Daily summary: Global stocks mixed amid economy worries

European indices finished the final session of the week in mixed moods, as EU officials were discussing the €750 billion recovery plan to respond to the coronavirus crisis.  Most likely worst affected countries will receive grants and loans to help them fight the negative effects of the pandemic. German chancellor Angela Merkel told reporters that the negotiations will be very difficult as the deal faces opposition from Denmark, Sweden, Austria and the Netherlands, as well as the threat of a Hungarian veto. Policymakers will also resume discussions about the new seven-year EU budget, after talks collapsed in February. During today’s session DAX rose 0.4%, CAC 40 fell 0.3% and FTSE 100 finished 0.6% higher. For the week DAX gained 2.3%, CAC 40 jumped 2% and FTSE 100 advanced 3.2%

 

US indices are trading in a local sideways move today, as investors swing between prospects of more fiscal stimulus and concerns regarding further business disruptions due to surging number of new coronavirus cases. Yesterday US reported record number of 75,000 new coronavirus infections, while cases continued to soar in India and Brazil. Also, Spain and Australia recorded their highest number of new Covid-19 cases in more than two months. Meanwhile FED expanded its Main Street Lending Program to include nonprofit organizations disrupted by the coronavirus pandemic such as educational institutions, hospitals, and social service organizations that were in sound financial condition prior to the pandemic. "Nonprofits provide vital services across the country and employ millions of Americans," Fed Chair Powell said. Also  New York Fed President John Williams warned for a prolonged US economic recovery from the coronavirus crisis and added that it was not time to think about raising interest rates. On the geopolitical front, Trump administration is considering banning travel to the United States by all members of the Chinese Communist Party, according to Reuters.

Meantime International Monetary Fund warned today that the US economy is expected to shrink by 6.6% this year due the pandemic, but a resurgence in coronavirus infections and a systemic increase in poverty could worsen that outlook. IMF also noted other risks, like sharp increase in government and corporate debt levels, and the prospect of a long period of low, or even negative, inflation."There are tremendous uncertainties surrounding the economic propagation of the COVID-19 shock," they said in a note. "It will likely take a prolonged period to repair the economy and to return activity to pre-pandemic levels."

Also investors received another set of mixed quarterly results from the US. BlackRock (BLK.US) and PPG Industries (PPG.US) quarterly results came in better-than-expected, however Netflix (NFLX.US) stock plunged over 7% as company is expecting  lower growth for the second half of 2020 compared to the prior year.

 

On the data front, University of Michigan's consumer sentiment for the US fell to 73.2 in July from 78.1 last month, well below analysts’ estimates of 79, due to rising numbers on new COVID-19 infections.  "Following the steepest two-month decline on record, it is not surprising that consumers need some time to reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy. Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring", according to the Surveys of Consumers chief economist, Richard Curtin. Meanwhile, housing starts data for June came better than expected while building permits were slightly below forecasts.

The dollar index dropped below 96.0 on Friday, not far from the levels not seen in 5 weeks and is on track to post its 4th straight weekly loss. Risk appetite for riskier currencies improved today amid hopes of further stimulus from EU and China.

Gold traded above the key $1,800 an ounce level on Friday boosted by a weaker dollar. Precious metal is heading for a small weekly rise, its sixth straight week of gains.

Economic calendar for Monday does not seem to be particularly interesting. German PPI reading and Buba Monthly Report will be the key release of the European session. MPC Members Haldane and  Tenreyro are scheduled to testify during US trading hours.  When it comes to newsflow, traders should look out for hints on China-US relations and further updates regarding spread of the COVID-19. On the earnings front IBM (IBM.US) will report its quarterly reading.