Europe is looking towards a mildly negative start as investors continue to weigh up rising coronavirus figures against signs of economic recovery and rising US – China tensions. The FTSE is lagging its peers following worse than forecast GDP data
Whilst risking coronavirus numbers and flares ups across the globe are keeping investors on edge, improving economic data is going some way to distracting investors. US pending home sales obliterated expectations, jumping 44.3% in May, well ahead of the 18.9% increase forecast and a solid recovery from April’s pandemic inspired plunge. The US housing market showing signs of a speedy recovery is boosting optimism surrounding the US economy, even after Fed Chair Jerome Powell said that the path to economic recovery is extraordinarily uncertain amid efforts to control the virus.
Overnight Chinese PMI data added to the upbeat mood. The official manufacturing PMI showed hat activity expanded faster than forecast, printing at 50.9, above estimates of 50.4. The level 50 separates expansion from contraction.
Optimism surrounding the global economic recovery is diverting some attention away from Beijing passing controversial Hong Kong security legislation, gaining major criticism from US and Japan. The move has set the scene for the most radical change to the way of life in Hong Kong since the British colony was returned 23 years ago. The move to limit freedom and civil rights in the financial hub puts Beijing further down the road on collision course with US.
QI GDP -1.7% vs -1.6% exp.
The FTSE is set to lag its European peers, opening in the red after Q1 GDP showed that the UK economy contracted by more than expected in the first quarter. Q1 GDP -1.7% yoy in Q1 worse than the -1.6% forecast. Quarter on quarter the economy contracted a worse than expected -2.2% vs -2% previously reported.
Given that the first quarter only included a week of lockdown, the worst is yet to come in, with economic growth in Q2 expected to be significantly worse given that the economy was paralysed for 2 of the three months. Today’s reading doesn’t bode well for Q2.
Following the release, the Pound has dropped back through $1.22 as it heads towards monthly lows.
Brexit talks are doing little to support sterling, with little progress on key issues and the UK insisting that an outline deal is ready by the end of July.
Attention will now turn to Boris Johnson and his plans to spend his way out of the pandemic crisis with huge infrastructure projects.
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.