• US regulators eased restrictions on large banks' investment
• US recorded near 45.5K new infections on Wednesday
• ECB new Eurosystem Repo facility
European indices managed to erase earlier losses and finished today's session higher after US regulators alleviated restrictions on the so-called "Volcker Rule," allowing banks to make larger investments in riskier funds like venture capital funds. Also banks will no longer have to set aside cash to safeguard derivatives trades between affiliates within the same firm. This is beneficial for big global banks that had lobbied for the relief, as it could free up as much as $40 billion in previously reserved cash. The rules were jointly unveiled by regulators today, with each agency expected to formally approve them.
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Create account Try a demo Download mobile app Download mobile appInvestors also welcomed the fact that the ECB launched a new repo facility to deliver Euro liquidity to central banks outside the Euro Area to support the economies and fund markets amid the coronavirus crisis. Meantime ECB chief economist Philip Lane warned yesterday that activity in the Eurozone would remain far below pre-pandemic levels for an extended period of time. DAX added 0.7%, CAC jumped 1% and FTSE 100 finished 0.4 % higher.
US indices launched today's session lower amid rising numbers of new coronavirus infections. California and Florida reported a record daily raise of new cases and in Houston intensive-care unit beds are near capacity. The governors of New York, New Jersey and Connecticut implemented a 14-day quarantine for travelers entering from most-infected areas. On the data front, initial jobless claims came in well above analysts’ expectations for the second straight week at 1.48 million, which indicates that it will take some time before the labour market will return to the pre-pandemic levels. Currently many investors believe that US will not reinstate the lockdown measures as it would damage the recovery. Still, rising number of infections might slow economic activity and undercut the “V-shaped" recovery scenario that has helped extend recent stock market rally. Potential slower recovery raised concerns over stock market valuation. In opinion of approximately 78% fund managers, currently stock market is at its most overvalued since 1998, according to a June survey by BofA Global Research. The S&P 500’s forward price/earnings ratio stands at 24.5, according to Refinitiv, a level that was last seen two decades ago during the dot-com bubble. Meanwhile Wall Street managed to erase earlier losses after US bank regulators ease Volcker rule. Dow Jones rose 0.17 % S&P 500 added 0.2 % and the Nasdaq is trading 0.4% higher.
WTI Crude oil rose more than 1% to above $38 a barrel and Brent erased earlier losses to trade around $40.8 a barrel during a volatile session, amid hopes of further monetary stimulus. However, rise in US stockpiles and rising numbers of coronavirus infections weighed on market sentiment
There is not much on the agenda tomorrow. US PCE Price Index and Michigan Consumer Sentiment Index are the main releases scheduled for Friday.
GBPUSD – currency pair bounced off the 1.2470 resistance and resumed the downward move. Should the current sentiment prevail, Cable may test short-term support at 1.2370. On the other hand, breaking above the 1.2470 may lead to a bigger upward correction. Source: xStation5
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