The Week Ahead – COVID-19, Economic Data and US Politics in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.

For the Dollar:

It’s another busy week ahead on the economic data front.

In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.

We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.

The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.

Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.

For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.

The Dollar Spot Index ended the week down by 1.15% to 93.349.

For the EUR:

It’s also another busy week ahead on the economic data front.

On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.

The focus will then shift German factory orders for June, due out on Thursday.

At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.

Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.

The EUR/USD ended the week up by 1.05% to $1.1778.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.

Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.

On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.

While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.

The GBP/USD ended the week up by 2.27% to $1.3085.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.

Expect the employment figures to have the greatest impact, however.

Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.

Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.

The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.

We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.

The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.

For the week, however, the main event is the RBA monetary policy decision on Tuesday.

Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\

Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.

The Aussie Dollar ended the week up by 0.53% to $0.7143.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.

With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.

Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.

The Kiwi Dollar ended the week down by 0.18% to $0.6629.

For the Japanese Yen:

It is a busy week ahead on the economic calendar.

Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.

The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.

While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.

The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead on the economic data front.

July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.

On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.

Away from the economic calendar, any chatter from Beijing will also need monitoring.

The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.

60 days may sound like a lot but when considering the lack of progress over 4-years…

A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.

Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…

U.S Politics:

Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.

The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…

The Coronavirus:

It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.

At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.

Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070

For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.

The Weekly Wrap – Economic Data, the FED, and Trump Sank the Dollar

The Stats

It was a busy week on the economic calendar, in the week ending 31st July.

A total of 56 stats were monitored, following the 41 stats from the week prior.

Of the 56 stats, 31 came in ahead forecasts, with 24 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 37, 35 stats reflected a deterioration from previous.

For the Greenback, it was a 6th consecutive week in the red. In the week ending 31st July, the Dollar Spot Index fell by 1.15% to 93.349. In the week prior, the Dollar had fallen by 1.57%.

The continued slide through the month of July left the Dollar Spot Index down by 4.15% for the month.

Dire economic data, the continued spread of COVID-19, and a dovish FED delivered the loss. Adding to the Dollar angst in the week was Trump’s Presidential Election delay tweet on Thursday…

According to a Reuters report, U.S Dollar net shorts surged to the highest in 9-years, delivering the largest monthly loss Since Sept-2010.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 17,731,750 for Friday, rising from last Friday’s 15,930,779 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,801,071 on a global basis. This was higher than the previous week’s increase of 1,741,556 in new cases.

In the U.S, the total rose by 454,463 to 4,702,774. In the week prior, the total number of new cases had risen by 478,299.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 22,753 to bring total infections to 793,804. In the previous week, the total number of new cases had risen by 17,404. Spain alone reported 16,101 new cases in the week.

Out of the U.S

It was a busy week on the economic data front.

Key stats included July consumer confidence, the weekly jobless claims, and 2nd quarter GDP figures.

The stats were skewed to the negative. Consumer confidence deteriorated in July, as a result of the 2nd wave of the pandemic. Initial jobless claims increased for a 2nd consecutive week, with the U.S economy contracting by 32.9% in the 2nd quarter.

At the end of the week, July consumer sentiment figures were also revised down.

There were some positives, however. Durable and core durable goods continued to rise in June.

Chicago’s PMI returned to expansion in July, with personal spending rising for a 2nd consecutive month in June. These were good enough to give the Dollar much-needed support at the end of the week.

In the equity markets, the NASDAQ and S&P500 rose by 3.69% and by 1.73% respectively. The Dow bucked the trend, however, falling by 0.16%.

Out of the UK

It was a particularly quiet week on the economic calendar, with no material stats to provide the Pound with direction.

A lack of economic data contributed to the upside in the Pound that benefitted from Dollar weakness. News of the government reintroducing lockdown measures in the North weighed at the end of the week, however.

In the week, the Pound rallied by 2.27% to $1.3085 in the week, following on from a 1.80% gain from the previous week. The FTSE100 ended the week down by 3.69%, following on from a 2.65% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In a quiet 1st half of the week, Germany’s IFO Business Climate Index figures for July provided support on Monday.

The focus then shifted to 2nd quarter GDP numbers. France, Germany, and the Eurozone reported particularly dire 2nd quarter numbers.

The German economy contracted by 10.1%, the French economy by 13.8%, and the Eurozone economy by 12.1%.

It wasn’t enough to send the EUR into the red, however, as the U.S delivered darker numbers.

For the week, the EUR rose by 1.05% to $1.1778, following a 2.00% rally from the previous week. A 0.58% pullback on Friday limited the upside for the week.

For the European major indexes, it was another bearish week. The DAX30 slid by 4.09%, with the CAC40 and EuroStoxx600 falling by 3.49% and by 2.98% respectively.

For the Loonie

It was a quiet week on the economic calendar.

Economic data included May GDP and June RMPI numbers at the end of the week.

The stats were positive, with the Canadian economy expanding by 4.5% in May, following April’s 11.7% contraction. In June, the RMPI rose by a further 7.5%, following a 16.4% jump in May.

While the other majors lost ground against the Greenback on Friday, the stats delivered support at the end of the week.

The Loonie rose by 0.02% to end the week at C$1.3412 against the Greenback. In the week prior, the Loonie had rallied by 1.22% to C$1.3415.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 31st July, the Aussie Dollar rose by 0.53% to $0.7143, while the Kiwi Dollar fell by 0.18% to $0.6629. A 1.04% slide on Friday, left the Kiwi in the red for the week.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Inflation and private sector credit figures delivered mixed results in the week.

In the 2nd quarter, consumer prices slid by 1.9%, with prices down by 0.30% year-on-year.

Final delivery numbers were not much better, with the Producer Price Index falling by 1.20% in the 2nd quarter. Year-on-year, the index fell by 0.40%.

The numbers were better than forecasts, which propped up the Aussie Dollar.

Private sector credit disappointed, however, falling by 0.3% in June.

While the Aussie Dollar found support against the Greenback, the latest COVID-19 outbreak pinned back the Aussie.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

While stats included building consent and business confidence figures, the focus was on the business confidence figures.

A marginal improvement in business confidence did little to support the Kiwi, however.

In July, the ANZ Business Confidence Index rose from -34.4 to -31.8.

According to the latest ANZ Report,

  • A net 9% of firms expect weaker economic activity in their own business, rising from -26% in June.
  • The retail sector drove the recovery, while the agriculture sector was the most negative.
  • 31% of firms say they intend to lay off staff, and 24% say they have less staff than a year ago.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

Retail sales continued to fall in June. Following a 12.5% slump in May, retail sales fell by 1.20%.

Industrial production delivered hope, however, rising by 2.7% in June, according to prelim figures. In May, production had tumbled by 8.9%.

A weakening U.S Dollar stemming from particularly dire economic data and a dovish FED supported the Yen.

The Japanese Yen rose by 0.29% to end the week at ¥105.83 against the Greenback. A 1.05% slide on Friday, cut the gains from earlier in the week. In the week prior, the Yen had risen by 0.82%.

Out of China

It was a quiet week on the economic data front.

July’s NBS private sector PMI figures delivered mixed results on Friday.

While the Non-Manufacturing PMI slipped from 54.4 to 54.2, the Manufacturing PMI rose from 50.9 to 51.1.

With Beijing and Washington silent, following the previous week’s diplomatic spat, the Yuan recovered to sub-CNY7 levels.

In the week ending 24th July, the Chinese Yuan rose by 0.62% to CNY6.9752 against the Dollar. In the week prior, the Yuan had fallen by 0.37%.

The CSI300 rallied by 4.20%, while the Hang Seng falling 0.45%, as a 2nd wave of the pandemic hit HK.

The Week Ahead – Geopolitics, the FED, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 57 stats in focus in the week ending 31st July. In the week prior, just 41 stats had been in focus.

For the Dollar:

It’s a busy week ahead on the economic data front.

In the 1st half of the week, June’s durable and core durable goods orders are due out along with July consumer confidence figures.

Expect consumer confidence to be the key driver, however. The figures will indicate sentiment towards the spike in new COVID-19 cases and unemployment.

The focus will then shift to 2nd quarter GDP numbers and the weekly initial jobless claims figures on Thursday.

With the markets expecting the worst on the GDP front, the weekly jobless claims will need to drop to sub-1.3m levels.

At the end of the week, inflation, personal spending, and finalized consumer sentiment figures will also draw attention.

On the monetary policy front, the FED delivers its July monetary policy decision on Wednesday. While no rate cut is expected, the markets will want the assurance of more support and perhaps some adjustments to its asset purchasing program. The press conference will garner plenty of attention.

The Dollar Spot Index ended the week down by 1.57% to 94.435.

For the EUR:

It’s also a busy week ahead on the economic data front.

At the start of the week, July’s IFO Business Climate Index figures are due out of Germany.

We may see some resilience in the EUR and the European majors, however, as progress is made with the EU Recovery Fund.

The focus will then shift to the 2nd half of the week.

On Thursday, 2nd quarter GDP and July unemployment figures are due out of Germany.

At the end of the week, French 2nd quarter GDP numbers and June consumer spending figures are in focus.

Expect prelim July inflation figures from member states and the Eurozone to have a muted impact.

Following the agreement on the mechanics of the EU Recovery Fund. Progress will need to be made in the coming weeks to support the EUR at its current levels.

The EUR/USD ended the week up by 2.00% to $1.1656.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound firmly in the hand of Brexit and trade talks.

The GBP/USD ended the week up by 1.80% to $1.2794.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

The markets will need to wait until Friday for May GDP and June RMPI figures.

While we expect some sensitivity to the numbers, U.S fiscal policy measures and COVID-19 updates will remain a key driver.

One curveball continues to be the ongoing spat between the U.S and China…

The Loonie ended the week up by 1.22% to C$1.3415 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

2nd quarter inflation and wholesale inflation figures are due out on Wednesday and Friday.

We don’t expect the numbers to have a lasting impact on the Aussie Dollar, however.

June’s private sector credit figures, also due out on Friday, will likely be brushed aside.

2nd quarter GDP figures from key economies, COVID-19 news, and geopolitics will remain the key drivers. A jump in new COVID-19 cases and deteriorating relations with China would likely test support for the Aussie Dollar.

The Aussie Dollar ended the week up by 1.56% to $0.7105.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

After a quiet start to the week, building consent and business confidence figures are due out on Thursday.

Expect the ANZ Business Confidence figures to have a greater influence on the Kiwi.

Away from the numbers, private sector PMIs from China, COVID-19, and geopolitics will remain in focus.

The Kiwi Dollar ended the week up by 1.28% to $0.6641.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

June retail sales figures, due out on Thursday, and industrial production numbers on Friday are the key stats for the week.

We would expect the Yen to brush aside the stats, however, with the market focus elsewhere.

Progress towards a COVID-19 vaccine would pin back any upside in the Yen. Support could come from the U.S administration, however.

There’s the spat with China and the U.S fiscal stimulus package to track.

The Japanese Yen ended the week up by 0.82% to ¥106.14 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

July’s private sector PMIs are due out on Friday. Expect the figures to influence risk appetite at the end of the week.

Away from the economic calendar, any chatter from Beijing will also need consideration.

The Chinese Yuan ended the week down 0.37% to CNY7.0184 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus in the week. Both sides agreed to continue negotiations through to September, which has bought Boris and the Pound some time.

With Germany having made it clear that they will focus on talks in September and October, however, it might be a slow summer.

U.S Politics:

It was quite a week for Trump and the Republicans last week. Expect more of the same in the week ahead.

First on the agenda will be to get the next fiscal stimulus package wrapped up. With benefits expiring at the end of the month, failure to deliver the next phase would be a blow to Trump’s hopes of a 2nd term.

Then we have the spat with China to consider and there’s the continued rise in new COVID-19 cases.

Corporate Earnings

Out of Germany, Deutsche Bank (Wed) is the marquee name delivering earnings results.

From France, LVMH (Mon), Peugeot (Tues), Total (Thurs), Airbus Grp (Thurs), Renault (Thurs), BNP Paribas (Fri), and Air France KLM (Fri) are key names delivering results.

The Coronavirus:

It was another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw positive news of progress towards a vaccine deliver support to riskier assets early in the week. This will need to continue in the week ahead to offset the negative impacts of points ii) and iii).

At the time of writing, the total number of coronavirus cases stood at 16,199,447. Monday to Saturday, the total number of new cases increased by 1,531,149. Over the same period in the previous week, the total number had risen by 1,385,504.

Monday through Saturday, the U.S reported 417,070 new cases to take the total to 4,315,709. This was down marginally from the previous week’s 419,276.

For Germany, Italy, and Spain, there were 17,083 new cases Monday through Saturday. This took the total to 771,697. In the previous week, there had been 10,124 cases over the same period. Spain accounted for 12,166 of the total new cases… With EU member states reopening borders, the chances of a 2nd wave across the EU will be on the rise.

Over the weekend, Reuters had reported a record rise in new COVID-19 cases in almost 40 countries last week.

The Weekly Wrap – COVID-19, Geopolitics, and Economic Data Drove the Majors

The Stats

It was a quieter week on the economic calendar, in the week ending 24th July.

A total of just 41 stats were monitored, following the 74 stats from the week prior.

Of the 41 stats, 23 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 33 of the stats reflected an upward trend from previous figures. Of the remaining 8, 7 stats reflected a deterioration from previous.

For the Greenback, it was a 5th consecutive week in the red. In the week ending 24th July, the Dollar Spot Index fell by 1.57% to 94.435. In the week prior, the Dollar had fallen by 0.73%.

For the U.S, the Dollar was on the back foot throughout the week. News of progress towards a COVID-19 vaccine weighed on the Dollar in the early part of the week.

Domestic issues will have also tested demand for the Dollar, however. News of the U.S administration sending Federal agents to control protests tested the Dollar. Rising tension between the U.S and China didn’t help as Trump looked to distract voters from the continued spike in new COVID-19 cases.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 15,930,779 for Friday, rising from last Friday’s 14,189,223 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,741,556 on a global basis. This was higher than the previous week’s increase of 1,584,328 in new cases.

In the U.S, the total rose by 478,299 to 4,248,311. In the week prior, the total number of new cases had risen by 484,462.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 17,404 to bring total infections to 771,051. In the previous week, the total number of new cases had risen by 10,432. Spain continued to see larger rises over the week.

Out of the U.S

It was another relatively quiet week on the economic data front.

Key stats included the weekly jobless claims figures and July’s private sector PMI numbers.

In the week ending 17th July, jobless claims rose by 1.416m following 1.3m from the previous week. It was yet more evidence that the economic recovery has more speed bumps to come.

Private sector PMIs also failed to impress. While manifesting sector activity returned to expansion in July, the services sector continued to contract.

With the stats on the negative, the Dollar was on the slide for the wrong reasons.

Rising tensions between the U.S and China, the use of Federal agents, and COVID-19 also weighed on the Greenback.

In the equity markets, the NASDAQ fell by 1.33%, with the Dow and S&P500 declining by 0.76% and 0.28% respectively.

Out of the UK

It was another busy week on the economic calendar.

Key stats included June retail sales and prelim private sector PMI numbers.

The stats were skewed to the positive for the Pound.

In June, retail sales surged by 13.9%, month-on-month, with core retail sales jumping by 13.5%.

A 2nd consecutive monthly jump saw sales return to pre-COVID-19 levels.

Private sector activity also impressed. According to prelim figures, the all-important services PMI jumped from 47.1 to 56.6.  With the Manufacturing PMI rising from 50.1 to 53.6, the composite increased from 47.7 to 57.1.

The only negative for the Pound was weaker than expected recovery in industrial trend orders. In July, industrial trend orders rose from -58 to -46. Economists had forecast a rise to -38.

Away from the economic calendar, the Pound also found support in the week. A combination of improved economic indicators and positive progress on trade talks delivered the upside.

In the week, the Pound rallied by 1.80% to $1.2794 in the week, reversing a 0.43% loss from the previous week. The FTSE100 ended the week down by 2.65%, partially reversing a 3.20% gain from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Key stats included German and Eurozone consumer confidence figures and prelim private sector PMIs.

The stats were skewed to the positive.

While the consumer confidence slipped in the Eurozone, confidence in Germany improved in August.

More importantly, private sector activity continued to see a pickup in activity in July.

The Eurozone’s Services PMI jumped from 48.3 to 55.1, with the Manufacturing PMI rising from 47.4 to 51.1.

Supported by a marked pickup in service sector activity in both France and Germany, the Eurozone Composite rose from 48.5 to 54.8.

On the geopolitical risk front, rising tension between the U.S and China was EUR negative.

At the start of the week, agreement on the mechanism of the EU Recovery Fund delivered a boost, however.

For the week, the EUR rallied by 2.00% to $1.1656, following a 1.13% gain from the previous week.

For the European major indexes, it was a bearish week. The CAC30 and EuroStoxx600 slid by 2.23% and 1.45% respectively, while the DAX40 slipped by 0.63%.

For the Loonie

It was a relatively busy week on the economic calendar.

Economic data included May retail sales and June inflation figures.

Retail sales bounced back from April’s slump, with inflationary pressures picking up in June.

Crude oil prices also headed northwards in the week, providing the Loonie with support.

The Loonie rose by 1.22% to end the week at C$1.3415 against the Greenback. In the week prior, the Loonie had risen by 0.09% to C$1.3415.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 24th July, the Aussie Dollar rose by 1.56% to $0.7105, with the Kiwi Dollar gaining 1.28% to $0.6641.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Retail sales figures disappointed on Wednesday, in spite of a 2.40% rise off the back of a 16.9% surge in May. Economists had forecast a 7.1% gain.

Also negative was a fall in business confidence. In the second quarter, the NAB Quarterly Business Confidence fell from -12 to -15, which was to be expected. The decline reflected the impact of the COVID-19 pandemic on the business sentiment.

On the monetary policy front, the RBA meeting minutes provided few surprises.

The upside in the week came as a result of the news of progress towards a COVID-19 vaccine. Even rising tensions between the U.S and China failed to send the Aussie into reverse.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

Key stats were limited to June trade figures.

A rise in exports and little movement in imports led to a narrowing of the trade deficit in June. The stats ultimately had a muted impact on the Kiwi Dollar, however, with geopolitics in focus on Friday.

Tracking the Aussie Dollar, hopes of a COVID-19 vaccine to boost the global economy supported the Kiwi.

For the Japanese Yen

It was a busy first half of the week on the data front, with Japan on holiday on Thursday and Friday.

June trade figures and July’s prelim private sector PMIs were in focus in the week.

The stats were mixed. In June, exports slid by 26.2%, following a 28.3% tumble in May. A more marked decline in imports, however, led to a narrowing of the trade deficit to ¥268.8bn.

From the private sector, both the manufacturing and services sectors reported a slower pace of contraction. It was of little consolation, however, with the rises in the PMIs only marginal.

The Manufacturing PMI rose from 40.1 to 42.6, with the Services PMI rising from 45.0 to 45.2.

Over the week, the stats had a muted impact on the Japanese Yen, however.

A weakening U.S Dollar stemming from the progress towards a COVID-19 vaccine supported the Yen.

The Japanese Yen rose by 0.82% to end the week at ¥106.14 against the Greenback. In the week prior, the Yen had fallen by 0.08%.

Out of China

It was a quiet week on the economic data front.

There were no material stats to provide the markets with direction.

On the monetary policy front, the PBoC left the 3-year and 5-year loan prime rates unchanged. This was in line with expectations, with the PBoC having pre-warned the markets of the likely end to policy easing near-term.

Over the week, rising tensions between the U.S and China weighed on the Yuan.

In the week ending 24th July, the Chinese Yuan fell by 0.37% to CNY7.0184 against the Dollar. In the week prior, the Yuan had gained 0.10%.

The CSI300 declined by 0.86% in the week, with the Hang Seng falling 1.53%, as U.S – China tensions weighed once more.

EU Rescue Deal Reached, Equities Jump, Ted Baker Rises

A number of ‘frugal’ countries, most notably The Netherlands, were against the original plan of a €500 billion to €250 billion, grant to loan ratio, especially if the grants didn’t have any conditions. It was agreed upon that €390 billion will be issued as grants, and the remaining €360 billion will be dished out as loans. A system will be put in place to help ensure that grants will be used appropriately, but at the moment traders are just focused on the fact that an agreement was reached.

The FTSE 100 is above 6,300 and the DAX 30 hit its highest level in over four and a half months. The bullish mood this morning is also on account of the optimism that is circulating in relation to the progress being made on developing potential Covid-19 vaccines.

Ted Baker, like other companies that have a high street presence, have been hit hard by the lockdown, but the group revealed than online trading has been significantly higher than expected. For the 11 weeks until mid-July, total sales slumped by 50% but e-commerce sales rose by 35%. The online sales equated to 69% of total sales, which is a huge improvement on the 25% it made up last year. The fashion house stated that trading has been ahead of the base case scenario that was mapped out last month, and that it has made a good start on achieving its full year 2023 goals.

TalkTalk shares saw volatility this morning as the company confirmed it achieved a significant improvement in average revenue per user (ARPU) in June and July, which promoted the company to say its expects to see an improvement in APRU for the rest of the year.

The pandemic impacted the business and it expects the cost to be £15 million, as bad debts are likely to be an issue. Stripping out voice usage and the pandemic impact, there would have been no difference between fourth quarter and first quarter ARPU. The group saw a decline in net debt and it expects earnings to remain stable or possibly even grow a little. The stock initially traded higher but it is now in the red.

AO World revealed an employee incentive plan. The scheme is designed to encourage employers to deliver a better service to customers as well as loyalty to the group. Essentially, if the market capitalisation is driven beyond a certain level – 30% higher from Monday’s valuation at the close – 10% of the additional value will be distributed to the employees as a part of the scheme. The measure is likely to boost morale and in turn help the business.

GVC shares are in the red this morning as HMRC announced it is expanding its investigation into its former Turkish online business. The update from the gaming company was short, but it said the UK tax authority is examining any ‘potential corporate offending’ by an entity within the GVC group.

Bloomsbury’s Publishing revealed an 18% rise in 4 month revenue to the end of June. The lockdown helped digital sales surge by over 60%.

The continued weakness in the US dollar has helped GBP/USD. In June, UK public sector net borrowing was £34.8 billion, while economists were expecting £34.3 billion. The May reading was revised to £44.7 billion, from £54.5 billion.

IBM shares pushed higher in post-market trading last night following the release of well-received second quarter results. EPS was $2.18, topping the $2.07 forecast. On a yearly basis, revenue slipped by 5% to $18.12 billion, but that exceeded the $17.72 billion consensus estimate. Gross margin was 48%, up from 45.1% in the first quarter. The cloud and cognitive division registered a 3% rise in revenue to $5.75 billion, and that was fractionally ahead of analysts’ estimates.

Snap is in focus as it will post its second quarter numbers tonight. The first quarter loss was $306 million, which was a slight improvement on the $310 million loss that was posted one year previous. Traders will be keen to see if the loss narrows further. In the first three months, ARPU increased by 20%, while total revenue rose by 44%.

We are expecting the Dow Jones to open 220 points up at 26,900, and the S&P 500 is called up 24 points at 3,275.

By David Madden (Market Analyst at CMC Markets UK)

EU Leaders Finally Agree on Pandemic Fiscal Package

US markets saw yet another record for the Nasdaq, while the S&P500 closed at its highest level since late February.

For the last few days all eyes have been on the political theatre going on in Brussels as EU leaders strive to cobble together a recovery fund that will somehow create a consensus between the various interests of 27 member states, and its leaders and deliver help to the likes of Spain, Italy and Greece, whose economies have been hit hardest by the coronavirus pandemic.

The latest compromise appears to be in the form of grants of €390bn, down from the initial €500bn, with low interest loans of €360bn, with the total sum of the pandemic recovery fund set to remain at €750bn. The leaders also agreed as a €1trn budget for the period of the next 7 years.

The Netherlands, led by PM Mark Rutte had insisted on certain changes being made, including a much lower grants figure, however it appears a compromise has been found in the form of a larger rebate. This would be bigger than the one they receive now under current EU budget rules.

These larger rebates would also apply to the other hold-outs including Austria, Denmark and Sweden. The Dutch PM also secured an emergency brake that would allow any country that was not satisfied with attempts by other countries to honour reform promises to call a halt to any monies being allocated to these countries. This brake, however would be time limited to approximately three months, however there were no details as to how any sanction would be applied if a breach were discovered.

The talks at the weekend which have spilled over into this week, have also touched upon the upcoming EU budget, which will need to be increased substantially in the coming years, not only to deal with the current pandemic, but for the EU to be able to meet its climate targets. With the UK leaving the bloc that will also mean much higher contributions from the remaining member nations, something that is proving to be somewhat of a sore spot.

While markets have reacted positively to the prospect that some form of deal will be agreed, with the German DAX leading the way in Europe, it will still need to be approved by all other EU member parliaments over the coming weeks.

This will mean any funds are unlikely to be available until the beginning of next year at the earliest, and even if all the funds are made available, the money will be nowhere near enough to compensate for the billions of euros of lost tax revenue, that has pushed southern European countries even deeper into their fiscal black holes.

While markets have been buoyed by the prospect that this deal has been agreed, the money in question is but a fraction of what is required to help the likes of Italy, Spain and Greece get out of their current difficulties. This deal is likely to be yet another sticking plaster on a dysfunctional monetary union, as it lurches from one crisis to another. On a more positive note what this agreement does do is establish the principal of some form of joint debt issuance, and it is this which can be construed as a baby step towards wider fiscal integration.

As a result today’s European session is expected to see a higher open, with the DAX set to open at its highest level in almost 5 months. .

Later this morning we’ll get another look under the hood of the UK economy and the amount of extra borrowing that the UK government undertook in June to keep the economic motor of the UK ticking over in response to the current coronavirus crisis.

The previous two months saw the UK government has borrow over £100bn, an exceptional post war intervention to support an economic shock that will reverberate for years to come. In April we saw £47.8bn, added to the national debt, followed by another £54.5bn in May as the UK treasury paid the wages of over 8m private sector employees.

Since then we’ve since discovered that the UK government shelled out over £15bn in respect of PPE to deal with the crisis, more money than it spends on the Home Office, Treasury and Foreign Office combined, while the number of jobs getting government support has risen to over 10m. Expectations are for another £40bn to be added to the national debt.

At some point the UK government will have to look at how they intend to pay for all of this, but for now with 2- and 5-year yields in negative territory, and 10 year yields below 0.2%, it isn’t something they need to be too concerned about right now.

We’re expecting to see another big number today for the June numbers, as the costs of the furlough scheme continue to rack up, and UK borrowing moves above 100% of GDP for the first time since World War Two.

The US dollar slipped to a one-month low yesterday as optimism over a deal in Brussels pushed the euro close to its best levels this year. The pound also enjoyed some decent gains ahead of the release of more economic data this week which is likely to lay bare the fairly lacklustre nature of the economic rebound as lockdown restrictions continue to be eased.

Bank of England chief economist Andrew Haldane maintained his recent view that the UK economic rebound was likely to be v-shaped in nature despite the announcement of further job cuts, this time from high street retailer Marks and Spencer yesterday. His view does appear to be a minority one on the MPC, with the declines in the pound seen last week driven by market expectations of a further cut in interest rates by the Bank of England at its September meeting.

EURUSD – broke above 1.1370 last week and has continued to edge higher with the highs this year at 1.1495 the next key resistance, after breaking above the 200-week MA, for the first time since June last year. A break above the 1.1500 level opens up a potential move towards 1.1570 and the 2019 highs. Support comes in at the 1.1370 level.

GBPUSD – another solid day yesterday, the pound has support at the 1.2500 area, with resistance currently at the 1.2680 area as well as the 200-day MA at 1. 2720. The larger resistance remains at the 1.2770 area as well as the June highs at 1.2815.

EURGBP – the June peaks at 0.9175/80 remain a key resistance zone, and the failure thus far to move beyond them does keep the bias slightly negative for a return to the 50-day MA at 0.8980, as well as the July lows at 0.8920.

USDJPY – currently has fairly solid support down near the 106.50 area, and resistance up near 107.50, as well as cloud resistance at the 108.00 level.

FTSE100 is expected to open 37 points higher at 6,298

DAX is expected to open 103 points higher at 13,150

CAC40 is expected to open 32 points higher at 5,125

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

AstraZeneca’s COVID-19 Vaccine Shows Positive Immune Response; Target Price GBX 10,970

As expected, AstraZeneca’s potential COVID-19 vaccine showed promising result in early-stage trials and said it was safe and produced strong immune responses to fight the deadly virus, according to trial results published in The Lancet medical journal on Monday, sending its shares up over 7%.

Developers of the Oxford vaccine, known as AZD1222, said the vaccine did not prompt any serious side effects and elicited antibody and T-cell immune responses. So far, the deadly coronavirus has infected over 14 million people in 188 countries and killed more than 600 thousand.

Earlier this month, the British-Swedish multinational pharmaceutical and biopharmaceutical company, said that they were satisfied by the immune response they witnessed during the trials.

Also, the WHO’s chief scientist said in June that AstraZeneca’s COVID-19 vaccine, known as AZD1222, was the most advanced in terms of development. At the time of writing, AstraZeneca shares traded 7% higher at GBX 9774.

Interestingly, Synairgen Plc, the respiratory drug discovery and development company, also announced a positive result from the trial of SNG001 among hospitalised COVID-19 patients.

After the announcement, Synairgen shares rose more than 400% to GBX 168 on Monday, up 2,581% so far this year.

Moderna started its Phase 2 trial in May and expects to start a Phase 3 trial on July 27. Our call is to buy Moderna as COVID-19 vaccine showed promising result; target price $112 in a best-case scenario.

Executive comment

“We hope this means the immune system will remember the virus, so that our vaccine will protect people for an extended period,” study lead author Andrew Pollard of the University of Oxford told Reuters.

“However, we need more research before we can confirm the vaccine effectively protects against SARS-CoV-2 (COVID-19) infection, and for how long any protection lasts.,”

AstraZeneca stock forecast

Morgan Stanley target a high of GBX 10,970 under a bull scenario and GBX 6,314 under the worst-case scenario. We second Morgan Stanley on AstraZeneca stock outlook. We also think it is good to buy at the current level and target at least GBX 10,500 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Notably neutralising antibody titres are similar-below other COVID-19 vaccines, boosted by a possible two-dose regimen, and importantly all subjects had marked increases in effector T-cells, which may bode well for durability. View AstraZeneca share price move as overdone,” said Peter Welford equity analyst at Jefferies, who gave a price target of GBX 8,000.

Upside and Downside risks

Positive pivotal data from the pipeline including Imfinzi+treme, tezepelumab and Enhertu, growth acceleration in EM ex-China, Morgan Stanley highlighted as upside risks to AstraZeneca.

Regulatory hurdles for roxadustat, broader pipeline failure (Enhertu), operating costs exceed expectations, competitive risks to the pharma pipeline and growth platforms. Impact of China VBP reform on the legacy portfolio and impact from COVID-19 global on operations, Morgan Stanley highlighted as downside risks.

Morgan Stanley forecast sales to increase by +0.5% in 2020 and between +0.8% and +0.7% in 2021-26; EPS is expected to remain unchanged in 2020 and rise between +0.8% and +0.5% in 2021-26.

Stocks Mixed Over Lack of EU Rescue Deal

The original proposal was that €500 billion be distributed as grants, and the remaining €250 billion be issued as loans. A few northern European members, Austria, Denmark, The Netherlands and Sweden, were opposed to such a high proportion of grants being issued. The group have been called the ‘frugal four’, and they are keen for conditions to be attached to the grants.

Talks continued into the early hours of today, and it is understood that some of the ‘frugal’ group are pushing for €390 billion in grants and €360 billion in loans. It was reported that France are keen for €400 billion is grants – so that is where the division lies. Some progress has been made, which is encouraging, and negotiations are expected to carry on this afternoon.

The EU have a track record of a lot of in-house haggling, but in the end a deal is usually struck. Italy and Spain had high debt levels going into the pandemic, and given how hard their economies have been hit on account of the health crisis, their debt is poised to jump. The Mediterranean countries have a higher dependency on tourism, so they will feel the pain of higher debt levels more so than their northern counterparts.

Future, the media company, confirmed the integration of TI Media is going well. Future will repay furlough funds to the government. This not only adds to their public image, but it underlines their financial health. The group are in talks with employees about reducing the size of the workforce. The consensus estimate for the full year adjusted EBITDA is £86.3-£91 million, and firm said it expects earnings to be at the top end of the forecasts. Keep in mind that last year’s figure was £54.5 million.

AstraZeneca shares are higher again on continued optimism in relation to the drug that they are working on with the University of Oxford – it is tipped as a possible Covid-19 vaccine. The Lancet media journal is expected to publish trial data on the drug today.

In terms of index points, BP and Royal Dutch Shell are some of the biggest fallers on the FTSE 100. The underlying oil market is down over 1% as concerns the health crisis will impact demand has hit the energy. It was reported that Japan’s oil imports fell by 14.7% in June, on an annual basis.

According to Righmove, house prices in Great Britain have risen by 2.4% since March. The annual reading was 3.7% growth, its highest growth rate since late 2016. The property portal said that customer enquiries are up 75% when compared with last year. It is clear the reopening of the housing market has unleashed pent up demand. Most of the UK house builders are higher this morning and Berkeley Group and Taylor Wimpey are some of the biggest gainers.

It was reported that Marks and Spencer are to announce hundreds of job cuts this week. One newspaper claimed that Ted Baker will lower its headcount by 500.

British American Tobacco shares have sold off following the downgrade by Jefferies. The bank has lowered its rating to hold from buy, and the price target was cut to 3,000 from 4,800p.

The euro had gained ground against the US dollar and the pound as hopes are growing for the EU to agree on the terms of the €750 billion rescue fund. The talks will continue today. It wouldn’t be a European meeting if it didn’t drag on. The gap between the two sides is narrowing, so currency traders took that as a sign that we are nearing a deal. Last month, German PPI was -1.8% and that was an improvement in the -2.2% registered in May, but economists were expected -1.5%.

IBM will be in focus as it will post its second quarter results tonight. The first quarter update was not well received. Revenue slipped by 3.4% to $17.57 billion, undershooting the $17.62 billion forecast. EPS were $1.84, and that topped the $1.80 estimate. The cloud and cognitive unit saw a 5.5% rise in revenue to $5.24 billion, but that fell short of the $5.30 billion consensus estimate.

We are expecting the Dow Jones to open 51 points lower at 26,620, and the S&P 500 is called down 6 points at 3,218.

By David Madden (Market Analyst at CMC Markets UK)

EU Rescue Fund Remains in Focus, Markets Calm

Not much was achieved at the European meeting on Friday, and that wasn’t exactly a surprise. The €750 billion rescue package was at the centre of the talks, and the original proposal was that €500 billion would be allocated as grants, and that €250 billion be distributed as loans.

The Netherlands, Austria, Sweden and Denmark, expressed opposition to €500 billion being allocated as grants without conditions. There were concerns that funds wouldn’t be used to tackle the health crisis. The countries in question, have been dubbed the ‘frugal four’, and they also called into question the size of the proposed grants, as they would prefer to see a higher percentage of loans.

Talks continued over the weekend. In a bid to win over the ‘frugal four’ it was suggested that €400 billion be dished out as grants rather than €500 billion. It was reported The Netherlands and Austria are pushing for €390 billion in grants, and €360 billion in loans, but nothing has been agreed upon yet. Discussions will continue this afternoon.

It was put forward that a ‘super emergency break’ be included in the package, meaning that any one government could question the use of the funds that are being deployed. Such a move would help ensure that the cash was been used for its appropriate purpose. The sooner the bloc can agree on the terms of the rescue the better for everyone, especially countries like Spain and Italy, which were hard hit by the health crisis, and are rely heavily on tourism.

Stocks in Asia are mixed as the CSI 300 is showing solid gains, the Nikkei 225 is flat, while the Hang Seng has turned positive.

The US posted mixed data on Friday. Building permits for June were 1.24 million, and that was a small increase from the 1.22 million in the previous update. The housing starts reading was 1.18 million, which was a decent jump on the 1.01 million registered in May. The preliminary reading of the University of Michigan consumer sentiment was 73.2 in July, its lowest in three months. The heath situation deteriorated in recent weeks, and a number of states have paused the reopening of their economies. That is probably why consumer sentiment slipped.

The US dollar had a negative run last week and on Wednesday it fell to its lowest level in nearly one month. In the last few months the currency has been a popular flight to quality play, and conversely, when dealers have been in risk-on mode, it has typically suffered. Risk appetite has been a bigger factor in the dollar’s moves lately, than economic indicators.

Inflation in the eurozone ticked up in June to 0.3% from 0.1%, but the core reading cooled to 0.1% from 0.3%. The core reading is often deemed to be a better gauge of underlying demand as it removes commodity prices from the measurement. Last week, Christine Lagarde, the head of the ECB, said that inflation is expected to remain low.

In the first week in July, gold hit is highest level since September 2011, but last week it traded sideways. The commodity has a track record of being a safe haven trade, but since the greenback has also become a popular risk-off trade, that has reduced gold’s volatility, due to their inverse relation relationship.

Oil lost a little ground last week as it was announced that OPEC+ will increase their output as of next month. In May, the group cut output by 9.7 million barrels per day (bpd) as a way of propping up the energy market. The ‘historic’ cut helped oil hit a three month high in June. Last week, it was announced the body would ease up on the production cuts to a reduction of 7.7 million bpd as of next month.

The original agreement stipulated that production would be increase in August, and last week that was confirmed. It is worth nothing that oil hasn’t fallen that much from the three month high that was registered in June. By Friday’s close, WTI and Brent crude are only down 2.4% and 1.9% respectively from the June highs.

At 7am (UK time) German PPI will be posted and economists are expecting it to rise from -2.2% in May to -1.6% in June.

EUR/USD – since late June it has been in an uptrend, and if the positive move continues, 1.1495 should be on the radar. If it moves through that level, it could target 1.1570. A break below the 1.1168 area might pave the way for 1.1060, the 200-day moving average, to be targeted.

GBP/USD – has been trading sideways in the past few sessions. A move higher might run into resistance at 1.2698, the 200-day moving average. A move through that level should put 1.2813 on the radar. Should it move lower, it might find support at 1.2418, the 100 day moving average.

EUR/GBP – should the bullish move from late April continue, it could target 0.9239. A break below the 50-day moving average at 0.8983, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for over one month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 8 points lower at 6,282

DAX 30 is expected to open 5 points higher at 12,924

CAC 40 is expected to open 6 points lower at 5,063

For a look at all of today’s economic events, check out our economic calendar
By David Madden (Market Analyst at CMC Markets UK)

AstraZeneca Promising Result on COVID-19 Vaccine to Boost Stock; Target Price GBX 10,970

The promising result on early-stage trials of AstraZeneca’s potential COVID-19 vaccine, which is expected to be announced as early as today, could boost demand for the stock.

The potential candidate is in large-scale Phase 3 human trials to see the vaccine helps protect against the deadly coronavirus; however, the company is yet to publish its Phase 1 results which would explain whether it is safe and can induce strong immune responses to fight the virus. However, many will eye the response of T cells in research as it is expected to be an important defence against coronavirus.

Earlier this month, the British-Swedish multinational pharmaceutical and biopharmaceutical company, said that they were satisfied by the immune response they witnessed during the trials and were anticipating to officially publish the outcome by the end of the month.

Also, the WHO’s chief scientist said last month that AstraZeneca’s COVID-19 vaccine, known as AZD1222, was the most advanced in terms of development.

Moderna started its Phase 2 trial in May and expects to start a Phase 3 trial on July 27. Our call is to buy Moderna as COVID-19 vaccine showed promising result; target price $112 in a best-case scenario.

At the time of writing, AstraZeneca shares traded 5% higher pre-market.

AstraZeneca stock forecast

Morgan Stanley target price is GBX 9,000 with a high of GBX10,970 under a bull scenario and GBX 6,314 under the worst-case scenario. JPMorgan set a GBX 9,500 target price on AstraZeneca and has a ‘Buy’ rating on the biopharmaceutical company’s stock.

Several other equity research firms have also updated their outlook AstraZeneca. Jefferies reissued a hold rating; Bryan, Garnier & Co increased their price objective to GBX 9,100 from GBX 8,780 and gave the company a ‘Buy’ rating. Liberum Capital maintained a ‘Buy’ rating on shares of AstraZeneca. In April, HSBC upped their target price on AstraZeneca from GBX 6,450 to GBX 6,690 and gave the company a reduce rating.

We second Morgan Stanley and JP Morgan on AstraZeneca stock outlook. We also think it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“AstraZeneca has the highest sales and EPS growth within EU biopharma over 2019-22, with the shift to speciality care driving underlying margin expansion. Our analysis shows a 52% price deflation for drugs initially impacted by the 4+7 Centralised Procurement Scheme in China and that >40% of AstraZeneca’s emerging market revenues could face generic pressures before 2025,” said Mark Purcell, equity analyst at Morgan Stanley.

“Enhertu (DS-8201), the ADC drug partnered with Daiichi Sankyo, has very high sales potential. We forecast 2028 risk-adjusted sales of $7.4bn, including >50% probability in various breast cancer indications and a low probability for gastric, colorectal and NSCLC indications,” he added.

Upside and Downside risks

Positive pivotal data from the pipeline including Imfinzi+treme, tezepelumab and Enhertu, growth acceleration in EM ex-China, Morgan Stanley highlighted as upside risks to AstraZeneca.

Regulatory hurdles for roxadustat, broader pipeline failure (Enhertu), operating costs exceed expectations, competitive risks to the pharma pipeline and growth platforms. Impact of China VBP reform on the legacy portfolio and impact from COVID-19 global on operations, Morgan Stanley highlighted as downside risks.

Morgan Stanley forecast sales to increase by +0.5% in 2020 and between +0.8% and +0.7% in 2021-26; EPS is expected to remain unchanged in 2020 and rise between +0.8% and +0.5% in 2021-26.

Mixed China Data, ECB in Focus

On the home front, the University of Oxford and AstraZeneca are working together on a potential vaccine, and yesterday there was chatter that things are going in the right direction. Nothing was announced, but it was speculated that there could be confirmation about the progress in the near-term, and that verification might even come today. Equity benchmarks on both sides of the Atlantic enjoyed decent gains, and some hit multi-week highs, while others set multi-month highs.

The pharma angle gave stocks a new lease of life as lately market participants have been fixated on the rate of new cases and the fatality rate. In the past week, we have also heard positive news from Gilead Sciences, Pfizer and BioNTech. Gilead’s, Remdesivir, can reduce the death rate by 62%, so that is being touted as a possible treatment. While two of the four drugs that Pfizer and BioNTech are working on as potential vaccines have been fast-tracked for FDA approval.

The optimism surrounding the drug stories overshadowed the news that China’s relationship with the US and the UK has deteriorated this week. The British government has banned Huawei from its 5G network. President Trump passed legislation that has removed Hong Kong’s special status, so the territory will lose out in terms of tariffs. In addition to that, the US government might seek to target individuals or organisations that are seen to be helping the Chinese government to impose itself on Hong Kong.

The moves by the UK and the US stem from the decision by the Beijing administration to introduce a law that has chipped away at Hong Kong’s autonomy. Traders will be keeping an eye on the situation, but it seems that the Donald doesn’t want to spark a big economic conflict with China, probably because he has an election to fight in November and his approval ratings are not great.

The US economy continues to rebound. The industrial production rate for June increased by 5.4%, and that was a big improvement from the 1.4% that was posted in May. The New York Fed manufacturing index jumped to 17.2 in July, a 14 month high. The reports suggest there is a lot of pent up demand, and that is being released as the economy is reopening. That level of growth is likely to taper off as it is unsustainable.

Overnight, China released a number of economic reports. The yearly GDP reading for the second quarter was 3.2%, and the consensus estimate was 2.5%. In the first quarter, the GDP reading was -6.8%. Retail sales in June were -1.8%, undershooting the 0.3% forecast, while the previous reading was -2.8%. Industrial production last month showed growth of 4.8%, and economists were expecting 4.7%.

The May report was 4.4%. Fixed asset investment fell by 3.1%, and the forecast was -3.3%, keep in mind the last reading was -6.3%. Equity markets in Asia are in the red as there are concerns that spending and investment in China remains weak. Indices in Europe are expected to open a little lower.

The ECB meeting will be in focus today. The refinancing rate and the deposit rate are tipped to hold steady at 0.0% and -0.5% respectively. Last month, the pandemic emergency purchase programme (PEPP) was upped by €600 billion to €1.35 trillion, and the scheme was extended from the end of 2020 until June 2021. The inflation and growth forecasts were trimmed. It is worth noting that there has been an impressive rebound in certain economic indicators, such as services and manufacturing.

In late June, the bond purchases made as a part of the PEPP, cooled to its lowest level since the stimulus package was expanded. That could be a sign the ECB want to rein in the easing programme as the economy is recovering at a quicker rate than initially expected. Even if the central are happy with the economic rebound, they won’t want to spook the markets. They will probably play it safe and state they are monitoring the situation, and that they are ready to act, should they feel it is required. The rate decision will be revealed at 12.45pm (UK time) and the press conference will start at 1.30pm (UK time).

The US dollar index fell to its lowest level in over one month yesterday as dealers dropped the greenback in favour of riskier assets, such as stocks. The euro benefitted from the slide in the greenback and it hit its highest level since March.

Metals were a mixed bag yesterday. Gold had a muted move, but it held above the $1,800 mark. Silver, benefitted from the softer greenback and it hit a new 10 month high. On the other hand, copper lost over 1.5%. The red metal had a great run from late March until now, and it is possible that dealers squared up their books ahead of the Chinese data being reported.

The Fed’s Beige Book was posted last night and almost all of the 12 districts saw an increase in economic activity as lockdown restrictions were eased. The outlook remains very uncertain, especially in light of the fact that some states are undoing the reopening of their economies.

Oil rallied yesterday on the back of the EIA report, it showed that US oil stockpiles dropped by nearly 7.5 million barrels, while the consensus estimate was for a draw of 2.25 million barrels. Gasoline inventories fell by 3.14 million barrels, and that was a larger drop than expected. The readings paint a picture of a US economy that is consuming more energy, hence the positive move in WTI and Brent crude.

At 7am (UK time) the UK labour reports will be released. The claimants count for June is tipped to fall to 250,000 from 528,900 in May. The unemployment rate is anticipated to rise to 4.2% in May, up from 3.9% in April. The average earnings reading that excludes bonuses to expected to fall to 0.5% in May, from 1.7% in April.

French CPI is tipped to slip to 0.1% in June from 0.4% in May. The report will be posted at 7.45am (UK time).

Traders will be keeping an eye on the various economic reports from the US. Initial jobless claims are tipped to fall from 1.31 million to 1.25 million. The continuing claims reading is anticipated to be 17.6 million, and keep in mind the previous reading was 18.06 million. The retail sales report for May was 17.7%, a record reading, and the June level is tipped to cool to 5%. The retail sales report that strips auto-sales is expected to be 5%, and that would be a fall from the 12.4% registered in May. The Philly Fed manufacturing index is tipped to be 20. The reports will be posted at 1.30pm (UK time).

EUR/USD – since late June it has been in an uptrend, and a break above the 1.1400 zone might put 1.1495 on the radar. A break below the 1.1168 area might pave the way for 1.1053, the 200-day moving average, to be targeted.

GBP/USD – has been trading sideways in the past few sessions. A move higher might run into resistance at 1.2694, the 200-day moving average. A move through that level should put 1.2813 on the radar. Should it move lower, it might find support at 1.2424, the 100 day moving average.

EUR/GBP – Monday’s candle has the potential to be a bullish reversal, and if it moves higher it could target 0.9239. A break below the 50-day moving average at 0.8963, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 18 points lower at 6,274

DAX 30 is expected to open 67 points lower at 12,863

CAC 40 is expected to open 19 points lower at 5,089

By David Madden (Market Analyst at CMC Markets UK)

Dixons and Burberry Slide, as ASOS Outperforms, US Banks Remain in Focus

Investors also appeared to be unconcerned that the vaccine prompted some side effects in these early stage trials, however Asia markets were slightly more mixed with the Bank of Japan leaving rates unchanged.

The Nikkei225, and Korean markets pushed higher, however Chinese and Hong Kong markets slid back in the wake of President Trump signing the legislation revoking Hong Kong’s special trade status.

Markets here in Europe have taken their cues from the late rally in the US, opening higher as the tug of war between the bulls and the bears continues with respect to the next significant move.

The DAX is once again trading back close to the highs we saw in early June, while the FTSE100 is once again back above the 6,200 level, having been in a fairly broad 6,000/6,400 range for the past four weeks.

Luxury fashion retailer Burberry has had to contend with a number of challenges over the last 12 months, from the disruption of its Hong Kong business as well as the fallout from weaker Chinese demand and the spread of coronavirus. In May the company reported full-year numbers that saw operating profits slide 57% to £189m Revenues were hit hard by the costs of the disruptions in Hong Kong as well as the closure of various stores due to coronavirus pushing their impairments up to £245m.

This morning’s Q1 numbers are slightly better, with Q1 sales declining 45% while Q2 sales are expected to fall by between 15% and 20%. Retail revenue almost halved from £498m to £257m. This is a little disappointing but not altogether surprising, and given recent news of further restrictions in Hong Kong, could be viewed as being on the optimistic side, which probably helps explain why the shares are lower in early trade.

The improvement in Q1 is mainly down to stores in mainland China and Korea re-opening, however given the recent challenges posed by coronavirus, management appear to be looking towards making some savings in the way the business is run by introducing some changes, taking a restructuring charge of £45m.

Some of these changes, as well as some office space rationalisation could mean a reduction in headcount at its London Head Office, delivering annual savings of £55m.

Electrical retailer Dixons Carphone reported its latest full year numbers, which saw revenues come in around 1% above expectations, at £10.17bn, and down 3% on 2019 levels.

The company posted a loss after tax of £163m, largely down to the impact of Covid-19, which impacted the UK and Ireland mobile operations causing revenues to fall 20%. This was primarily down to the closure of stores at the end of March. All other areas of the business saw revenues increase over the period. While losses have reduced, and the outlook set to remain uncertain, the shares have slipped sharply in early trade, however all other areas of the business performed quite well, which suggests that investors might be overreacting to the losses in the mobile division, which Dixons is pulling away from in any case.

Fast fashion retailer ASOS latest update for the four months to the end of June, has seen the shares push back up towards this year’s high on expectations that profits are likely to be at the upper end of forecasts. Group sales saw an increase of 10% to just over £1bn for the period, with the customer base seeing a rise of 16%. Most of the sales growth came in its EU market, with a rise in sales of 22%. Gross margins were lower to the tune of 70bps, a trend that seems likely to continue given the current environment.

In a sign that fashion companies are becoming increasingly nervous about their brand reputation, ASOS also announced that they were axing contracts to suppliers who were found to be in breach health and safety, as well as workers’ rights regulations.

Homeware retailer Dunelm Group was one of the few success stories in UK retail last year, with the company posting strong operating profits and paying a special dividend. We are unlikely to see anything like that this year. The company closed all of its stores on the 24th March, furloughing employees under the governments job retention scheme, at a cost of £14.5m, and has slowly been reopening the business since late April, when it reopened its on line operations. At the time it said it had enough capital to withstand store closures of up to six months.

Fortunately, that hasn’t come to pass, and the company never had to draw on its £175m financing facilities. All of its stores have now re-opened, with one-way systems and strict social distancing guidelines in place. The in-store coffee shops are expected to reopen by the end of July, while the share price has managed to recover most of its losses for this year. This morning’s Q4 update, has seen total sales for the quarter decline by 28.6%. Online sales more than made up for that with a rise of 105.6% year on year, with the month of May seeing a 141% increase.

In terms of the full year numbers, sales were only down 3.9% on the prior year at £1.06bn, with profits before tax expected to be in the range of £105m to £110m, down from £125.9m the previous year, which given the disruption over the last few months is a pretty decent performance.

In terms of the future, costs are expected to increase to the region of £150k per week, however given how badly coronavirus has affected other retailers, Dunelm has ridden out the storm remarkably well.

The pound is holding up well after a weak session yesterday with the latest inflation numbers showing a modest uptick in June to 0.6%, with core prices rising 1.4%, from 1.2% in May.

Crude oil prices are a touch higher this morning ahead of an online meeting of OPEC+ monitoring committee which could decide whether the group is inclined to maintain the production cuts currently in place, which are due to expire at the end of this month.

US markets look set to open higher, building on the momentum seen in the leadup to last nights close, with the focus once again back on the latest bank earnings numbers for Q2.

Having seen JPMorgan, Citigroup and Wells Fargo collectively set aside another $28bn in respect of non-performing loans yesterday, that number is set to increase further when the likes of Bank of America, Goldman Sachs and Bank of New York Mellon report their latest Q2 numbers later today.

In Q1 US banks set aside $25bn in respect of credit provisions, and the key takeaway from yesterday was that while these banks trading divisions were doing well, their retail operations were starting to creak alarmingly. This is why Wells Fargo suffered its worst year since 2008, given that it lacks an investment banking arm, and could well see the bank embark on some significant cost saving measures over the course of the next few months.

The difference between Wells Fargo and JPMorgan’s numbers couldn’t have been starker, with Wall Street trading operations doing well, while Main Street painted a picture of creaking consumer finances.

Dow Jones is expected to open 190 points higher at 26,832

S&P500 is expected to open 15 points higher at 3,212

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Mood Lifted on Vaccine Hopes, US-China Tensions Tick Up

There is a growing concern that certain parts of the world are going backwards in terms of reopening their economies. Hong Kong has reintroduced some restrictions, and the Australian state of Victoria has paused the reopening of its economy. In the US, Florida reclosed bars and restaurants. Philadelphia will ban large public events until February. European equity markets ended the day in the red. Some traders are concerned we have seen the high water mark as far as reopening the global economy is concerned.

In addition to the health concerns, markets also have to contend with rising tensions in regards to China. US Secretary of State, Mike Pompeo, said that China’s territorial claims in the South China Sea are ‘completely unlawful’. The Chinese government claimed the US are intentionally distorting the facts. Yesterday, the UK announced that it will ban Huawei from its 5G network.

The move won’t be immediate, but it will be required to be out of the equation by 2027. China’s international relations have been under strain recently since the introduction of the controversial national security law. It is not a huge surprise that the US and the UK are trying to apply some pressure to the Beijing administration in light of what is going on in relation to Hong Kong.

It is interesting that the Trump administration don’t want to take on China in terms of a trade spat. President Trump is content to keep phase one of the trade deal intact and pick smaller battles. The Donald is facing re-election in November so he probably won’t do anything too drastic between now and then.

Tensions between the US and China have risen again as President Trump signed legislation that will target individuals and companies that are helping the Chinese government tighten its grip on Hong Kong. Chinese government officials could be in the firing line. The US government will end its special status for Hong Kong, so that should apply pressure to the region in terms of tariffs. Stocks in China and Hong Kong are lower.

Moderna, a pharmaceutical company, announced that its potential Covid-19 vaccine delivered a robust immune response in an early stage human trial, and that has helped wider market sentiment. European indices are called higher.

Reporting season in the US kicked off yesterday as JPMorgan, Citigroup and Wells Fargo posted their latest figures. Collectively, the three banks set aside more than $27 billion for bad debt provisions. During the reporting season in April, the major banks set aside $25 billion for credit losses, and as far as this reporting season is concerned, we still have yet to hear from Goldman Sachs, Bank of America and Morgan Stanley. US stocks moved lower initially but the S&P 500 closed at the high of the day – it finished up 1.3%.

The latest UK GDP data showed the economy improved in May, but the rebound wasn’t as impressive as economists were expecting. On a monthly basis, the economy grew by 1.8%, and that was a big difference from the -20.5% registered in April, but the consensus estimate was for growth of 5.5%. The annual reading was even less impressive. The reading for May was -24%, and that was a tiny improvement on April’s -24.5%, and the forecast was -20.4%. The OBR issued a bleak outlook, as the body predicts the budget deficit will be 13-21% of GDP, and the yearly GDP forecast is -12.4%.

The UK CPI rate for June is tipped to fall to 0.4% from 0.5%, and the core reading is anticipated to hold steady at 1.2%. The reports will be posted at 7am (UK time).

The Italian CPI reading will be revealed at 9am (UK time) and economists are expecting it to fall from -0.3% to -0.4% in June.

The New York Fed manufacturing reading is tipped to be 10, and that would be a big improvement from the -0.2 that was posted in June. It is worth nothing the previous reading was the highest in four months. The update will be announced at 1.30pm (UK time).

At 2.15pm (UK time) the US industrial production report for June will be announced. The consensus estimate is 4.4%.

The Bank of Canada is expected to keep rates on hold at 0.25%, and the decision will be released at 3pm (UK time). The press conference will be held one hour later.

The EIA report will be posted at 3.30pm (UK time) and oil stockpiles are tipped to fall by 2.5 million barrels, while gasoline inventories are expected to rise by 1.3 million barrels.

The Beige Book will be announced at 7pm (UK time) and the update should provide us with a flavour of how the US economy is performing.

EUR/USD – since late June it has been in an uptrend, and a break above the 1.1400 zone might put 1.1495 on the radar. A break below the 1.1168 area might pave the way for 1.1051, the 200-day moving average, to be targeted.

GBP/USD – moved lower in the past two sessions and further declines could see it target 1.2427, the 100 day moving average. A move higher might run into resistance at 1.2693, the 200-day moving average. A move through that level should put 1.2813 on the radar.

EUR/GBP – Monday’s candle has the potential to be a bullish reversal, and if it moves higher it could target 0.9239. A break below the 50-day moving average at 0.8957, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 53 points higher at 6,232

DAX 30 is expected to open 150 points higher at 12,847

CAC 40 is expected to open 58 points higher at 5,065

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

European Stocks Open Lower, as UK GDP Data Disappoints

In Asia markets were also a little twitchy over rising tension between the US and China over China’s actions in the South China sea, while Hong Kong tightened its own restrictions over a further rise in cases.

The latest Chinese trade data did appear to offer some optimism, that the Chinese economy was continuing its slow road back from its February lockdown with imports rising 2.7% in June, against an expectation of a 9% decline, the first positive figure for imports this year, while exports also rose a better than expected 0.5%.

This could bode well for this week’s China Q2 GDP data which is due out on Thursday, and is expected to see a rather optimistic quarterly bounce back of 9.5%.

This improvement in Chinese data doesn’t appear to have offered much in the way of a catalyst for a recovery in Asia markets with the Nikkei 225 closing sharply lower.

Markets in Europe have taken their cues from the slide in US and Asia markets opening lower this morning after the latest UK GDP data for May showed that the economy rebounded on a monthly basis by a very disappointing 1.8% in May, well below expectations of a 5.5% rebound with the index of services really disappointing at a pretty miserable 0.9%.

Both manufacturing and industrial production numbers for May showed a decent rebound, with recoveries to 8.4% and 6% respectively, however the services sector was hugely disappointing, with index of services showing a 0.9% improvement when a more robust 4.8% number was expected. Given that services make up 75% of the UK economy it is becoming ever clearer that the road back to recovery is going to be a long and arduous one.

One important caveat is that this sort of monthly data particularly relating to GDP is and services is notoriously difficult to collate, particularly at times like this, which means we could see significant subsequent revisions in the coming months. As such it should be viewed very much from within that prism, in the same way someone throws darts at a dartboard blindfolded.

The latest BRC retail sales numbers for June were more promising, rising 10.9% as a rise in online shopping saw some pent-up post lockdown demand released. Supermarket sales were a particularly strong area, however the more traditional areas of high street shopping remained weak, and there is a risk the upcoming government insistence on the wearing of face masks in stores, could hinder any recovery in this regard.

At a time when the economy is so fragile, it seems rather counterintuitive to insist on face coverings in shops, where human interaction can be kept to a minimum due to a strict entrance policy, without insisting on the use of them in restaurants and pubs, where human interaction is much greater, and the risk of contracting Covid-19 is much higher. You can’t on the one hand say its altruistic to wear a mask in a shop, where the risk of infection is lower, and then say that its ok not to wear a mask in pubs, restaurants or bars.

In a further sign that on-line shopping appears to be the way to go Ocado this morning released its latest first half numbers and as expected the company saw a big surge in revenues.

Ocado has had a number of problems over the years, but the rise in its share price hasn’t been one of them and has been one of the big winners of the ongoing Covid-19 disruption of the UK economy, despite it never having made a profit.

Today hasn’t been any different, with a pre-tax loss of £40.6m. Ocado’s strength lies in its unique technology which has received a significant boost as a result of the coronavirus pandemic.

Today’s first half numbers showed that revenues rose 27%, despite the company temporarily closing its website in order to deal with the increased demand in on-line traffic, while it also saw a first half operating loss of £17.7m.

The company said it was positive on the outlook, however declined to offer any guidance and said it plans o spend £600m on capital expenditure this year, from the proceeds of its recent £1bn capital raising.

Soft drinks and tonic maker Fevertree announced this morning that it has seen a solid start to the year. Off trade sales for the 12-week period to June 12th saw a 34% increase year on year, as alcohol consumption amongst consumers went up during lockdown, with the US showing a particularly strong performance. On trade sales were weaker as a result of the various lockdowns closing bars and other licensed premises.

Fevertree also announced the acquisition of Global Drinks Partnership, its sales agent in Germany for €2.6m.

On-line electrical retailer AO World also reported its final results for the year ended March 2020, which won’t have captured the likely upsurge in business since the end of March lockdown. Total revenue still increased 15.9%, to over the £1bn, with the UK business contributing to the bulk of that, while operating losses slowed to £3.8m.

In terms of the future the company is optimistic on the revenue front, and expects to achieve positive EBITDA in Germany on revenues of €250m. as far as the UK economy is concerned while revenue is currently ahead of expectations, white goods demand could be affected by a slower recovery in the UK economy, the housing market, as well as uncertainty over the end of the Brexit transition period t the end of the year.

Amongst the worst performers on the FTSE100 in early trade is Halma, the technology company which has seen its share price fall sharply in early trade after reporting full year numbers in line with expectations.

Revenues for the year ended 31st March 2020 rose 11% to £1.34bn, while statutory profits before tax rose 8% to £224.1m. The dividend was increased by 5%, however the company outlook was a little disappointing, with revenue expected to be 4% lower in Q1 from a year ago, with profits for 2021 also expected to be 5% to 10% lower than 2020.

Cyber technology group, and owner of AVG antivirus Avast is also sharply lower after hitting a new record high yesterday, on the back of a revenue and price upgrade from Peel Hunt at the end of last week, even though the broker still rates the stock as a sell.

The pound is a little bit softer on the back of this morning’s UK economic data, which can only be described as disappointing at best. If the Bank of England is looking for early signs of a recovery then they must have a very strong microscope, or they must be hoping that the June numbers will be much improved. UK gilt yields have also softened further as markets once again mull the prospect of a rate cut in September.

US markets look set to open modestly higher after yesterday sharp sell off as investors look ahead to the latest Q2 numbers from JPMorgan Chase, Citigroup and Wells Fargo.

JPMorgan could do well given its more diverse operations, however investors will be looking to see whether these key US bellwethers set aside further provisions in the face of the big spikes seen in US unemployment, and the rising number of Covid-19 cases that are currently being seen across, a wide swathe of US states right now.

Another plus point for US banks will be the fees they received for processing the Paycheck Protection Program for US businesses. It is being estimated that US banks that are part of the scheme have made up to $24bn in fees, despite bearing none of the risk in passing the funds on from the Small Business Administration. We could also see announcements of job losses with talk last week that Wells Fargo could be about to announce thousands of cuts due to its higher costs.

Lockheed Martin is also likely to be in focus after China said it would impose sanctions on the company.

US CPI inflation numbers for June are expected to show a significant uptick to 0.6% from 0.1%.

Dow Jones is expected to open 40 points higher at 26,125

S&P500 is expected to open 6 points higher at 3,161

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Ocado Share Price Slips Despite Solid H1 Results

The opening of operations in Paris and Toronto boosted the overseas business. The expansion of the group came at a cost, and that was a contributing factor behind the 36% fall in EBITDA to £19.8 million. The firm is in better shape as it swung from a net debt position of £283.4 million to a cash balance of £196.2 million.

In terms of the guidance, there were no material changes to the previous forecast. The company anticipates a positive outlook for online groceries, but the guidance for retail revenue remains suspended on account of the unpredictable nature of the pandemic. Ocado is planning on capital expenditure of roughly £600 million this year, so it is clearly optimistic about its prospects.

Ocado issued a positive second quarter update in early May. The group said that retail revenue growth was 40.4%, and that was a big improvement on the 10.3% posted in the first quarter. The lockdown acted as a double victory for the firm, as grocery stores across the board experienced a jump in activity as some people decided to stockpile items. The fact the lockdown was driven by health concerns, encouraged some people to go down the route of online shopping. The update in May pushed the Ocado share price higher and it went to a record high in June.

Ocado have not been without there issues, for example, the fire at their operation in Andover was a big factor in the widening of last year’s loss. The full year pre-tax loss was £214.5 million, and that was a big increase on the £44 million loss from the previous year. The fire wasn’t blamed for everything, as the loss at its international solutions unit increased too. The group revenue increased by 9.9% to £1.75 billion as it popularity increased at home and abroad.

The group muddled along for years as it tried to compete with the online division of well-established players such as Tesco. Like any relatively new business, it took its time working on its craft. Ocado tried unsuccessfully to strike up international partnerships for years, but then it relatively quick succession, it brokered deals in France, Canada, the US, Australia and more recently Japan.

It seems to me the more partners Ocado racked up, the easier it was for them to strike up further partnerships. The firm has marked itself out as a specialist in online food delivery, and given the enormous shift to e-commerce in the past few months, Ocado should be in a good position to sign-up more partners.

The Ocado share price is up 60% year-to-date, which has driven up its market capitalisation to more than £15 billion. Keep in the collective market capitalisation of Sainsbury’s, Morrisons and Marks and Spencer is roughly £11 billion. The lofty valuation of Ocado has prompted a few raised eyebrows, so the company has high expectations to live up to.

The stock has been in an uptrend since mid-March and while it holds above its 50-day moving average at 2,001p, the bullish trend should continue.

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

Europe Set for Negative Start, US-China Tensions Rise, US Tech Giants Fell

Pfizer and BioNTech are working on four drugs that they are hoping will go on to be coronavirus vaccines, and the FDA put two of the four on a fast track for approval. At the back end of last week, BioNTech said they could receive approval as early as Christmas, but in light of yesterday’s news, it might even be sooner.

European equities closed higher and US stocks got off to a good start on the back of the news. The FDA update carried on nicely from Friday’s news that Remdesivir, the antiviral drug produced by Gilead Sciences, can reduce the fatality rate in coronavirus sufferers by 62%. In the past couple of trading sessions there was a feeling that big pharma stands a chance of taking on the virus.

That being said, many countries are still battling against Covid-19. There were in excess of 60,000 new cases yesterday in the US, while there were 312 deaths. The infection rate remains high, but at least the fatality rate is relatively low. The situation in Florida is getting worse as the growth in the number of new cases was 4.7%, while the seven day average was 4.4%.

Robert Kaplan, the head of the Federal Reserve Bank of Dallas, issued a mixed statement yesterday. The central banker expressed concerns in relation to the infection rate, and he said the Fed might be required to do more should assistance be needed. Mr Kaplan also said the Fed might row back on its stimulus packages should the economy improve.

The NASDAQ 100 set a fresh record high yesterday, a few hours into the trading session. The bullish run didn’t last long as the tech focused index finished down more than 2%, and the S&P 500 closed down nearly 1%. The usual suspects – Apple, Amazon, Netflix, Facebook and Google’s parent, Alphabet – all set all-time highs, but finished lower.

US earnings season will kick-off today as the latest quarterly numbers from JPMorgan, Wells Fargo and Citigroup will be posted. In April, the major banks collectively put aside more than $25 billion for provision for bad debts, the view is that the rate of loan defaults will surge on account of the pandemic.

Last month, the Fed carried out a stress test, and in one extreme scenario, the central bank cautioned that total bad debts provisions could be $700 billion. Dividends will be in focus as the Fed said that pay-outs must be capped at current rates, and there has been speculation that dividends could be cut in an effort to conserve cash.

It was a mixed day for commodities yesterday. The slide in the US dollar helped gold. Silver, copper and palladium were also helped by the move in the greenback, and the overall feel-good factor helped the industrial metals too. Oil on the other hand lost ground as there was talk that OPEC+ are looking to taper off the steep production cuts that were introduced in May. Last month WTI and Brent crude hit three month highs, but they failed to retest those levels since, because of the pausing of the reopening of economies.

Overnight, China posted its trade data for June. Imports were 2.7%, and economists were expecting -10%, keep in mind the May reading was -16.7%. Exports came in at 0.5%, and the consensus estimate was -1.5%, while the May reading was -3.3%. The rebound in imports and exports points to a turnaround in the global economy. It is possible the positive exports reading was largely because of Western government’s demand for personal protective equipment.

Rising tensions between the US and China in relation to Beijing’s territorial claims in the South China Sea has weighed on sentiment. Hong Kong is reintroducing tougher restrictions and a rise in coronavirus cases in Victoria, Australia, has impacted the mood too. Stocks in Asia are in the red, and European markets are called lower.

At 7am (UK time) the UK will release a number of economic reports. The GDP reading for May on an annual basis is tipped to be -20.4% and that would be an improvement on the -24.5% posted in April. The monthly reading is expected to be 5.5%, and keep in mind the April reading was -20.4%. UK industrial output, manufacturing output and construction output are expected to be 6%, 8% and 14.5% respectively.

At the same time, the final reading of German CPI for June will be posted and the consensus estimate is 0.8%.

The German ZEW economic sentiment report for July is tipped to be 60, and that would be a dip from the 63.4 recorded in June. It will be released at 10am (UK time).

Eurozone industrial production will be announced at 10am (UK time) and the May reading on a monthly basis is tipped to be 15%, and that would be a huge rebound from the -17.1% posted in April.

US headline CPI is expected to rebound to 0.6% from 0.1% in May. The core reading is tipped to be 1.1% and that would be a fall from the 1.2% that was posted in May.

EUR/USD – since late June it has been in an uptrend, and a break above the 1.1400 zone might put 1.1495 on the radar. A break below the 1.1168 area might pave the way for 1.1049, the 200-day moving average, to be targeted.

GBP/USD – has been in an uptrend recently, and should the positive move continue, it might target 1.2690, the 200-day moving average. A move through that level should put 1.2813 on the radar. Thursday’s candle has the potential to be a gravestone doji, and a move lower could see it target 1.2432, the 100 day moving average. A drop below 1.2251, might bring 1.2076 into play.

EUR/GBP – yesterday’s daily candle has the potential to be a bullish reversal, and if it moves higher it could see it target 0.9067 or 0.9239. A break below the 50-day moving average at 0.8949, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 78 points lower at 6,098

DAX 30 is expected to open 239 points lower at 12,560

CAC 40 is expected to open 91 points lower at 4,965

By David Madden (Market Analyst at CMC Markets UK) 

Traders in Risk-on Mode as Stocks and Metals Rise

The drug in question has been tipped as a potential treatment for the coronavirus for several months, and the findings from the latest study boosted market sentiment. BioNTech and Pfizer are working on a potential vaccine for Covid-19, and at the back end of last week, BioNTech announced that it is possible that its drug might receive approval from the FDA by December.

The pandemic will continue to dominate the headlines. On Sunday, the WHO said that another record was set for the number of daily cases. For the fourth day in a row, the US registered over 60,000 new cases. Countries like India and Mexico are seeing a rise in the number of new cases too.

Overnight, stock markets in Asia pushed higher despite the deteriorating health situation. This week US earnings season will kick-off and tomorrow big banks such as JPMorgan, Wells Fargo and Citigroup will reveal their numbers.

The latest jobs data from Canada showed that the economy is turning around. The unemployment rate fell from 13.7% in May to 12.3% in June, which was encouraging to see, but it is worth noting that economists were expecting a reading of 12%. The employment change reading showed that 952,900 jobs were added last month, and that comfortably topped the 700,000 consensus estimate. The May update showed that nearly 290,000 jobs were created, so last month’s report was a big improvement.

The finer details of the update showed that 488,100 full-time jobs were added, while 464,800 part-time jobs were created. Average wages fell to 6.8% from 9.96%, and that was likely down to the return of lower-income earners back to the jobs market. Typically, a decrease in earnings would be seen as negative as workers who earn less typically spend less, but in these circumstances, it could be seen as positive as it is a sign that more people are going back to work.

Demand at the factory level in the US continues to be weak as the headline PPI remained at -0.8% in June, while economists were expecting it to rebound to -0.2%. The core reading, which strips out commodity prices, fell to 0.1% from 0.3%. The core report is considered to be a better reflection of underlying demand. PPI is often a front-runner for CPI, because if demand at the factory level is falling, it will probably fall at the consumer level too. The headline CPI rate is currently 0.1%, and in the months ahead it is likely to remain under pressure.

The US dollar index fell on Friday as traders turned their backs on the currency as they were in risk-on mode. In the past few months, the greenback has acted as a flight-to-quality play, and it typically slides when dealers are keen to take on more risk.

Metals performed well last week. Gold hit a level last seen in September 2011, silver hit a 10-month high, and copper reached a level last seen in April 2019. The weaker greenback was a factor in the positive run in the metals market. Copper is often seen as a good proxy for demand, so its rally suggests the traders are banking on a continuation in the rebound of the global economy.

Oil gained ground on Friday as the overall sense of optimism boosted the energy market. The Baker Hughes report showed the number of active oil rigs in the US fell by four to 181, its lowest since 2009. The rig count is falling but it is falling at a slower pace. The number of active gasoline rigs in the US fell by one to 75, matching its lowest level on record. One report over the weekend claimed that Saudi Arabia are keen to raise production and retreat from the record production cuts that were announced in April.

Andrew Bailey, the governor of the Bank of England, will take part in a webinar at 4.30pm (UK time).

EUR/USD

Since early May it has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1049, the 200-day moving average, to be targeted.

GBP/USD

Since late June it has been in an uptrend, and should the positive move continue, it might target 1.2690, the 200-day moving average. A move through that level should put 1.2813 on the radar. Thursday’s candle has the potential to be a gravestone doji, and a move lower could see it target 1.2436, the 100 day moving average. A drop below 1.2251, might bring 1.2076 into play.

EUR/GBP

Last Tuesday’s daily candle was a bearish reversal, and if it moves lower it might find support at 0.8881, the 100-day moving average. A retaking of 0.9067 could see it target 0.9239.

USD/JPY

The USD/JPY been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 55 points higher at 6,150

DAX 30 is expected to open 151 points higher at 12,784

CAC 40 is expected to open 55 points higher at 5,025

By David Madden (Market Analyst at CMC Markets UK)   

Health Concerns Hammer Stocks, Dollar Jumps 

Europe

Traders in Europe are paying close attention to developments in the US. According to Reuters, 42 of the 50 states in the US registered an increase in the number of new cases yesterday, so that is influencing sentiment on this side of the Atlantic.

Grafton Group shares are in demand today as the company confirmed that trading in June was better than expected. The group, like its peers, remarked on the pent up demand as a result of the lockdown. Revenue last month increased by 11.4% to £247.8 million. It is worth noting the company made an acquisition last July, so the numbers were a bit misleading, but nonetheless, demand was robust.

The pandemic had a negative impact on the business as revenue for the six month period fell by over 19% to £1.06 billion, but traders are focused on the rebound in activity since things have gone back to normal. Grafton is in a strong position in terms of liquidity as it has access to £658 million, so there are no concerns on that front. No guidance was issued on account of the uncertainty. In April, it was announced that directors would be taking a pay cut, and because of the strong trading last month, the cut has been reversed, and that is a sign the company is over the worst of the crisis.

Rolls Royce shares had a volatile start to the trading session on the back of its first half update. The engineering giant has been hit hard by the pandemic as air travel has been severely impacted, so in turn demand for aircraft engines has tumbled. In May, the group announced plans to cut up to 9,000 jobs from its workforce of 52,000. At the back end of last week, the group said it was exploring its options in regards to strengthening its balance sheet, and traders took that as a sign that even more restructuring plans would be mapped out.

This morning, the group said it cut costs in the first half by £300 million, and it will cut costs by another £700 million by the end of the year. Its pro-forma liquidity position stands at £8.1 billion. The stock initially traded higher as dealers were encouraged by the cost cutting plans, but the positive move didn’t last long. Traders latched onto the fact that cash outflow was £3 billion in the first half and that an additional £1 billion would flow out in the rest of the year. Looking further down the track, the company expects cash consumption to significantly reduce. Rolls Royce is targeting free cash flow of at least £750 million in 2022.

Vistry, the housebuilder, saw a doff-off in completions in the first half as the lockdown disrupted activity, but demand is respectable and the order book is healthy. In terms of forward sales, including partnerships, the group has £1.26 billion worth of work in the pipeline, and that has taken the light off the underperformance in the first half.

Revenue from house building in the six month period was £344 million, and that was a big fall from the £854 million registered last year. The fall in revenue from the partnership’s unit was less severe. Efficiencies from integration are improving at a faster rate than expected. The net debt position was cut to £355 million from £476 million in May. The sizeable fall in debt should take some pressure off the company in terms of interest rate payments.

Persimmon issued an update covering the first six months of the year. It was similar to that from Vistry, whereby there was a fall in the number of houses it completed, but the order book is robust. Revenue in the six month period was £1.19 billion, which was a 32% fall on the year. Average selling prices ticked by 3.7% to £225,050. The order book is up 15% on the year at £1.86 billion. The economic climate is uncertain, but the housebuilder confirmed that cancellations are at historic lows.

The housebuilding sector as a whole is higher today on the back of yesterday’s announcement from Rishi Sunak, the Chancellor of the Exchequer, the stamp duty threshold will be lifted from £125,000 to £500,000.

SAP shares hit a record high as its preliminary second quarter results were well-received. Revenue increased by 2% to €7.64 billion. Operating profit rose by 7% to €1.96 billion. The group confirmed that full-year earnings will be €8.1-€8.7 billion.

Boohoo shares are back in fashion after a torrid few days. The group is still carrying out an investigation into its UK supply chain. There has been an allegation that the group was connected to a supplier who paid its staff below the minimum wage, something Boohoo has denied.

US

The S&P 500 is showing a loss of over 1% as the health crisis is hanging over sentiment on Wall Street. Lately, the tech sector has been booming, but even the NASDAQ 100 is 0.35% lower this afternoon.

The initial jobless claims reading fell from 1.41 million to 1.31 million. It has dropped for 14 weeks in a row. The continuing claims update came in at 18.06 million, and that was a fall from the previous reading of 18.76 million. It is clear that the labour market in the US is improving, but the pace of progress is slow. Several US states have either paused or reversed the reopening of their economies so that is likely to hold back the jobs market.

Walgreens Boots Alliance shares are in the red as the third quarter EPS was 83 cents, while equity analysts were expecting $1.19. Revenue was slightly higher on the year as it was $34.63 billion, fractionally topping forecasts. Same store sales in the US increased by 3%, and traders were anticipating a decline of 0.2%. The UK business suffered amid the lockdown even though stores remained open as it was deemed an essential service. The group is cutting costs on account of the economic environment. Boots will cut 4,000 jobs.

Carnival Corp shares are up today as it was announced that its Germany subsidiary, AIDA, will recommence three cruises from August. The business has to restart from somewhere, and even if that is a low point, but at least it projects a positive message.

The recent rally in Chinese stocks has spilled over to the US, as stocks like NetEaseJD.Com and Alibaba have listings in New York too. Recently, the China Securities Journal published a bullish article about domestic equities, and the positive sentiment is still doing the rounds.

Bed Bad & Beyond shares have tumbled on the back of the latest quarterly update. Revenue fell by 49% to $1.31 billion, undershooting the $1.39 billion forecast. The loss per share narrowed to $1.96, but equity analysts were predicting a loss per share of $1.22. The company plans to close roughly a fifth of its namesake stores over the next two years.

It was reported that Wells Fargo is planning on cutting jobs, the group will post its latest quarterly numbers next week.

FX

The US dollar index fell to its lowest level in nearly one month in this session, but it has since rebounded as traders are in risk-off mode. EUR/USD is down today on account of the move in the greenback. The latest trade data from Germany showed that imports and exports in May increased by 3.5% and 9% respectively. Both readings showed huge rebounds on the month, but the levels missed economists’ forecasts of 12% and 13.8% respectively.

GBP/USD was higher earlier, but the turnaround in the greenback hit the currency pair. Political uncertainty exists in regards to the UK’s post-transition period relationship with the EU, but the pound has been gaining ground this week. According to a report from the FX options market, there has been an increase in the number of bullish trades on GBP/USD.

Commodities

Gold is just about above the $1,800 mark. Yesterday the metal hit its highest level since September 2011 and it remains in its uptrend. The commodity has been popular lately as it attracted safe-haven flows but that isn’t the case today on account of the upward move in the dollar. European and most US equity markets haven’t retested their June highs as health fears continue to circulate, and that has helped gold in the past month.

Oil prices are in the red today as fears that US demand will dwindle on account of the pandemic has impacted the energy market. The EIA report yesterday showed that gasoline inventories in the US fell by over 4.8 million barrels, a sign that people were driving more. The finer details showed that areas where lockdown restrictions were reintroduced, saw a fall in consumption, so traders are mindful of that today.

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

Rolls Royce drags on the FTSE100, as SAP Boosts the DAX

Investors appear to be making the conscious decision to find safety in the US trillion-dollar big caps rather than move their capital into the traditional safe haven of government bonds.

Asia markets have taken their cues from yesterday’s positive US session, despite the continued rise in coronavirus cases across the US, and which US Federal Reserve President Loretta Mester expressing concern that the rising virus count is introducing increased downside risks to the US economic recovery. On Wednesday we saw Texas set a new record for daily cases, hospitalisations hit a new high in California, while Arizona posted a new record number of deaths.

After two successive negative European sessions, markets here in Europe have taken their cues from yesterday’s recovery in US markets and this morning’s positive Asia session, opening modestly higher, though still well off their peaks from Monday, and struggling to make much in the way of headway early on.

If anything, the rising coronavirus case count in the US, is helping to weigh down any confidence in a more global recovery in equity markets, however on the plus side there doesn’t appear to be any evidence of a second wave here in Europe so far as various lockdown measures continue to get eased.

While this is positive for markets in Europe the lack of any imminent agreement between EU leaders on any pandemic recovery fund appears to be deterring a wholesale move of capital back into European markets for the time being.

The problems in the aerospace sector continued to be laid bare this morning as Airbus the European plane maker reported that it had failed to obtain any new aircraft orders for the third month in succession. This is equally bad news for Rolls Royce who have been having difficulties of their own, as they reported their latest first half numbers this morning.

Last Friday there were reports that Rolls Royce was looking at reinforcing its balance sheet further by raising additional capital, or disposing of some of its assets with ITP Aero, its Spanish operation one likely option. There was no mention of raising additional capital in todays’ Q2 update which has seen management say that they expect a better performance in the second half of the year.

Good progress has been made in reducing one-off costs with £300m achieved in H1, with another £700m expected by the end of 2020. The company also said it would be taking a charge of £1.45bn over the next 6 years, in respect of reducing the size of its hedge book, with £100m of that charge being taken this year and £300m in 2021 and 2022, and then £750m spread over 2023 to 2026.

The company also said that they had pro-forma liquidity of £8.1bn, including an undrawn credit facility of £1.9bn, and commitments for a new 5-year term loan facility of £2bn underwritten by a syndicate of banks and a partial guarantee from UK Export Finance. The company also took a £1.45bn write down in respect of hedges spread over 6 years.

Not all sectors are in the doldrums, with the increasing focus on cloud technology, helping to benefit the tech sector, as more and more business moves on line. This morning German software giant SAP reported an improvement on its Q1 numbers, with cloud revenues rising 21% in Q2, driven by improvements in its Asia markets.  This outperformance in SAP has helped underpin the DAX in early trade this morning.

Rio Tinto this morning announced it was closing its New Zealand operations as an aluminium supply glut takes its toll on its profits.

In the wake of yesterday’s budget measures on stamp duty, house builder Persimmon announced its latest first half update.

Unsurprisingly given the lockdowns in April total revenues fell to £1.19bn, down from £1.75bn in 2019, with completions sharply lower at 4,900, down from 7,584. On the plus side average selling prices were modestly higher at £225k, however higher costs are likely to eat away at overall margins in the months ahead, which could act as a drag on profitability.

Much will depend on whether the removal of stamp duty for properties up to £500k will offset any loss of confidence prospective buyers have about the economic outlook. Recent mortgage approvals data suggests that consumers are becoming much more cautious.

In terms of future expectations there does appear to have been a fairly strong rebound since sales offices reopened with forward sales up 15% from the same period last year, helping to push the shares higher in early trade.

Vistry Group also posted a positive first half update, delivering a total of 1,235 completions in H1, down from 3,371 a year ago, with an average selling price of £290k. Revenue was sharply lower at £344m, down from £854m in 2019. Forward sales saw an improvement to £1.66bn, up from £1.5bn at the end of May.

Real estate investment trusts have had a rough time of it recently, with Intu going into administration only recently. Workspace Group has been one of those companies that have done things a little differently over the last ten years, in terms of how it sold its office space, and that has helped cushion it to some extent, due to its focus on small or micro businesses, selling flexible office space, and short-term leases with superfast connectivity.

This does appear to be reflected in this morning’s Q1 update, which has seen the company report cash collection of rents at 75%, net of rent reductions and deferrals. The company has received 65% of rents due in Q2, compared to 80% a year ago. Activity in its business centres has remained low at 15% of normal. Demand is now picking up as lockdowns get eased further.

Building materials and DIY retailer Grafton Group has seen its shares rise in early trading after it reported H1 numbers, which saw revenues fall 19.4% to just over £1bn. June trading has proved to be more resilient, with revenues 11.4% higher than the same period last year.

Boohoo shares are also sharply higher this morning as buyers start to return after the precipitous falls of earlier this week, with some saying that the declines have been too severe, when set against the underlying long-term fundamentals.

US markets look set to open modestly lower against this morning’s rather indifferent European session, with the main focus once again set to be on the latest weekly jobless claims numbers, and in light of the recent re-imposition of lockdowns, the main focus will once again be on continuing claims and whether that number starts to edge up again in the weeks ahead. This could take some time to be reflected in the numbers with continuing claims expected to fall below 19m to 18.95m.

Weekly jobless claims are expected to fall to 1.37m.

Bed Bath and Beyond shares are also expected to be in focus after the company announced the closure of 200 stores over 2 years due to a 50% fall in sales.

Delta Airlines is also expected to give its latest Q2 update and it’s not expected to paint a pretty picture. Delta had a standout 2019 largely due to its reliance on sales of Premium class tickets. Business travel, which a lot of national carriers rely on, is likely to see a big drop off in the months ahead as companies realise that lots of meetings can take place just as easily on Zoom and other remote conferencing facilities.

Year on year revenue for Q2 is expected to decline by 90%, with the carrier losing 85% of its flight capacity at the height of the pandemic, while losses are expected to come in at $4.43c a share. Delta expects to add 1,000 new flights to be scheduled this month, and another 1,000 in August.

Dow Jones is expected to open 60 points lower at 26,007

S&P500 is expected to open 4 points lower at 3,166

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Europe Set to Rebound, US Jobs Data on Radar

Traders in this part of the world continue to monitor the situation in the US, where the majority of states continue to see the number of new Covid-19 cases increase. As of yesterday, the number of confirmed cases in the US exceeded 3 million. On Tuesday, the WHO cautioned there could be an increase in the fatality rate as there has been a rise in infections, but the death rate so far has lagged.

US-China tensions were doing the rounds yesterday. The decision by the Chinese government to introduce the national security law in regards to Hong Kong has sparked criticism from many countries around the world as it chips away at the principal of ‘one country two systems’.

Yesterday there was speculation the US government would hit back at Beijing by potentially undermining the Hong Kong Dollar (HKD) peg. It wasn’t that long ago that President Trump reiterated that the US-China trade deal was intact, so going after the HKD might be a useful tactic. The US leader might be hesitant about taking a very tough stance against the Beijing administration given that he’s not doing well in the polls and the Presidential election is in November.

The mini-budget from Rishi Sunak, the UK’s Chancellor of the Exchequer, made big political headlines yesterday, but it didn’t have a significant impact on the markets. Mr Sunak revealed £30 billion worth of schemes that are aimed at providing assistance to the UK economy. The furlough scheme will come to an end in October and £9 billion will be allocated to job retention. There will be a temporary cut to VAT for the tourism and hospitality sector.

In addition to that, there have been incentives offered for dining out too – the combined stimulus is worth £4.5 billion. Providing help to the battered hospitality sector is a sensible move, but people in the UK might be cautious about socialising given what has happened in places like Melbourne and the US in relation to a rise in new cases. As expected, the stamp duty threshold was upped to £500,000 from £125,000. One could argue that this tactic might not be as fruitful as the government are hoping as some people are likely to be cautious about purchasing a property on account of the huge economic uncertainty.

The health crisis in the US remained in focus. Oklahoma, California and Tennessee all posted a record daily rise in the number of new cases. States like Florida and Arizona continue to see higher case numbers too. Despite the pandemic, US equity benchmarks closed higher as the tech sector continued its bullish run. Amazon, Apple and Netflix all set new record highs. Raphael Bostic, the head of the Federal Reserve of Atlanta, said that some of the fiscal support programmes might need to be extended.

Overnight, China posted its CPI data for June and the level was 2.5%, while economists were expecting 2.5%. Keep in mind the May reading was 2.4%. The PPI metric was -3%, and the consensus estimate was -3.2%, while the previous update was -3.7%. The improvement in the PPI rate might bring about higher CPI in the months ahead. Stocks in Asia are up on the session, and European markets are being called higher too.

The US dollar came under pressure yesterday. It was a quiet day in terms of economic data so the move wasn’t influenced by economic indicators. Lately the greenback has been a popular safe haven for traders, it was showing losses during the day when European indices were in the red, and when US stocks were flickering between positive and negative territory.

Gold was given a hand by the slide in the US dollar. The metal topped $1,800, and it was the first time since September 2011 that it traded above that mark. The commodity is still popular with certain traders as there are concerns that a second wave of Covid-19 could be on the cards. The metal’s positive move is being partly fuelled by the belief that central banks will maintain very loose monetary policy. Some people are afraid an inflation rise is in the pipeline, so that is influencing gold too.

At 7am (UK time) Germany will post its trade data for May, and the imports and exports are tipped to be 12% and 13.8% respectively.

The US initial jobless claims is anticipated to fall from 1.42 million to 1.37 million. The metric has fallen for the past 13 weeks in a row. The continuing claims reading is tipped to drop from 19.29 million to 18.95 million. Keep in mind that last week’s reading actually ticked up. The reports will be posted at 1.30pm (UK time).

A eurogroup video conference meeting will be held today and traders will be listening out for any potential progress being made in relation to the region’s recovery fund.

EUR/USD – since early May it has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1042, the 200 day moving average, to be targeted.

GBP/USD – since late June it has been in an uptrend, and should the positive move continue, it might target 1.2687, the 200-day moving average. A move through that level should put 1.2812 on the radar. A drop below 1.2251, might bring 1.2076 into play.

EUR/GBP – Tuesday’s daily candle has the potential to be a bearish reversal, and if it moves lower it might find support at 0.8935, the 50-day moving average. A retaking of 0.9067 could see it target 0.9239.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 34 points higher at 6,190

DAX 30 is expected to open 153 points higher at 12,647

CAC 40 is expected to open 46 points higher at 5,027

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)