Is the bear market rally top in? US COVID-19 cases weigh on stocks

Intermediate

Macroeconomic/ geopolitical developments

  • Global financial markets continued the indecisive tone seen through mid-June into the end of the month, which has been in relation to competing forces; positive economic data/ strong retail demand/ support from the authorities on the one hand and the rise in COVID-19 cases on the other.
  • The strong rally from mid-May into the first half of June, was driven to some extent by strong demand for stocks by retail investors, supported by positive economic data.
  • An example of which from the past week was the June Flash Purchasing Managers Index (PMI) from Markit for Europe and the US, significantly beating market expectations.
  • However, new outbreaks of the coronavirus globally, plus the growth of the pandemic in some US states sees mounting concerns with respect to unlocking economies.
  • Significant outbreaks have been seen in Australia and Japan, as well as in Germany where the R-rate spiked higher. The authorities in China are still dealing with the Beijing outbreak, but of greatest concern for markets is the coronavirus data from the United States.
  • Many southern US states have seen large increases in the number of COVID-19 cases throughout; Florida Texas, California and Arizona particularly suffering.
covid map US states
  • President Trump has stated there will be no new lockdown, but markets are obviously worried about a continued first wave/ second wave of infections, hospitalisations and possibly an increase in the rate of deaths, that could see the US economy under more stringent lockdown measures again.
  • In the UK, however, the government announced in the past week further easings of many lockdown measures starting 4th July, including the reopening of pubs, restaurants and cinemas.
lockdown eased
  • This is seen as a positive for the economy, but again there are worries regarding the spread of COVID-19, highlighted by the chaotic scenes at UK beaches over the past week.
  • Still focusing on the UK, there has been a negative tone from Europe (particularly from Michel Barnier), regarding the Brexit trade negotiations, highlighting an ongoing impasse.

Global financial market developments

sp500 chart
  • However, from a technical analysis perspective, these consolidation ranges are looking more like chart topping patterns, highlighting that the bear market rallies from March could be over!
  • The hesitancy has been reflected by Forex markets, where most major currencies have moved sideways against the US Dollar.
  • There has, however, been notable US Dollar strength versus the other reserve currencies, the Euro and the Pound, reflecting the growing “risk off” threat.
  • In addition, the Pound is under negative pressures from the above-mentioned EU trade deal issues.
  • Mixed messages from the commodity world, Oil has stalled back from a new multi-month peak, whilst Copper has pushed up to prod at its June high.

Key this week

  • Deaths from and new cases of the COVID-19 coronavirus will stay a key focus, with particular concerns about the rises in numerous US states.
  • Central Bank Watch: Fed Chairman Jerome Powell and US Treasury Secretary Mnuchin both testify to Congress on Tuesday. The Fed Minutes from the last FOMC Meeting are published on Wednesday.
  • On the macroeconomic data side, we get Japanese Retail Trade data, EU Business Climate and German CPI on Monday, Chinese PMI, UK GDP and EU CPI are out on Tuesday. Wednesday then brings a busy data day with Global Manufacturing PMI data released throughout the day by Markit, with the US PMI out from the ISM, Germany posts its Employment data for June, plus ADP Employment data for the US. The US Employment report is out on Thursday as the US Independence Day holiday is being observed on Friday, with US markets closed. Friday does, however, see global Markit Services and Composite PMI data published.
DateKey Macroeconomic Events
29/06/20Japanese Retail Trade data; EU Business Climate; German CPI
30/06/20Chinese PMI; UK GDP; EU CPI; Jerome Powell testifies; Treasury Secretary Mnuchin speaks
01/07/20Markit global Manufacturing PMI; Germany Employment report; US ADP Employment; ISM US PMI; FOMC Meeting Minutes
02/07/20US Employment report
03/07/20US Independence Day holiday; global Markit Services and Composite PMI

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

Comment on this video

Your email address will not be published. Required fields are marked *


Latest Related News

Next bull leg resuming for share indices (DAX forecast)

A firm rebound for global stock averages Wednesday, after the late June-early July surge higher, to try to reject the corrective setback tone so far this week.This has resumed the more bullish threat we highlighted last week as stock indices have begun to resolve the consolidation theme from earlier in June to a more bullish outlook.The more bullish viewpoint has been driven by better than… Continued

Day Trade Ideas: Video analysis – Dollar, WTI Crude, Gold, Emini S&P, Dow Jones

Wide analysis of the US Dollar, Crude Oil, E-Mini Future S&P 500 and the Dow Jones. Also taking a look at Gold and how it is doing in these volatile times. Continued

Pound shifts to more bullish (GBPUSD Forecast)

GBPUSD day trade outlook: Intermediate-term shift to bullish and upside risks  A strong advance Tuesday through key 1.2542 resistance for an intermediate-term shift from neutral to bullish, to build on the strong, very early July rally above 1.2510 resistance and to now also overcome the 1.2580 level to 1.2592, to keep the risk to the upside into Wednesday.  Day trade setup We see an upside bias for 1.2592 and 1.2633; a break here aims… Continued

Stocks averages sustain bull threats (S&P 500 forecast)

In Friday’s publication we highlighted the more bullish threat for the German benchmark stock index future, the DAX forecast.The gains so far this week by share indices globally have reinforced the surge higher last Thursday, after the far better than expected US Employment report for June, which produced bullish breakout attempts from multi-week range environments from June.Here we look at the US benchmark stock index… Continued

“Risk on” resumes! Data wins over virus concerns

Macroeconomic/ geopolitical developments Global financial markets have started to resolve the indecisive theme that has been evident from the middle of June into more of a “risk on” bias to start July.Markets have been caught between two competing forces; increasingly positive economic data compared to consensus and the rise in COVID-19 cases (particularly in the southern states of the US, but also in pockets globally).The… Continued

Forex Brokers in your location