A look at the day ahead from Dhara Ranasinghe, senior markets correspondent, EMEA. The views expressed are her own.
World markets are caught in a tug of war — that much is clear from the gyrations in stocks, bonds and FX in the past week. Encouraging economic data provides the push for further stock market gains, surging coronavirus infections the pull on sentiment. These opposing forces have sent the S&P 500 up by as much 1.8% this week and down by as much as 2.4%, with Thursday’s gains leaving it flat.
So to the end of a choppy week. Asian stocks eked out slight gains after the U.S. set a record for a one-day increase in coronavirus cases. Hong Kong shares slumped 0.8% after the U.S. Senate passed a bill to sanction people and companies it considers helping China to restrict the territory’s autonomy. China’s markets were shut for a holiday.
European shares are opening higher. Wirecard, which collapsed owing creditors almost $4 billion after disclosing a gaping hole in its books, slid 17% in premarket trade.
While an easing in European lockdown rules bodes well for sentiment in the region, headlines from other major economies may lend itself to caution. The governor of Texas temporarily halted the state’s reopening on Thursday as COVID-19 infections and hospitalizations surged. Texas, at the forefront of efforts to reopen, has seen one of the biggest jumps in new cases.
Central banks showed no signs of letting their guard down in the face of the crisis. The U.S. Federal Reserve said on Thursday it would cap big bank dividend payments and bar share repurchases until at least the fourth quarter after finding lenders faced significant capital losses when tested against an economic slump.
And Mexico’s central bank cut its benchmark rate to the lowest level in nearly four years, citing worries about growth and an uncertain outlook as the coronavirus pandemic ravages Latin America’s second-largest economy. At 5%, Mexico’s key interest rate is now at its lowest since 2016.
One notable beneficiary of the global uncertainty is gold, which is heading for a third straight week of gains. It has risen more than 1% this week, scaling a near eight-year high near $1,780 on Wednesday.
In currency markets, the dollar is holding firm as caution over rapid rises in U.S. coronavirus cases cast doubt over the reopening of the economy — keeping demand for the safe-haven currency intact. The dollar index has pared a large part of this week’s losses.
The Hungarian forint was 0.1% lower after the central bank on Friday said it may cut its key interest rate once more by 15 basis points in July, but that is as far as it will go. Turkey’s lira and South Africa’s rand are trading flat, while the Russian rouble was a touch lower.
In other European corporate news, Austria’s financial markets watchdog is investigating AMS’s top management on suspicion of illegal share transactions during the ongoing takeover of Osram.
Rescue plans for airlines remain in the spotlight, with Lufthansa shares up 6% in premarket trade after investors backed a German plan. The Dutch government has reached a deal with France to contribute 3.4 billion euros ($3.8 billion) to an Air France-KLM bailout, sources told Reuters.
Salvatore Ferragamo will only release half-year sales data on July 28, postponing the remaining financial data for the semester and a conference call with analysts to Sept. 15.
Hornbach Holding shares are up 4% in early trade after adjusted EBIT jumped 78.4%.
And Italy’s Intesa Sanpaolo has said regulators have approved documents for a UBI takeover bid.
Reporting by Dhara Ranasinghe