European markets are trading flat as investors digest the economic data. The economic numbers out of the UK were very disappointing, and the fact is that things are likely to remain this way because of the possibility of a second coronavirus wave.
The S&P 500 and the Dow futures are also under the influence of the news that the Trump administration has escalated tensions on a new front with China. The relations between Washington and Beijing has been strained because of the territorial dispute in South China Sea. The US has rejected China’s claim in the South China Sea. Basically, the Trump administration has reversed the previous US policy of not taking sides in territorial disputes. Investors are largely concerned about this continuous escalation of tensions between the two major superpowers.
The global stock market had a negative trading session. The HSI index fell the most, it closed with a loss of 1.09%. The Shanghai and Japanese Nikkei also posted losses of 0.83% and 0.87% respectively.
Oil Prices: OPEC+ May Taper Its Supply Cut
The biggest question for oil traders is about the partnership between OPEC and Russia that resulted in curtailing the oil supply. How long this partnership will last and how will they address the upcoming expiry of this agreement are the two questions for traders. Looking at the sideway price action of WTI and Brent, it is clear that traders are not certain about the future of oil price but they are optimistic that the prices will not fall off the cliff like before. The expectations are that they will increase the supply by a small amount which could be somewhere around 2 million barrels b/d.
Dow Jones And S&P 500 Futures Today
The Dow futures are trading lower today as the stock market rally fatigue settles in. Overall, risk sentiment is taking a hit because investors have become cautious.
The Dow Jones index briefly crossed above the 50-day simple moving average on a daily time frame yesterday which is positive for the stock market rally. However, traders were quick in taking the profit off the table and this is why we did not close above this moving average yesterday. Overall, the Dow’s price looks solid because the DJIA’s index price is trading above the two important moving averages: 100 and 200-day SMA.
Stock Market Rally Gave Up Gains
The US stock market gave up most of its gains in the final hour of trading yesterday and this was a confirmation that traders are unsure how the new earnings season will shape up the risk rally.
The S&P 500 stocks fell 0.94% and gave up all of its gains. The information technology sector led the S&P 500 index lower, 278 stocks fell while 226 stocks advanced. The S&P 500 index is down 0.77% in the past 5 days but it is up 3.75% in the past 30 days.
The S&P 500’s airline index is likely to be the focus for investors today. The airline index has the second largest weighting in the S&P 500 index. The airline index peaked in June and ever since we have seen downtrend. Delta Air Lines (NYSE:DAL) will report its earnings today and investors will be looking at the impact of COVID-19 on its passenger traffic.
The Dow Jones closed higher and posted small gains of 0.04%. 17 stock of the Dow index soared and 13 dropped. Pfizer (NYSE:PFE) was the biggest mover and advanced 4.08%.
The NASDAQ composite, the tech-savvy index, experienced the biggest loss yesterday and closed lower by -2.13%.
Coronavirus: 13 Million
On a global basis, coronavirus cases has surpassed the 13 million mark and over 570K people have died because of Covid-19. Coronavirus cases in the US increased by over 64K from a day earlier. This is 2% increase in Covid-19 cases which is pretty much in line with the average daily surge of 1.9%.
Japan said that it will not hesitate to declare another emergency if there was a need to stop the virus spread. Wearing mask will be made mandatory in the UK from July 24. Again, this is a measure designed to stop the spread of the coronavirus or more importantly to avoid the second wave of coronavirus in the UK.
Coronavirus surge in the US is slowing the recovery process while Singapore reported that it has entered into recession and its GDP has dropped by a record 41.2% from the previous three months.