COVID-19 experimental medication trial failure and EU disappointing support bill discussion caused risk sentiment to decline.
Summary: Global equities tumbled down sharply on conflicting reports surrounding the failure of the Gilead Sciences Inc experimental drug trial. While some claim first trial was a failure, the firm clarified in a statement that findings were inconclusive because of early termination of the study. Whatever the outcome, as hopes for a cure to COVID-19 vanished following the update, risk sentiment in COVID-19 hit economies plunged sharply yet again, resulting in today’s worldwide meltdown. Following dovish activity in Asian markets, European markets also saw a sharp decline in key risk assets on worries surrounding the COVID-19 pandemic. Further, a disappointing outcome in EU’s latest support package also added a major blow adding fuel to today’s dovish price activity.
Rare Metals: Rare metals are trading range-bound in the international market today, consolidating their hold slightly below weekly highs. Profit booking activity caused gold to inch down from weekly highs, but lingering caution in market underpins safe-haven demand keeps price steady above $11720 handle.
Crude Oil: Crude Oil futures are continuing to see price action take on consolidative tone near familiar price levels. But there have been some improvements as brokers are taking measures to ensure traders do not suffer from similar incidents. Some brokers have announced increased margin requirements, while others have taken measures to stop traders from making new positions in WTI & Brent benchmarks.
DXY: US Dollar index, which measures the strength of US Greenback against six major global currencies, continues to remain steady around the 100 handle. While broad-based risk sentiment has taken a nosedive, USD is unable to make headway as US House has approved yet another support package.
On The Lookout: As the trading session comes to close for the week, macro data outcome gave a significant blow to UK and Europe as UK retail sales and German IFO Business climate index saw a worse than expected outcome. EU support package discussion has had a disappointing outcome as the EU summit saw ministers agree on the recovery fund but failed to make guidelines on how to finance the support package and what should be the size of the support package. This made it fall much behind its counterpart from another side of the Atlantic Ocean.
US House yesterday approved the 484 Billion USD worth economic support bill that takes care of the paycheck protection program for small businesses. The support bill also takes care of extra fund requirements to support hospitals and testing activities.
On the economic calendar front, the US calendar sees the release of Michigan Consumer Sentiment and Consumer Expectations data, and the Canadian calendar sees the release of Budget balance data. On the earnings front, the US market sees quarterly data from American Express, Baidu, Royal Caribbean Cruises, Ventas, and Verizon.
Trading Perspective: While broad market risk appetite has gone down, and cues from international markets were dovish, US futures trading in the international market was positively supported by impact from US house approval of Support package. Wall Street is expected to open on a positive note; however, gains are likely to be limited given impact from COVID-19 medical trial-related headlines.
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