- US futures reverse losses, turn green
- UK Mortgage Approvals miss
- Nikkei 1.19% Dax 3.33%%
- US 10Y 0.66
- Oil $36/bbl
- Gold $1740/oz
- BTCUSD $10,135
- UK Mortgage Approvals 15K vs. 22K
Asia and the EU
A powerful reversal in risk today in European trade helped turn futures positive as markets ignored the social unrest in the US and focused instead on news that China may continue to buy US soybeans.
As we noted yesterday, the only thing that seems to derail this market is the prospect of further US-China tensions. Not the specter of civil unrest in every major US city. Not the possibility of 20% of US small-businesses closing their doors forever. Not even the disturbing trend of rising COVID-19 infections in such key states as Texas have had any impact on the relentless rally in equities.
Stock traders have been happy to ignore every piece of bad news, as long as the Fed spigot remains open and the war of words between Beijing and Washington DC does not turn into further tariffs and sanctions. Therefore, today’s story in Global Times that China continues to purchase US soybeans in line with market rules, unaffected by external factors, helped spark a buying frenzy at the start of European trade that pushed indices higher by nearly 1% after being down as much as -0.5% in early Asian hours.
In FX, the risk flows also pressed forward with the buck lower across the board and EUR/USD up for the fourth straight day as the pair approached the key $1.1200 hurdle. We have noted before that the euro appears to have turned the corner after an announcement of a massive fiscal stimulus fund pushed by Germany and France. But longs need to be cautious ahead of the ECB press conference this Thursday, which could dampen the rally if Ms. Lagarde paints a highly negative picture of the post-COVID recovery.
The US calendar today is barren and price action is likely to be driven by whatever news-flow comes from the streets of US cities. So far, the protests have only turned violent against property and while the economic damage has been substantial, the market has basically ignored the developments as a one-off event. However, if President Trump makes good on his promise to militarize the response and if that, in turn, causes more loss of human life, the market will no longer be able to ignore the brewing political crisis in the US.