While some of the themes remain the same (Covid headlines back on the scary side of things) there is always something interesting out there. Two that caught my eye today are placings / rights issues and volumes vs the market moves.
So what do you do when things are getting a bit hairy on the Covid front and the world is laughing at your Tulsa moment? You reignite the tariff war. Headlines out this morning have dominated the newswires and that’s presumably exactly what the administration wanted to happen (I looked back to the last time we mentioned tariffs and it was in February – those glorious days when Covid was “just another type of flu”). Markets have reacted to the “new” uncertainty accordingly and we’ve been lower all day. Volumes not huge though so feels like more of a markdown than anything too dramatic.
A better day all round today with finally plenty to talk about at both the macro and the micro level. Let’s start with the macro and worth noting the Navarro comments (China/US trade deal being “over”) which saw a 500 points drop in the Dow futures before the denial which saw a sharp rally. By the time Europe was open things had settled and investors focussed instead on the various PMI data for the Eurozone. These can be summed up as “headlines strong, detail a bit more of a concern”. We’ve had France and the UK nudge back into expansionary territory. Germany and the Eurozone still below 50 at the headline level but a lot better in May than they were in April. The devil in the detail though and jobs are still being cut on balance (manufacturing especially), inflows of new business and orders still negative, prices still falling. Underlying demand remains very subdued. Furlough schemes masking a lot of the employment pain. So less bad for sure but too soon to get too carried away.
Quiet start of the week and nothing on the macro/corporate side is particularly grabbing investors’ attention. We had Trump failing at his first campaign rally over the weekend (he’s now looking at curbing employment-based visas after that ), noise on the stimulus front (Andrew Bailey suggesting that the BoE should reduce its balance sheet before even considering rising rates – a little bit alarming), US/China relations are not improving much and virus cases continue to rise across the globe (both ongoing).
QUOTE OF THE DAY “Infection rates are rapidly falling, we have protected the NHS and, thanks to the hard work of millions […]
Another lacklustre session with volumes low (down 15-20% vs yesterday’s already subdued levels) as investors again tussle with what will decide the direction for a pretty directionless market. There had been hope that the BoE might help give some excitement on a dull day but everything there pretty much bang in line with expectations. With most indices sitting almost exactly where they were 10 days ago you can see why a lot of people are staying on the sidelines at the moment trying to ignore the market noise. Quarter end expiries tomorrow might help volume but it’s looking like a quiet afternoon ahead.
A topsy-turvy week so far as the markets fluctuate between the negatives of a some increasingly tense geopolitical situations (North/South Korea and China/India) and surging Covid cases and the positives of the intractable draw of central bank stimulus. The latter winning out currently although volumes are lower overall with most sitting on the sidelines. The trend in Europe continues to be “volatile but overall sideways” with most indices trading between their 50dma levels (support) and their 200dma levels (resistance).
After a decent bounce in the US overnight (amid the Fed announcing that they will begin to purchase corporate bonds), Asian and European equities didn’t have another choice other than to follow (also boosted by Trump talking about a $1 trillion infrastructure package). Asia closed up (SZCOMP made a 3m high) and Europe has been trading well up since the open. The V2X slipped -9% this morning and although it is still above its 200d average, it is encouraging to see it trading below both its 50d and 100d averages. While volumes remain low vs the last 5 and 20 days, important levels to keep an eye on include resistance at 10,000 on the Nasdaq and EuroStoxx 50’s resistance at 3383.
Bumpy start to the week as worries over a second wave of the virus dominate the headlines. The number of cases are not only increasing in the US but also in China – Beijing had to close one of its biggest markets and lockdown nearby areas as they reported a surge in cases over the weekend. Asia slipped in the morning (note indices are still above their 50d averages though) and European equities followed. All indices ticked lower at the open and although they have partially recovered, they are still in the red . Volumes are low across the board and not a single index is trading above its AVATs. Seems like the dip buyers / profit takers that we saw last week are in pause mode and as we suggested on Friday, they are ready to sit for a bit.
A much needed bounce after a torrid week although it feels more a case of selling exhaustion than anything particularly positive. UK MoM GDP showed a contraction of -20.4% in April (vs est. -18.7%) to continue the negative news flow. Note that leaves the UK behind the rest of Europe with the worst May survey. Volume wise it’s been a quieter session as investors lick their wounds. Lots of incoming on “where do we go from here”. As always with that question the charts team a good place to start and while the 50dma have broadly held, it does look as though markets will continue to struggle to break through the all important 200 dma. Possible these big moves mean people sit the next few sessions out.