Market movers today

GDP data for France, Spain, Italy as well as Canada are expected to show a significant slowdown similar to what we saw in Germany and US yesterday.

The preliminary EU inflation data for July are also expected to decline, whereas the US PCE data for July are expected to rebound modestly.

Moody's may update its view on the German sovereign rating. However, we do not expect a change to either the outlook or the rating.

The risk of a second wave of COVID-19 is likely to put downward pressure on rates, but risky assets are supported by fiscal and monetary stimulus. The USD is likely to remain under pressure given the weak data as well as the political uncertainty such as yesterday's comments from President Trump regarding postponing the US presidential election.


Selected market news

Global bond yields declined on the back of weak German GDP data for Q1 as well as US GDP data. The GDP data are significantly affected by the coronavirus and we will get more GDP data today from Canada, Spain, France and Italy.

However, US tech stocks rallied led by Apple, Facebook and Amazon. This gave some support to the S&P500, but it still closed lower yesterday due to the weak GDP data and the tweet from President Trump regarding postponing the US presidential election on 3 November until the pandemic eases. The dollar continued to underperform most of it peers and broke through the 1.18 level versus the euro and is heading towards a test of 1.20 today.

This morning we are seeing a mixed picture in the Asian equity markets, but the global markets are preparing for a second wave of COVID-19. In Japan the equity market tumbled on the back of a new rise in COVID-19 cases and there was record high number of new cases yesterday. The Chinese PMI data released this morning were a bit better than expected as the manufacturing PMI rose in July to 51.1 from 50.9, but the service PMI fell.

Given the risk of a second wave of the coronavirus crisis, the unprecedented monetary support from global central banks as well as the fiscal support are here to stay until we get a vaccine or medicine that is a durable cure for COVID-19.


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