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Stimulus, jobless claims, earnings season and BrexitAs usual for this week, the main news of the day were centered around the plans to rescue the US economy, the earnings season and, traditionally for Thursday, jobless claims in the US. As Democrats and Republicans have less time, the process of preparing a new stimulus package has intensified markedly. Republicans seem to have decided on their position: legislators have agreed with the White House on the amount of aid (1 trillion) and its main components. But so far there is no any legislative act, just as there is no agreement with the democrats. The news of today was a message from China about the closure of the US Consulate in Chengdu. In addition, yesterday there was another portion of negativity from the Brexit negotiations: Michel Barnier said that the current negotiating position of the UK makes a new trade agreement unlikely. This is about selling the pound against the dollar today, even though the latter is weak. On the fronts of the pandemic, meanwhile, things are still extremely bad. The number of new cases in the world has confidently passed the 15 million mark, and a number of countries have not even reached their peak in the number of cases. All this will inevitably lead, among other things, to economic consequences for the third quarter. So, we should expect the next downward revisions of the forecasts for the growth rates of the world economy. The situation in the economy is already quite difficult without it. The US labor market is giving clear signals that there is no sign of a quick recovery. Yesterday's data on initial jobless claims showed an increase in the number of unemployed (over 1.4 million new applications). In fairness, it should be noted that the number of people receiving benefits on a permanent basis has decreased (to 16.2 million). Meanwhile, the earnings season in the US continues and yesterday it gave more cause for concern than for optimism. Southwest and American Airlines have traditionally reported 80% + drop in revenues and losses of $ 1 billion and $ 2 billion for this sector, respectively. Twitter reported a 23% drop in ad revenue and reported a billion-dollar loss. And even AT&T showed weak data: revenues fell by $ 2 billion.
Short
by Trade24Fx
Tesla and Microsoft, US vs China and jobless claims aheadYesterday was primarily interesting for the reports from some of the most overvalued companies in the US stock market (at least, judging by the basic investment metrics): Tesla and Microsoft. Tesla, as expected by hook or by crook, was able to show profit, or rather its illusion. But this opens the way for it to be included in the SP500 index and is another reason for optimism among buyers. As a reminder, we do not share it in any way and consider Tesla shares a bubble that will surely burst. As for Microsoft, despite the good numbers, shares at the premarket were under pressure. The reason for disappointment is the decline in the growth rate of revenue from cloud services, which is the main driver of the company's growth as a whole. Among other news, it is worth noting the continued growth of tensions between the United States and China. This time, the escalation took place not in the economy, but rather in politics. We are talking about the closure of the Chinese Consulate in Houston. Markets are waiting for the reaction from China. It is obvious that the development of the situation will invariably move from the sphere of politics to the plane of the economy. All in all, there is little cause for optimism. As for the United States, the focus is not so much on the problematic relations with China, but on the fate of the new package of economic stimuli, which should replace the package under the CARES act. Democrats and Republicans are still far from a compromise and exchange threats and curses at each other through the press. Meanwhile, the clock is ticking, counting is already going on for days. The current week is extremely poor for important macroeconomic statistics. Nevertheless, today is an exception in this regard - weekly data on jobless claims in the last 3-4 months has caused increased interest in the financial markets. So far, the situation in the labor market does not confirm the hopes of optimists in any way: 1.3 million new applications for unemployment benefits and 18-20 million people receiving them on an ongoing basis indicate that there is no confident recovery yet. Given the number of companies that have filed and continue to file for bankruptcy, it is not yet possible to expect a sharp improvement in the situation.
NASDAQ:TSLAShort
by Trade24Fx
1
Dreams of a bright future and their consequencesFinancial markets yesterday continued to dream of a bright future under the influence of magic pills news. The effect was complex: from the decline in the VIX index and the growth of stock markets, ending with the growth of commodity markets and a decline of the dollar. The latter is under strong pressure, as a result the Dollar Index moved below the base support of 96, which opens the way for a further decline. Moreover, the euro, pound, Australian dollar and a number of other currencies simultaneously break important levels, which again opens the way for them to further growth against the US dollar. Since we do not share the optimism prevailing in the markets, simply because the reason for the growth is expectations, not facts, we are not in a hurry to sell the dollar, but the recommendation to buy it has been withdrawn. The earnings season in the US is going pretty well. That is, in most cases, the main reason for joy is the exceeding of analysts' forecasts, and not the actual growth of the financial performance of companies, but this is enough for positive-minded markets. Today in this regard will be extremely interesting, because of reports from Microsoft and Tesla. Both stocks are extremely overvalued (although even an overpriced company like Microsoft looks relatively undervalued compared to Tesla), so it will be interesting to see if they what they have got and markets reaction. Oil yesterday also became hostage to a general wave of rising risk sentiments in financial markets and was able to break through key resistance. True, at the end of the day, buyers' sentiment was spoiled by data on US oil stocks from the API, which showed a sharp increase in reserves (by 7.54 million barrels). However, today's official data may bring them back into good spirits. Or not, if the numbers from the API will be confirmed.
NASDAQ:TSLAShort
by Trade24Fx
1
Agonizing summit, stimulus and magic pillsThe EU summit, which instead of one day on Friday dragged on for the entire weekend and smoothly turned on Monday, become of the most difficult and longest in the history of the EU. It should be reminded that the fate of the 750-billion-euro aid fund was decided there. The price is more than serious, so it is not surprising that there was no unity in the ranks of Europe. The stumbling block was not so much the size of the fund as its distribution and control mechanisms. At the end of Monday, it seems that a compromise has been reached. At the same time, the size of the fund has not changed - 750 billion euros, but the structure of its distribution has undergone significant changes. The total amount of gratuitous aid (will be distributed in the form of grants) has been reduced from 500 to 390 billion euros, and the size of loans is 360 billion instead of 250. Although these news for the euro are generally positive, it seems to have exhausted its entire upward potential. In general, the issue of stimulus to the economy this week came to the fore not only in the EU, but also in the United States. By and large, the United States has only a week to agree on a new stimulus package. Otherwise, next week the US economy will face a situation of survival in a crisis without government assistance. All this is happening against the backdrop of a worsening pandemic situation in the United States. The mayor of Los Angeles said he is ready to return a full-fledged lockdown in the city. Meanwhile, the vaccine race continues. The UK has already agreed to purchase 90 million doses from Pfizer and Valneva, and seek effective treatments. Pfizer has released additional information on its tests (positive). In terms of treatment and medicine, AstraZeneca excelled by announcing the results of clinical trials of their experimental drug developed in collaboration with Oxford University. Preliminary results showed that the drug kills not only the virus, but also the cells affected by the virus. In general, a magic pill in its purest form. And small British company Synairgen more than tripled its capitalization after announcing the results of its Covid treatment option. Amid the news, the US tech sector saw another impressive rally led by Amazon and Tesla.
Short
by Trade24Fx
Week in a Glance: earnings season, Chinese GDP, EU, OPEC and panThe past week was exceptionally rich in all sorts of events: the start of the earnings season in the United States, meetings of the three leading world central banks (Banks of Japan and Canada, as well as the ECB), the OPEC + meeting, the EU summit, China's GDP, as well as news from Moderna, continued growth of bankruptcies in the United States; and much more. Central banks decided to leave the parameters of monetary policy in the Eurozone, Japan and Canada unchanged. At the same time, the Bank of Japan has significantly worsened its own forecasts for economic growth. The main positive news of the week can be considered information from Moderna about the next successful round of testing a vaccine against coronavirus, as well as statistics on China's GDP, which not only did not slip into a recession, but also showed results much higher than analysts' expectations (+ 3.2%). But this positive is so far covered by pandemic news: the total number of cases in the world has exceeded 14.5 million with 600K+ deaths, and last week was characterized by new highs in the number of new cases, both in the world and in the United States. As a result, California (the largest US economy and the 5th largest economy in the world among all countries in terms of GDP) went into lockdown # 2. The key event for the oil market was the OPEC + meeting. There will be no further record reduction of 9.7 million barrels per day. From August, the voluntary cuts will drop to 7.7 million barrels per day. And although OPEC tried to sweeten the pill (a number of countries will increase the size of reductions in order to fulfill the obligations violated in May-June, and Saudi Arabia promised not to increase exports in August), this news is generally negative for the oil market. So, this week we will be looking for points to sell oil. We will also continue to sell in the US stock market. The earnings season, which kicked off last week, doesn't look as disastrous as it could have been. But the banks' reservation of billions to cover future loan losses suggests that businesses are preparing for a further deterioration in the situation. And there are enough reasons for this: if Congress does not extend payments to the unemployed and small businesses (the current aid expires next week), then the United States risks facing a real picture of the crisis. However, the continuing increase in the number of bankruptcies of large companies (retailers, restaurants, oil workers, etc.) suggests that the situation is already very negative. Last week ended on a very minor note: the EU summit, at which the fate of the 750 billion aid fund was decided, failed again. This is a very serious blow to the euro. So today we will sell it against both the dollar and other currencies.
Short
by Trade24Fx
1
China's GDP, US unemployment and the European aid fundThe main event of yesterday in terms of macroeconomic statistics was the publication of data on China's GDP for the second quarter. The data came out significantly better than forecasted (+ 3.2% vs. analysts' expectations of 2.1%). Formally, the news is simply great and should have led to a surge of optimism in the stock market in China and the world in general. But by the end of yesterday, the key index of the Chinese stock market has lost almost 5%. Yes, this can be attributed to weak data on retail sales in China. But it seems to us that the markets are just ripe for a correction. This is also supported by information from UBS that the bank's richest clients, who took huge loans in March to buy shares, are now actively fixing profits and planning to move from equities in favor of other assets. The ECB, as expected, did not change the parameters of monetary policy yesterday. Nevertheless, the euro, which in the first half of the day faced serious difficulties after the announcement of the results of the ECB meeting, rose sharply, only to then decline again at the end of the day. However, the main news for the euro this week is the results of today's EU summit. If the aid fund of 750 billion euros will be approved, then the euro may well go above 1.15. Otherwise, the week will likely end below 1.13. But let’s get back to yesterday. Data on retail sales and figures on jobless claims in the United States. Retail sales were a pleasant surprise (+ 7.5% m / m against the forecast of + 5.0% m / m), but the figures on jobless claims were rather mixed. In general, the situation in the labor market continues to be disgusting and the reopening of the economy has not yet radically changed it. The steadily overwhelming number of people receiving unemployment benefits is now doubly dangerous, since there will be no additional checks of $ 600 per week since August. And if the government does not propose alternatives, the US economy may face very serious problems in this regard.
Short
by Trade24Fx
2
Central banks, OPEC +, earnings season, dollar and ECBYesterday started with the Bank of Japan. As we have already noted, the parameters of monetary policy (rates and quantitative easing program) were left unchanged. But at the same time, the Central Bank lowered its own forecast for the country's economic growth in the current fiscal year (ends in March 2021): GDP will decrease by 4.5% -5.7% (previously the range was 3% -5%), that is, outlook is worsened very significant. The Bank of Canada also did not change the status quo: the parameters of monetary policy were left unchanged. Among other news, it is worth noting the results of the OPEC + meeting. As we predicted, the voluntary 9.7 million b / d cut for August was not extended. This means that in a couple of weeks, the supply in the oil market may immediately grow by 2 million b / d, which is a very strong bearish signal. On the other hand, OPEC + assures that the overall reduction in August and September will be not 7.7 million bpd, but about 8.54 million bpd over the next two months, since Iraq, Nigeria, Angola, Russia and Kazakhstan will compensate for previous non-compliance. Otherwise, markets continued to be in risky mode following the announcement of Moderna vaccine trials. We have note once again that this news does not solve the current problems in any way, even if we forget that this is a very early stage of testing and more than one month will pass before the vaccine appears on the shelves. However, this temporary optimism boosted equity markets and also weighed on the dollar. As a result, the Dollar Index tried to break the key support 96. So far, we cannot state unambiguously that the level has been taken, which means that all our recommendations for buying the dollar remain relevant. But if a breakdown does occur, then it makes sense to turn into dollar sales across the entire spectrum of the foreign exchange market. The earnings season, meanwhile, continues and yesterday's reports can be treated as good ones for the current conditions. However, the growth of equity markets was very limited. This is largely due to the fact that those companies whose results turned out to be better than forecasted had their own unique reasons for improving performance, which, moreover, were of a rather one-step nature. In general, stock markets are clearly losing momentum. For example, today the data on Chinese GDP came out better than forecasted, but the Chinese stock market is in deep red. Today we are preparing for new reports from US corporations (Netflix, Johnson and Johnson, Morgan Stanly, Bank of America and others), as well as the ECB's decision on the parameters of monetary policy in the Eurozone.
SSE:000300Short
by Trade24Fx
1
Lockdown 2.0 in California, weak data and central banksThe main news of yesterday can be considered the introduction of lockdown №2 in California. Yes, this is a milder version of restrictions (food in take-away restaurants, banning bars and public events), but California is still the main generator of US GDP, and indeed the world as a whole (6th place among all countries in the world level of GDP). So, everything is serious, very serious, especially considering that the situation with the pandemic in the US is getting worse. And not only in the USA: Hong Kong tightens restrictions, Tokyo is a step away from introducing a new state of emergency, Iran is closing schools, etc. In general, yesterday can be safely written in the liabilities of the global economy. In addition to the lockdown in California, there were many depressing macroeconomic data. For example, industrial production in Japan (-26.3% in May compared with the same period last year) and the UK (6%, which is actually equivalent to a strong drop, since these data are relative to the previous month, manufacturing production in the metric year / year decreased by 22.8%), Singapore's GDP in the second quarter fell into the abyss (-41.2%), and in the UK the situation is slightly better (1.8% compared to the previous month is all almost a 20% drop compared to the same period last year). The data from the Eurozone was not very pleased either (economic sentiments, according to ZEW data, was much lower than forecasts), which, however, did not prevent the euro from growing (expectations of EU summit on Friday). Yesterday, the earnings season began in the United States. Banks started with their financial reports. The overall results can be summarized as follows: those who had large trading departments were able to relatively withstand the lockdown (JPMorgan), but those who were totally dependent on the traditional banking business suffered more than noticeably (Wells Fargo). In general, the losses of banks from traditional business are enormous - almost each of the banks wrote off about $ 8 billion for possible loan losses. These are the highest marks since the global financial crisis. Today promises to be no less eventful. The Bank of Japan has already announced the results of its meeting: the rate was left unchanged. The Bank of Canada will announce its decision later. In addition, we are waiting for data on inflation in the UK, as well as industrial production in the United States. From the conditional positive of yesterday, at least for the oil market, we can consider the OPEC report, in which the cartel was relatively optimistic about the market prospects in the foreseeable future. But this positive can be dispelled today by the decision of OPEC + to increase production by 2 million bpd. Yes, and the markets traditionally took the opportunity to increase optimism - the news about the next round of vaccine trials from Moderna.
DJ:DJIShort
by Trade24Fx
1
UK GDP and other data, bank earnings, OPEC outlookAs we noted in yesterday’s report, this week is going to be exceptionally eventful. Yesterday's events in the US stock market - a clear confirmation of this. And this is just the beginning. Tuesday should be another proof, because today fully starts the earnings season and many important macroeconomic statistics will be published. As for the data, China has already reported international trade data (imports grew by 2.7% and exports by 0.5%), which once again indicates that the Chinese economy is feeling yourself relatively good. This cannot be said about Japan: industrial production in May collapsed by 26.3% compared with the same period last year. Next, we are waiting for data on UK GDP and industrial production for May (do not flatter yourself with forecasts that expect growth rates: this growth relative to the previous month, and relative to May last year, it will most likely be a decrease of 15-20%). Recall that our position on the pound is to look for points for its sales in the foreign exchange market. This can be done both against the dollar and against the euro. The day will continue with data on consumer inflation in Germany and USA, as well as industrial production in the Eurozone. In addition, OPEC is due to release its monthly oil market review on Tuesday. Considering that the OPEC + meeting will take place in the middle of the week, at which they will decide to extend the reduction by 9.7 million b / d further or not, this week will be difficult for the oil market. Our expectations are that they will not extend (this means that since August the supply in the oil market will grow by 2 million bpd), and the report will have concerns about the growth of oil demand, which together gives reason to recommend oil sells from current prices. And finally, the earnings season. According to analysts, it will become the worst since the global financial crisis (and maybe even worse). Today, before the markets open, banks will report and it is very likely they will set the pace for this week and even the entire earnings season.
DJ:DJIShort
by Trade24Fx
3