Trading Week Ahead: 1st June – 5th June 2020

พฤษภาคม 31, 2020
by Joseph Jeffriess, Market Analyst

Article Recap

Key Events and Data Releases This Week

Bank Holiday - New Zealand, Switzerland, France and Germany

USD ISM Manufacturing PMI
AUD RBA Rate Statement, RBA Cash Rate
Bank Holiday - Italy

AUD GDP USD ADP Non-Farm Employment Change

CAD BOC Rate Statement, Overnight Rate
USD ISM Non-Manufacturing PMI
EUR Main Refinancing Rate, Monetary Policy Statement, ECB Press Conference

CAD Employment Change, Unemployment Rate
USD Average Hourly Earnings , Non-Farm Employment Change, Unemployment Rate

(Times adapted to AEST timezone)

The recent tensions between China and the U.S. continued to be a topic of discussion for most of last week as the Chinese pursued their new national security policy in Hong Kong. This, as of yet, has had little influence on global markets and after the falls during the previous week, the Hang Seng and CFD market HK50 stabilized and edged higher. With a lot due to happen on the job and GDP fronts in most major economic blocks, this issue may remain in the back seat for now. If tensions between the two countries do escalate further, we could see some influence, so it is worth keeping an eye on the ongoing developments.

U.S Stocks Power Higher

In a largely positive week, U.S. equities continued higher as did most risk currencies. Last Tuesday and Wednesday the Nasdaq started to show some signs of weakness as President Trump lashed out at Twitter and put forward an executive order. Nerves subsided by Thursday and the Nasdaq returned to rally on Friday. By the end of the week, the NDX had added 1.42% and closed above 9,580. The US30 added 3.65%, and the SPX500 added 2.98% for the week. U.S. stocks are mind-blowing at the moment – what is it going to take to turn them? Riots across the U.S., GDP shrunk, and the virus infection and death rates continue to climb! Despite all of this the rallies continue and the NDX is now less than 2% away from new records.

NDX100 Weekly

The Best of the Rest

Other notable performances this week came from the JPN225 +6.86%, the GER30 +4.62% and the FRA40 +5.01%. As mentioned, risk currencies also performed well last week, gaining to both the USD and JPY. The EUR was boosted by stimulus package news, while the AUD shrugged off China–Australian and China-US tensions. The EURUSD gained 1.91%, and the EURJPY gained 2.16%. The AUD saw a 2.02% gain to the USD and a 2.34% rise to the JPY. Positive recovery news was another factor for the AUD locally.

The Week Ahead

Chinese data missed over the weekend with the manufacturing PMI coming in at 50.6, 0.5 below the 51.1 expected. Today is shaping up to be a quieter session with several countries observing bank holidays. But things will pick up, don’t worry!

On Tuesday, the RBA meets, but rates are expected to stay on hold as is the target for three-year bond yields. The statement will be sighted, but with the recovery still going we wouldn’t expect too many surprises. Australian GDP is due on Wednesday, and the expectation is for a modest drop to -0.4% from 0.5%. Any surprises in this number could move both the AUD and ASX. 

The ECB meets on Thursday and rates are expected to remain on hold at 0.00%. Traders will be looking to the statement for details on the ECB’s emergency asset purchasing program, anything less than an expansion could prove to be a shock to the market. The expectation is for a 500 billion-euro ($555 billion) top-up, we will also see their latest economic projections, which could confirm President Christine Lagarde’s remarks that the Euro area is in a much-worse decline than initially thought.

The week concludes with U.S employment data and thoughts are it could show a depression-like jobs rate for the United States. The forecast is for unemployment to hit 19.5% – a level not seen since the great depression, while employers are also expected to slash jobs from their payrolls. Last month, payrolls tanked to -20,500K. This month 8,000K is expected to have been lost. A better figure but still horrible. As always, the figure beating the expected could help risk, and a figure lower than expected could boost safe-havens. 

This week the Nasdaq remains the key focus. Could we see continued buying take the index to record highs? I still find this hard to believe when we look at what is going on at the moment, but we will see.  

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