Equity Markets

European stocks edged higher on improving economic data despite the resurgence of coronavirus cases and mixed corporate earnings reports. In the US share market, earnings reports are relatively buoyant and the tech rally continues to drive the momentum on Wall Street. However, there are still doubts over the second stimulus package ahead of the month-long break.

On the geopolitical front, the tensions between the US and China are escalating. Chinese tech companies remain entangled in the feud – the potential sale of the social media app TikTok to Microsoft sparked a fresh wave of tensions between the two powerful countries.

Wall Street ended in positive territory despite the escalating geopolitical tensions and the mounting rise of the COVID-19 cases:

• Dow Jones Industrial Average gained 164 points or 0.6% to 26,828.
• S&P 500 rose by 12 points or 0.4% to 3,307.
• Nasdaq Composite finished by 38 points or 0.4% higher to 10,941.

Currency Markets

In the FX space, major currencies were stronger against the US dollar. The greenback struggled to recover on the upside dragged by virus woes, uncertainty about the agreement on the second stimulus package and geopolitical tensions.

Commodity-linked currencies were among the best performing G10 currencies against the US dollar. The Euro continues to attract buyers at the expense of the greenback. The cost to sell dollars and buy euros has fallen to a two-month low which makes the shared currency more attractive.

On the economic front, investors were pleased with the improvement in the economic data received yesterday:

• Aussie Retail Sales jumped to 2.7% in June 2020 following a rise of 16.9% in May and a fall of 17.7% in April 2020.
• Canadian manufacturers signalled a rebound in production volumes at 52.9 in July, up from 47.8 in June. The index registered is the first expansion for the first time in five months. The rebound was led by improving customer demand as more parts of the economy reopen after stoppages during the pandemic.

In the US, current business conditions rose 14 points to 53.5 in July, increasing for the third month in a row and reaching a 15 month high. New orders for manufactured goods in June, up two consecutive months, increased $25.5 billion or 6.2 percent to $437.2 billion.

Commodities

Crude oil prices edged higher on the overall optimism and promising manufacturing data. The oil market found support on the weekly oil updates. API weekly crude oil stock declined to -8.587M in July 31 from previous -6.829M. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading around $41.56 and $44.30, respectively.

Gold

Gold has been on an unstoppable rally recently as investors are hedging with safe-haven assets given the ongoing uncertainty and geopolitical tensions. The precious metal surged above the $2,000 mark. As of writing, it is currently trading at $2,024 after reaching a high of $2,031.

Where is the next target level? In July, many big banks struggle to agree on the next level if the gold broke the $2,000 mark. The fundamentals for driving gold higher remain bullish. In the face of uncertainties, gold is gaining momentum due to a number of factors ranging from the global economic crisis, US election, stimulus packages, continued spread of the virus, geopolitical tensions between US and China, and a fragile rally in the stock market among others.

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