Daily summary: US-China tensions hit risk appetite

 

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.