesday, as a weakening US dollar drove traders towards the bullion. US-China tensions also provided support for the precious metal.

Details: Conflicting statements by the White House trade adviser Peter Navarro regarding the US-China trade deal led to more investors buying gold for its safe-haven status.

While speaking to Fox News, Navarro said that the trade deal with China was over. President Donald Trump later tweeted that the deal was intact, followed by Navarro walking back on his earlier comments to confirm that the Phase I trade deal remained in place.

The ICE US Dollar Index, which measures the greenback’s performance against major currencies, declined 0.5% on Tuesday. The index has lost 1.1% so far this week.

Gold trading remained strong, despite the gains recorded by equity markets, driven by a rise in PMI readings for June.

August gold gained 0.8% to end at $1,782 an ounce on the Comex, after rising 0.8% on Monday. Gold prices settled at their highest level since October 2012.

Following a 0.3% increase on Monday, July silver gained 0.9% to reach $18.063 an ounce in yesterday’s session.

In other metals, July copper gained 0.2% to $2.6585 a pound, while July platinum rose 0.3% to $846.40 an ounce.

What to watch: With covid-19 cases continuing to rise in various parts of the world, traders expect the safe-haven yellow metal to remain strong in the near term. Gold prices could continue their rally today and reach new highs in the coming days. Gold futures traded higher by 0.2% to $1,784.70 an ounce in this morning’s Asian trading.

Other Markets: US indices trading closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.5%, 0.43% and 0.74%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Switzerland’s investor sentiment index, Saudi Arabia’s inflation rate, UAE’s loan growth as well as the US MBA mortgage applications, house price index and EIA crude oil stocks.