U.S. Protests affect U.S. economic reopen plans with China-U.S. tensions adding pressure causing recovery hopes to fade, creating a clouded outlook for U.S. market activity.
Summary: The global equity market today saw major indices and key equities test multi-month highs. As risk sentiment improved across the global market, major indices and key equities traded on a positive note for the second consecutive session this week. Taking cues from the Asian market, the European market saw major risk assets open on a positive note.
The fundamental support for market bulls gained a huge boost over gains in Lufthansa shares as the firm’s board approved a government bailout package worth several billion dollars. Aside from gains in Lufthansa shares, gains in auto sector shares led by positive activity in BMW, Daimler, and Volkswagen stocks and boost to travel sector shares also helped improve risk sentiment, keeping major indices and risk assets on bullish price rally across the day.
Rare Metals: Over lack of fresh cues to support safe-haven demand, rare metals are seeing price consolidate slightly lower to recent highs. Profit booking activity ate away some of the gains, but protests in the U.S. over racial discrimination and Sino-U.S. tensions keep rare metals steady above key support price levels.
Crude Oil: Crude oil price is trading positive across both major international benchmarks and their futures. As OPEC+ members are expected to meet in a teleconference meeting later this week, traders hope for an extension for ongoing production and supply cut, and this pushed price of both W.T.I. and Brent to three-month highs with W.T.I. trading above $13 p/b while Brent trades above $38.50 p/b.
D.X.Y.: The U.S. Dollar index, which measures the strength of U.S. Greenback against six major rival global currencies, remains range-bound near monthly lows scaled in previous sessions around the mid-97 mark. As protests over the death of black prisoners and tensions between China & the U.S.A. continue to rise, dovish pressure stemming from the events adds pressure to U.S. Greenback, weakening it in the global market.
On The Lookout: The main focus is on U.S. protest proceedings and EU-UK talks. As the U.K. has kept its Brexit transitional timeline unchanged at the end of the year, and talks failed to produce positive results so far, the E.U. and U.K. are set to get together one last time to work things out between the two market regions as they discuss their trade relations.
While U.S. states have just slowly started easing up and relax lockdown measures, death of Mr. George Floyd in police custody in Minneapolis reopened pent up anger given that this is the second death of a person under Minneapolis’s police custody with the first victim being Mr. Jamar Clark who was shot down in November of 2015. As both events displayed a clear racial and economic inequality, old wounds were reopened, resulting in protests across the nation with some peaceful in nature. At the same time, a majority have taken on violent tone leading to the destruction of property and looting activities.
This has, in turn, affected the economic reopening and lockdown easing plans of various U.S. states as government officials fear the possibility of further escalation in protests. This has led to Sino-U.S. tensions taking the backseat among investors’ focus over lack of fresh developments. On the release front, the U.S. calendar remains silent for the day, aside from the release of API weekly crude oil stockpile data.
Trading Perspective: U.S. futures trading in the international market were mostly positively supported by prevalent risk sentiment in the international market. But Wall Street is expected to open flat as recovery hopes eased given pressure from escalating protests in U.S.A. and Sino-U.S. tensions, which greatly affect the government’s plans for lockdown relaxation and economic reopening plans.
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