The last week has been a tale of two halves, with Mondays open picking up from the week before with surging stocks relentlessly even in the face of increasing case numbers, even in the United States. Even despite a pullback on Tuesday, the buying remained relentless as we came into Wednesday with the Nasdaq already on all time highs and the S&P 500 looking like it wanted to take on the historic highs seen prior to the Covid-19 pandemic hitting Stateside.

Whilst the urge to avoid fighting the trend of the market remained, there seemed an inevitability that a tipping point was coming. Finally, on Thursday we could have started to see the beginning of this inflection point. With raising globally daily cases, Hong Kong having to take the steps of shutting schools, Australia taking steps to limit inbound transport again, US daily new cases hitting the 60,000 mark, Mexico seeing 2 straight days of record new increases, 12.2 million global cases and over 550,000 deaths now recorded, the facts couldn’t continue to be ignored.

This brought the equity markets sharply lower, and whilst the buoyant US averages were more reluctantly sold, the weight took them off the highs eradicating the gains seen on the week, as safe haven currencies were heavily bought as well as treasuries and long dated bonds. We also witnessed a stall in the price of Oil as it fell from 41 to below 39 Dollars per barrel as we head into an important OPEC meeting next week. As always the close of the week and beginning of the new one will be closely monitored, as the news that falls within often sets the tone, and as the market focus seems to be correcting from macro data back towards case numbers that will be the key factor to consider.

Gold had benefited hugely from the dollar weakness brought by the buoyant stock market, making the next directional play rather interesting, as there is no doubt that raising fears of a prolonged and substantial second wave is positive for the metal, but will that be a faster move than the flight to safety buyers of the US Dollar. For now it is stalling around the 1800 level, with the next week looking key to the longer term direction. 

It's been another long and hard week for President Trump in the US as the election race starts to heat up and the potential of his tax records being made publicly available was answered. As we continually state he will ensure cash in the form of stimulus remains available to thwart any downside in stocks to protect his savior of the stock markets campaign.

In the UK this week as Brexit talk developments fell silent, the main event this week was the “mini-budget” held by Chancellor Rishi Sunak. Sunak took the opportunity to attempt to stimulate sectors of the economy impacted by lockdown and trepidatory consumerism as they reopened. The hospitality industry also got a welcome boost as well as a stamp duty holiday to boost the housing market, with tax removed on purchases sub £500,000. Sunak also tried to encourage the continuous employment of workers returning from furlough, offering an albeit modest incentive for employers welcoming furloughed workers back with continuous employment into next year. Whilst, Sunak impresses on the stand, the big question of his ability will come in the Autumn when he will need to explain where he will get the money to pay for this. This sentiment was shared by ratings agency Moody’s who outlined they expected to see the UK economy (GDP) slump by 10% this year citing the Chancellors stimulus will aid gradual economic recovery, but add pressure on the UK’s fiscal position. 

The Week Ahead:

Monday: A quiet start to the week with little in the way of meaningful data. There is however a public appearance from The Bank of England’s Head Bailey then the Federal Reserve's Williams in the afternoon session

Tuesday: A busier day starting with Chinese Trade Balance data. Next up is German CPI and UK GDP, Industrial Production and Manufacturing data. German ZEW confidence data is next before US Core and Non-core CPI

Wednesday: The day starts with The Bank of Japan Monetary Policy Statement and conference. Next up is UK CPI Inflation. In the Afternoon its The Bank of Canada Rate decision and Conference. 

Thursday: Australian Employment data comes first before Chinese GDP. Early in the afternoon we get the ECB rate decision and statement. From the States we get Retail Sales and weekly jobless. 

Friday: A quiet end to the week with the only notable data being the University of Michigan data from the US. We also hear again from the UK MPC’s Bailey.