Stocks trying to rebound, despite Trump’s positive COVID-19 test

Intermediate

Macroeconomic/ geopolitical developments

  • The end of last week saw huge geopolitical news as President Trump announced that he had tested positive for COVID-19 and as a precautionary measure was hospitalised over the weekend.
Trump covid
  • As we look at in more details below, in our “global financial market developments” section, markets briefly went into a “risk off” mode on this news but quickly shifted back towards “risk on” through Friday’s session.
  • Although this could now throw the US Presidential election into some turmoil, markets appear to have viewed the news as possibly easing the threat of a difficult transition of power, if Biden wins the November vote.
  • Although COVID-19 cases continue to grow at a high rate across Europe and the U.K., many countries have just started to experience some plateauing in this data.
  • The renewal of lockdown measures across European nations appears to be working to some extent, therefore, with possibly a less negative impact for the economic outlook.
  • This has aided the “risk on” price action seen through late September into early October.
  • Republicans and Democrats remain unable to come to an agreement on a new economic relief package, but some indications of hope on this front have also helped the “risk on” theme this past week.
  • The EU and UK resumed their trade talks and although signals from these negotiations have been mixed, there appears to be some improvement in the chances of a deal being done.
  • In turn, the Pound has rallied against both the US Dollar and Euro.
  • On the data front over the past week:
    • Purchasing Managers Index (PMI) data were mixed, but with most major economies beating (or only just missing) expectations
    • The US Employment report was disappointing (but had little market impact).

Global financial market developments

  • Global stock markets were again erratic last week but now with a more positive tone, trying to build on rebound since the bear move lows were set in latter September.
DJIA chart
  • In the Forex space, the theme has shifted from to “risk off” to “risk on” with the US Dollar again weakening against most major currencies
  • The “risk currencies”, notably the Australian Dollar, have benefited versus the USD.
  • The Pound has rebounded after significant September losses versus both the US Dollar and against the Euro, with risks now for further GBP gains.
  • EURUSD has tried to undo the bigger Head & Shoulders Topping pattern, shifting to a more positive short-term outlook.
  • In the commodity space:

Key this week

  • Monday to Wednesday are Chinese holidays, markets are closed. Australia is also closed Monday for the Labour Day holiday.
  • Central Bank Watch: Tuesday sees the Reserve Bank of Australia (RBA) meeting, interest rate decision and rate statement and also sees Jerome Powell, Fed Chairman speak. Wednesday sees the release of the Federal Open Market Committee (FOMC) meeting minutes.
  • Macroeconomic data: The significant data releases this week are the global Markit Services and US Institute for Supply Management (ISM) Services PMI data released Monday.
DateKey Macroeconomic Events
05/10/20Chinese holiday, markets closed; global Markit Services and US ISM Services PMI
06/10/20Chinese holiday, markets closed; RBA meeting, interest rate decision and rate statement; Fed Chairman Jerome Powell speaks
07/10/20Chinese holiday, markets closed; German Industrial Production; FOMC meeting minutes
08/10/20US Jobless Claims
09/10/20UK GDP, Manufacturing and Industrial Production; Canadian Employment

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

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