Tuesday, June 30th marks the last day in the month of June. However, not only is it month end, it is also the end of Q2 and the half year mark of 2020. China headlines take a backseat last week as markets traded primarily on headlines related to the increase in the number of coronavirus cases around the world and throughout many individual states in the US. Countries and US states are beginning to “roll back” in certain areas which may have opened to quickly. US Presidential opponents Donald Trump and Joe Biden begin the long-awaited pre-election politicking, which had been delayed due to the coronavirus. Along with month end comes a plethora of economic data, as well as an abbreviated week in the US due to Independence Day.
Boris Johnson announced the guidelines for the re-opening of the UK from July 4th, including a reduction in social distancing from 2 metres to 1 metre. In addition, he announced that pubs, cinemas, and more restaurants which had been closed for months, are also able to reopen. The EU is going to reopen it borders on July 1st to all countries, expect for those which do not have the coronavirus under control (which includes the US, Brazil, and Russia). However just as some countries and US states are continuing to re-open, others are finding increases in the number of cases. This is causing some to roll back their re-openings. Countries such as Australia, Japan and Germany have noticed increases in cases. In the US, while states such as New York and New Jersey continue to slowly re-open, states such as Texas, Arizona, and Florida have slowed down their re-openings to a point where Texas is even re-closing! Traders have new heightened fears of another economic slowdown, just as things seemed like they were getting better. Watch next week to see if coronavirus cases globally continue to increase. If so, this may raise the chances of another round of risk-off for the markets.
Just before the coronavirus outbreak in February, it appeared that Donald Trump many have had the 2020 Presidential election locked up. However, since the outbreak began, political and social unrest have thrown Trump for a loop and it now appears that Joe Biden is in the driver’s seat with a commanding 15-point lead over Trump. Although the markets appear to favor Trump as an economic friendly President, some fear that recent events may have revealed his lack of leadership during a crisis. This could spell defeat for President Trump in November. With the US elections a little over 4 months away, things could get nasty between the two opponents during the summer months. US political headlines should be monitored closely going forward.
With the end of June on Tuesday, it is also month-end, quarter-end, and half-year end! Monday and Tuesday may see some volatility as fund managers position their books with some “window dressing”. Traders need to be aware that there could be some noise, especially around the London and US fix. In addition, we will see our usual month-end/beginning of month data releases, including NFP on Thursday (moved up 1 day because of the US holiday). Expectations are currently for +3,000,000 jobs after adding 2,500,000 jobs in May. However, recall that the US lost 20,000,000 jobs in April! Additional economic data is as follows:
Saturday
- EU: ECB Schnabel Speech
Sunday
- China: Industrial Profits YTD (MAY)
Monday
- Japan: Retail Sales
- UK: BOE Governor Bailey Speech
- UK: BOE Consumer Credit (MAY)
- EU: Business Confidence (JUN)
- EU: Consumer Confidence Final (JUN)
- EU: Economic Sentiment (JUN)
- Germany: Inflation Rate Prel (JUN)
- US: Pending Home Sales (MAY)
- Canada: PPI (May)
Tuesday
- Australia: RBA Deputy Gov Debelle Speaks
- Japan: Unemployment Rate (MAY)
- China: NBS Manufacturing PMI (JUN)
- China: Non-Manufacturing PMI (JUN)
- UK: GDP Growth Rate QoQ Final (Q1)
- UK: Current Account (Q1)
- EU: Inflation Rate
- Canada: GDP (APR)
- US: Chicago PMI (JUN)
Wednesday
- Japan: Tankan Large Non –Manufacturing Index (Q2)
- China: Caixin Manufacturing PMI (JUN)
- Germany: Retail Sales (MAY)
- Germany: Unemployment Change (JUN)
- EU: Individual countries Manufacturing PMI Final (JUN)
- UK: Manufacturing PMI Final (JUN)
- US: ADP Employment Change (JUN)
- US: ISM Manufacturing PMI (JUN)
- US: Fed Chair Powell and Treasury Secretary Mnunin Testimony
- US: FOMC Minutes
- Crude Inventories
Thursday
- EU: Unemployment Rate (MAY)
- EU: PPI (MAY)
- Canada: Trade Balance (MAY)
- Canada: Manufacturing PMI (JUN)
- US: Trade Balance (MAY)
- US: Non-Farm Payrolls
- US: Factory Orders (MAY)
- UK: BOE Financial Stability Report
Friday
- Global Services PMI Final (JUN)
- Australia: Trade Balance (MAY)
- Australia: Retail Sales (MAY)
- Australia: Building Permits (MAY)
- China: Caixin Services PMI (JUN)
Chart of the Week: XAU/USD
Source: Tradingview, FOREX.com
Despite having a positive correlation with stocks for March and April, Gold has come back in line to trade in the negative correlation fashion we would expect between the two asset classes. That is, when stocks trade higher or lower, gold trades inversely to it. Currently the correlation coefficient is -.53. If the number continues to move towards –1.00, we can further expect that Gold and SPX will continue to move in opposite directions. Gold is breaking out of a pennant formation and has reached its highest levels (1779) since September 2011 when it reached 1925. The target for a pennant formation is the length of the flagpole added to the breakout point of the pennant. In this case the target is near 2050! If the correlation between Gold and stocks hold, stocks may be ready for a selloff!
This week, the focus will continue to be on coronavirus cases: are they increasing, are they decreasing, are governments rolling back the re-openings? Along with month-end, quarter-end, and half year-end, there could be some volatility this week! NFP is due Thursday because of a US holiday as well!
Have a great weekend and please remember to always wash your hands (and it wouldn’t be a bad idea to wear a mask when out in public as well!)
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