Global equities pushed higher last week despite a rising CV-19 case count, with investors taking heart from a continuing ‘re-opening’ bounce in the data, further somewhat encouraging drug news and – most important of all – several major U.S. states still resisting pressure to impose lockdowns of the type seen earlier this year. A weaker $US, meanwhile, supported further gains in emerging market equities and commodities in general, including gold. Global tech – led by the NASDAQ-100 – continued to power on. And Chinese stocks are also on a tear, supported by apparent Government encouragement through the State media!
Bigger picture, global stocks ended the week just above their recent (end-week) range – though the U.S. S&P 500 closed at 3,185, or just below its recent end-week high of 3,194. In the week ahead, most critical will be the U.S. CV-19 case count and whether the most at risk states (such as Texas and Georgia) impose tougher ‘stay at home’ lockdowns. The market also has the start of the U.S. Q2 earnings reporting season to contend with, where a 44% decline in earnings on year-ago levels is currently anticipated. Of course, given weak earnings are largely expected, focus will be on what, if any, corporate guidance is offered. Given the current backdrop, it’s hard to imagine companies being especially upbeat, but the market still seems willing to rejoice at the slightest bit of good or hopeful news. As is usual, the relatively harder-hit U.S. banking sector will kick the season off.
Data-wise, U.S. retail sales and consumer sentiment on Thursday and Friday respectively will provide some guide on the extent to which the ‘re-opening economic bounce’ continues to play out, though this is becoming somewhat old news in light of the more recent virus outbreak. China’s Q2 GDP – along with key monthly data covering industrial production, investment and retail sales – is also released on Thursday, which should confirm China’s post-virus recovery remains on track.
Of course, the major market factor last week was the worsening CV-19 outlook in Melbourne, with the metropolitan area moving back into lockdown and Victorians effectively barred from travelling outside their State. NSW, meanwhile, remains on high alert, with the Government seemingly ready to flick the switch to some form of lockdown again at any moment.
Against this backdrop, it’s perhaps surprising the S&P/ASX 200 only dropped 2.3% last week, and futures suggest a solid start to the week this morning. The $A also remained remarkably resilient, though helped by a weaker $US. In terms of data, the NAB business and Westpac consumer sentiment surveys are due on Tuesday and Wednesday respectively, with the June labour force report out on Thursday. After a slump in May, employment is expected to rebound by around 100k in June, though with the unemployment rate edging up to 7.4% from 7.1% due to a lift in labour force participation. All that said, this data is now very much old news, and the market will be much more focused on any spread in Melbourne’s CV-19 outbreak and how other State Governments react.
Have a great week!
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