global equities

Wall Street to Open Muted On Covid-19 Woes

Wall Street

Fresh escalation of COVID-19 cases causes a major set back to the positive price rally in the global market. 

Summary: The global equity market is off to a dovish start for the week as fresh COVID-19 victim count is escalating at a sharp rate across all major global economies which have relaxed lockdown measures. Further, the latest update providing more insight into China’s new national security law, which allows it to take invasive measures against Hong Kong and Macau, also acted as a deterrent to risk sentiment.

In the European market, major indices and key equities saw dovish opening over the impact from the decline in bank and oil sector shares and a spike in new COVID-19 cases in Germany. This, along with cues from the Asian market, caused risk sentiment to plummet in the European market resulting in dovish activity across all major European markets during the majority of intraday activity today. 

Precious Metals; Both Gold and Silver are enjoying a field day despite seeing relatively low gains as the trading activity has increased proportionally to increase in caution in the market. Concerns of the resurgent COVID-19 outbreak across key global markets are keeping safe-haven demand well supported in immediate and foreseeable future, allowing rare metals to trade positive across the day. 

Crude Oil: The price of crude oil in international market across both futures and spot market are seeing positive price action. However, the price movement is limited within familiar levels as concerns of low demand are starting to outweigh the impact of enforced production and supply limitations. In late-European market hours, both Brent and WTI spot prices were up by 1% on the day. 

DXY: The US Dollar index, which measures the strength of the US Greenback against six major rival global currencies, is barely holding at 97 handles in Asian and European hours today. This move is a result of the impact of the Fed’s latest balance sheet info. The data which came in late Thursday showed that other major central banks have finally lowered their USD purchasing activity after nearly three months.

As the swap activity has decreased and the US Fed has also seen a visible decline in demand for further emergency support activity from its end and this is viewed by many in the market as a sign that global financial markets are slowly but surely returning to near-normal levels last seen before the global COVID-19 outbreak crisis from Feb-March 2020.

On The Lookout: The week ahead will be an interesting point for analysts as they observe trading activity across key markets and match it with their theories to gain a clear picture and idea on the directional bias of the global financial market in immediate and near-future market durations. Some of the key factors that traders are on the lookout for include – new COVID-19 count, IMF’s revised global economic forecast, PMI data from the UK and Eurozone, and  US reaction to developments in China.

While President Trump has not made any visible move or comments yet, given his activity in the recent past and release of fresh insights into Chinese National Security law with its plans for Hong Kong and Macau is sure to light up a fiery argument between the two nations. China is already engaged in a war with India and suffering impact from the COVID-19 crisis and US sanctions. Any harsh retaliation from the US at the moment is likely to cause yet another dovish global rally in the near term. 

Trading Perspective: The US futures were mostly flat in the international market but showed some signs of positive price action despite investor mood in the international market. This suggests Wall Street is likely to see a subdued opening at the start of this week’s trading activity. On the release front, the US calendar sees the release of Existing Home Sales data and speech from BOC’s Macklem, ECB’s Lane, and US Fed Kashkari. 

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