The Weekly Wrap – A Dose of Reality Hit Risk Appetite

The Stats

It was a relatively busy week on the economic calendar, in the week ending 12^th June.

A total of 48 stats were monitored, following the 61 stats from the week prior.

Of the 48 stats, 25 came in ahead forecasts, with 21 economic indicators coming up short of forecast. Just 2 stats were in line with forecasts in the week.

Looking at the numbers, 28 of the stats reflected an upward trend from previous figures. Of the remaining 20, 19 stats reflected a deterioration from previous.

For the Greenback, a run of 3 consecutive weekly losses came to an end. A Thursday and Friday rebound reversed losses from early in the week. The U.S Dollar Spot Index rose by a relatively modest 0.39% to end the week at 97.319. In the week prior, the Dollar had fallen by 1.43%.

Doom and gloom over the economic outlook had hit the markets before Powell’s press conference. The World Bank got things going at the start of the week, projecting a 5.2% global economic contraction.

OPEC jumped on the bandwagon, also delivering doomsday like projections that sank crude oil prices…

News of a jump in new coronavirus cases from states recently reopened also spooked the markets mid-week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 7,718,680 on Friday, rising from last Friday’s 6,823,680 total cases. Week-on-week, the total number of cases increased by 895,000, on a global basis. This was higher than the previous week’s increase of 797,573 in new cases.

In the U.S, the total rose by 162,643 to 2,115,319. In the week prior, the total number of new cases had risen by 159,413.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 5,842 to bring total infections to 713,845. In the previous week, the total number of new cases had risen by 6,992.

Out of the U.S

It was a relatively quiet week on the economic data front.

Key stats in the week were really limited to just the weekly jobless claims figures and consumer sentiment and expectations figures.

Much to the U.S President’s delight, the weekly jobless claims rose by 1.542m in the week ending 5^th June. While still on the higher side, this was well below the previous week’s 1.877m.

It wasn’t enough to ease market panic on the day, however, as Powell’s comments echoed across the global financial markets.

On Friday, prelim consumer sentiment and expectations figures for June also garnered plenty of attention.

The Michigan Consumer Expectations Index rose from 65.9 to 73.1, with the Michigan Consumer Sentiment Index rising from 82.3 to 87.8. It was good enough to support the U.S majors on the day.

Away from the numbers, the FOMC June policy decision, economic projections, and press conference was the main event.

FED Chair Powell provided the markets with a reality check during the press conference. The markets responded in kind, with riskier assets taking a dive.

Remarkably, the very same riskier assets found support on Friday, though not enough to reverse losses from earlier in the week.

On the geopolitical risk front, tension remained high domestically following the murder of Floyd George. Tensions between the U.S and China also continued to simmer.

In the equity markets, the Dow slid by 5.55%, with the NASDAQ and S&P500 falling by 2.30% and by 4.78% respectively.

Out of the UK

It was a relatively busy week on the economic calendar. The markets had to wait until Friday for the numbers, however, for the lion’s share of the stats.

The stats were heavily skewed to the negative, with the UK economy contracting by an alarming 24.5%, year-on-year, in April.

Manufacturing production tumbled by 24.3%, month-on-month, as the lockdown led to a closure of all non-essential businesses.

The figures led to assurance from the Bank of England Governor Bailey that he is ready to take action. It was the UK’s largest contraction on record.

On the Brexit front, there was no talk of an extension to the transition period. This does lead to an increased risk of a hard Brexit should both sides fail to take a softer stance on demands.

In the week, the Pound fell by 1.01% to $1.2540, partially reversing a 2.63% gain from the previous week. The FTSE100 ended the week down by 5.85%.

Out of the Eurozone

It was a relatively busy week economic data front. While the stats were skewed to the positive, the stats were still a disappointment. May’s inflation figures, also released in the week, drew little attention.

There were some noteworthy numbers to consider amongst the stats:

In April, industrial production tumbled by 17.9% in Germany and by 17.1% in the Eurozone. Also dire was trade data from Germany, where the trade surplus narrowed from €12.8bn to €3.2bn in April.

While the data was quite dire, the EUR briefly visited $1.14 levels before falling into the red.

For the week, the EUR fell by 0.32% to $1.1256, following a 1.71% gain from the previous week.

For the European major indexes, it was a particularly bearish week. The CAC40 and DAX30 slid by 6.90% and 6.99% respectively, with the EuroStoxx600 falling by 5.66%.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, bringing to an end a run of 3 consecutive weekly gains.

In the week ending 12^th June, the Aussie Dollar fell by 1.48% to $0.6866, with the Kiwi Dollar declining by 0.95% to $0.6445.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar on the economic data front.

Business and consumer confidence figures for May and June were the key stats of the week.

While the good news was that both consumer and business confidence improved, concerns over the economic outlook weighed.

Projections from the World Bank, OPEC, and the FED Chair all contributed to the Aussie Dollar’s demise.

For the Kiwi Dollar

It was also a quiet week on the economic calendar.

Key stats included business confidence, electronic card retail sales, and business PMI numbers for May.

All the stats were skewed to the positive.

In spite of a rebound in the numbers, business confidence and the business PMI remained at low levels.

A 78.9% rebound in retail sales was also not enough to support the Kiwi in the week.

It was the economic projections that led to an end to a 3-week rally.

For the Loonie

It was a particularly quiet week on the economic calendar. Economic data was limited to housing start figures for May that had a muted impact on the Loonie.

Direction through the week came from market risk appetite and crude oil prices.

OPEC’s doom and gloom certainly didn’t help and neither did news of the Saudis ending their extra cuts in output post-June.

OPEC + may need to be doing a lot more in terms of rebalancing supply and demand to restore price stability.

The Loonie fell by 1.24% to end the week at C$1.3589, following a 2.60% rally from the previous week.

For the Japanese Yen

It was a relatively quiet week on the data front.

In the 1^st half of the week, finalized 1^st quarter GDP numbers were in focus. While revised up from 1^st estimate, it was a reminder of economic conditions and what lies ahead.

In the 2^nd half of the week, the BSI Large Manufacturing Conditions Index tumbled from -17.2 to -52.3 in Q2.

Rounding off a bad week on the data front, finalized industrial production figures were revised down from prelim. In April, production slid by 9.8% following a 3.7% fall in March.

While the stats were negative in the week, it was risk aversion that finally delivered support for the Yen. Much of that was down to FED Chair Powell, who managed to further deflect Dollar demand.

The Japanese Yen rose by 2.02% to end the week at ¥107.38. In the week prior, the Yen had fallen by 1.63% against the U.S Dollar.

Out of China

Economic data included May trade and inflation figures. While exports fell less than expected, the trade data pointed to a likely slump in exports in the coming months.

Imports tumbled by 16.7%, following a 14.2% slide in April. Exports fell by just 3.3%, but with global demand in May likely to have been lackluster, exports in May could see a more marked slide.

In the 2^nd half of the week, inflation and factory gate prices delivered further evidence of weak demand.

On the geopolitical front, it was a quiet week, with the U.S and China seemingly standing down for now…

It does remain to be seen, however, whether the recent semblance of calm will continue.

In the week ending 12^th June, the Yuan ended the week flat at CNY7.0835 against the Greenback.

The CSI300 ended the week up by just 0.05%, while the Hang Seng fell by a relatively modest 1.89%.