A controversial new security law in Hong Kong and no China GDP forecast are refuelling the concerns over US China relations. Hostilities between the two biggest global economies have unearthed some caution in the second half of the week.

 

UK retail sales

Shares in Europe have opened weaker on Friday. Another monthly crash in UK retail sales and government borrowing at a level of nearly 100% of GDP pulled on British blue chips. Grocery shares dropped alongside the dire retail sales figures but those with a significant online presence like Next and to lesser extend Ocado fared better. Rising chatter of negative interest rates and a pullback in oil prices are weighing on bank and oil company shares. Automakers like Daimler and BMW with exposure to China were biggest fallers on the DAX. Lufthansa is bucking the trend with small gains as optimism hold ups for a government rescue.

 

Hong Kong

Shares in Hong Kong dropped more than 4% on Friday, outpacing other declines across Asia. The dollar edged higher to the detriment of the Chinese yuan and other Asia FX. China is pushing through a ‘sedition' law for Hong Kong in the name of ‘national security'. The decision came at its National People's Congress annual gathering. The law sets up the possibility of a clash between Chinese security and pro-democracy demonstrators in Hong Kong, as well as a review of the city's special trading relationship by the US. Both stand to cause prolonged underperformance in the Hang Seng. Separately China announced it will not set a GDP target for this year and reiterated it will meet commitments in its phase one US trade deal.

 

Trump "NBC"

If Trump were impersonating Alec Baldwin, not the other way around, he might change the line ABC (Always Be Closing) to NBC (Never Be Closing)!. President Trump, while touring a Ford factory on Thursday said "we are not closing our country" if there were to be a second wave, while also admitting a second wave is "standard" for a contagious virus. There had been a view in markets that reopening is an unadulterated good thing; the President's determination not to close again if necessary could change that. The comments reflect a growing divide – not just in Washington – but also in the population over which is worse for people's health and prosperity –another lockdown or the virus itself. This debate could be central in the November US election, if indeed second waves do occur. Shorter term, the immediate implications are that the Democrat-proposed stimulus bill probably doesn't pass the Republican Senate.

 

Amazon

Shares of Amazon fell 2% on Thursday after touching a record high, pulling Wall Street lower in the process. Facebook shares also hit new records while Alibaba shares fell 2.1%. If you own shares that are reaching new highs in this kind of environment, you probably won't want to push your luck. Some profit-taking makes sense. What hasn't been evidenced yet is any concern over the implication of Facebook shops for Amazon. For now, Facebook isn't selling itself but offering storefronts for businesses – but half of the sales on Amazon are by third parties. If any company can create a big enough marketplace of sellers to upturn Amazon's dominance of ecommerce, its Facebook.

 

Jobs vs. Stocks?

The S&P 500 has recovered over one third of its value since the March 23 low. A common question has been ‘How are stock markets doing so well in the face of such historic job losses?' We don't exactly answer the question – but there is a frame of reference to be had from comparing the S&P 500 with the Nasdaq Composite and the Russell 2000. The Russell 2000 is broader section of more domestic US companies and is up from the March low, but significantly less than the Nasdaq which is heavily influenced by tech companies who have been less impacted by the pandemic.

 

Chart: Nasdaq/S&P 500/Russell 2000 (YTD)

Nasdaq

This information has been prepared by London Capital Group Ltd (LCG). The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. LCG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

EUR/USD moves closer to 1.1100 amid upbeat market mood

EUR/USD is trading well above 1.1050, hitting new 8-week highs. US data was mixed with a ray of light coming from continuing claims. Hopes about the EU Fund and reopenings trump Sino-American relations.

EUR/USD News

AUD/USD retreats ahead of the close as US equities turn red

After spending most of the day within positive levels, US indexes turned south ahead of the close, dragging the Aussie alongside. AUD/USD still up for the day in the 0.6630 price zone.

AUD/USD News

Goldman Sachs puts Bitcoin on par with Gold

One of the world's largest investment banks, Goldman Sachs, announced a conference for its clients entitled “Implications of Current Inflation, Gold and Bitcoin Policies”

Read more

Gold: Limited gains below the $1730/oz level for XAU/USD

After bouncing from the 1690/1700 price zone XAU/USD is stalling below the 1730 resistance and the 50 SMA on the four chart. The picture is mixed as it seems the metal is challenging a tough resistance near the 1730 level.

Gold News

WTI oil prices rally on gasoline demand and hopes of output cuts’ extension

WTI crude oil prices have appreciated more than 5% on Thursday to reach $34 and approach two-month highs. Investors' optimism about an increase of gasoline demand and speculation of an OPEC+ deal to extend output cuts are driving crude prices higher.

Oil News

Forex Majors

Cryptocurrencies

Signatures