Daily summary: US-China tensions hit risk appetite

• Escalating tensions between Beijing and Washington
• Increasing hopes for a coronavirus vaccine
• British public debt  close to 100% of the country's GDP

 

European stocks finished last session of the week in mixed moods. Early in the session major European indices were trading lower due to rising tensions between the US and China. However sentiment was  boosted  after minutes from the ECB's April meeting showed that central bank is "fully prepared" to step up the Pandemic Emergency Purchase Scheme as soon as June to support the Eurozone economy, which is seen shrinking by a ten percent this year due to the pandemic. Meanwhile economic data showed that UK public debt reached almost 100% of GDP last month. It is the highest level in nearly 60 years, while retail sales slumped at a record pace due to the pandemic. DAX 30 added 0.1%, CAC 40 finished flat, FTSE MIB added 1.3%, IBEX 35 gained 0.2% and FTSE 100 lost 0.4%.

US indices are trading mixed as China-U.S. tensions weighed on market moods. Today Beijing signaled it would impose new national security measures on Hong Kong after last year’s burst of anti-government protests in the city. President Donald Trump warned that US government will react "very strongly" if that happened. This statement raised concerns over Washington and Beijing possibly reneging on their Phase-1 trade deal. For the first time in 30 years, China refrained from setting a particular goal of economic growth. Investors are concerned that the Chinese economy may not be able to meet expectations that have already been drastically reduced since the outbreak of the epidemic.

Recent tensions overshadowed positive comments on a potential coronavirus vaccine from Dr. Anthony Fauci which is the director of the National Institute of Allergy and Infectious Diseases. Today Dr. Fauci told NPR that Moderna’s vaccine data looked “promising.” “I don’t want people to think that any of us feel that staying locked down for a prolonged period of time is the way to go.” Also in his opinion stay-at-home orders intended to curb the spread of the coronavirus could end up causing “irreparable damage” if imposed for too long. “We had to do that when we had the explosion of cases but now is the time depending upon where you are and what your situation is to begin to seriously look at reopening the economy, reopening the country to try to get back to some degree of normal.” Fauci said during an interview with CNBC. During today’s session Dow Jones fell 0.42%, S&P 500 is trading nearly flat and Nasdaq rose 0.28%.

Retail sales in Canada plunged 10 percent over a month earlier in March 2020, after rising an upwardly revised 0.4 percent in February and matching market forecasts. It was the largest drop in retail trade on record, amid business closures due to the covid-19 pandemic.

US WTI crude futures lost 3.5% to trade around $32.7 a barrel while prescious metals prices rose in connection with the worsening relationship between the US and China.  Gold futures for delivery on the Comex exchange were up 0.6% at $1,732.45 /oz. Spot gold was up 0.3% at $1,732.91/oz .Silver futures outperformed again, rising 1.7% to $ 17.69 an ounce, while platinum rose 2.8% to $ 890.40 an ounce.

 

U.S. financial markets will be closed May 25 in observance of Memorial Day. The New York Stock Exchange and the Nasdaq will resume normal trading hours Tuesday. U.S. commodities markets, including gold and oil futures, also won't be open for trading. London Stock Exchange will be also closed on Monday due to Bank Holiday. Therefore  investors should expect lower volatility in the financial markets. German Final GDP and Ifo Business Climate will be the key releases scheduled for Monday. Also BOC Gov Poloz is scheduled to speak.

NZDUSD has been trading in an sideways move since mid-April. Recently price bounced off the upper limit of the range at 0.6154 which is additionally strengthened by the 100 MA (green line). If current sentiment prevails support at 0.5915 may come into play. Source: xStation5

The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.