Global Fundamental Analysis 20/05/2020

Global Fundamental Analysis 20/05/2020

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open 83 points down.

Facebook Launches Shopping Platform for Small Businesses  –  The service, Facebook Shops, will enlist small businesses to sell their wares online at
the same time the coronavirus pandemic is upending business world-wide.

The U.S. economy’s recovery from the current downturn is likely to drag on through the end of next year, with the labor market experiencing its sharpest deterioration since the 1930s, the Congressional Budget Office said.

Overnight Summary

EACH MARKET IN FOCUS

Australian Market

US Market

U.S. stocks fell as investors grew more skittish about a potential coronavirus vaccine that sparked a big rally the previous day.
The Dow Jones Industrial Average fell 390.51 points, or 1.6%, to 24206.86. The index traded modestly lower for most of the session, before its losses accelerated in the final hour.
The declines came a day after the blue chips notched their biggest rally in more than a month, fueled by promising data on a vaccine under development at Moderna. Some of that optimism evaporated in the afternoon when a report on medical-news site Stat News cast doubt on the data.

The S&P 500 and Nasdaq Composite also tumbled after the report was posted online. The S&P fell 30.97 points, or 1%, to 2922.94, while the tech-heavy Nasdaq – which had been up for most of the day – dropped 49.72 points, or 0.5%, to 9185.10.

Commodities

Gold prices finished higher to recoup more than half of what they lost a day earlier, as Federal Reserve Chairman Jerome Powell said the U.S. central bank stands
ready to provide more support for the domestic economy.

Gold for June delivery on Comex tacked on $11.20, or nearly 0.7%, to settle at $1,745.60 an ounce, following a 1.3% decline Monday, which marked the first decline in
five sessions. Prices fell Monday as renewed optimism about a vaccine for the coronavirus undermined the need for a safe haven, causing gold to retreat from the highest intraday levels since 2012.

Oil Futures

U.S. benchmark oil futures settled higher, getting a lift from global supply cuts and signs of improving demand, following a volatile trading session that ended with the
expiration of the June contract.  West Texas Intermediate crude-oil prices settled in backwardation on Monday, a condition in which the spot price and nearby futures are bid higher than contracts for later delivery. The June WTI Nymex contract price also ended above the July contract, which is now the front month.

June WTI crude, which expired at the end of the session, held ground above the price for the July contract, ending at $32.50 a barrel, up 68 cents, or 2.1%, after surging 8.1% on Monday.  The July WTI contract, which is the most-actively traded, added 31 cents, or 1%, to settle at $31.96 a barrel, following a 7.2% rally for the contract in the previous session.

Forex

The WSJ Dollar Index was recently up 0.02% at 93.66.  Federal Reserve Chairman Jerome Powell said that while there are limits — he didn’t
say what they were — to how large the Fed balance sheet can grow, they have not been hit yet. Powell also said that as the Fed balance sheet goes from $3.8 trillion in September to nearly $7 trillion now, and higher in the future, he doesn’t see inflation or financial stability issues coming from the size of Fed holdings.

European Markets

Asian Markets

Earlier in the day, stocks rallied in Asia.  Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index were up 1.5% and 2.1%, respectively. South Korea’s Kospi Composite added 2.3%.
Japanese stocks rose, led by gains in financial, electronics and auto stocks, as hopes for economies to reopen continue, including in Japan. The Nikkei Stock Average rose 1.5% at 20433.45. Hong Kong shares ended the session higher, extending a recovery trend after last week’s losing streak. The benchmark Hang Seng Index rose 1.9% to settle at 24388.13.

China’s major stock market benchmarks closed higher, tracking the broader Asian stock market on hopes that a new vaccine could help combat the coronavirus pandemic. The Shanghai Composite Index ended up 0.8%, the smaller Shenzhen Composite Index gained 1.3% and the startup-heavy ChiNext Price Index climbed 1.4%.

South Korean stocks ended higher, with the benchmark Kospi up 2.2% at 1980.61, supported by improved sentiment following news of a potential coronavirus vaccine.
Investors are also likely to watch out for developments pertaining to the ongoing U.S.-China trade tensions.

And India’s benchmark BSE Sensex index closed 0.6% higher at 30196.17, lifted by telco and energy stocks.

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