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Weekly market review May 11-15, 2020


May 11, 2020
Weekly market review May 11-15, 2020

The market of indices restored most of their lost positions, boosted by a number of factors. Countries are gradually lifting quarantine restrictions, contributing to increased demand for risky assets. In the United States, governments of California and Michigan, which are large industrial regions, intend to allow factories to reopen from coronavirus lockdowns soon.

Stock Market Restoration

Stock market growth is also fueled by expectations of an additional package of economic support measures in the United States.

The White House announced the start of negotiations with leaders of Democrats and Republicans on this package. Finally, stock market indices were also boosted by the softening of rhetoric in relations between the United States and China.

The parties held a telephone conversation, during which they discussed the progress in fulfilling the commitments of the parties under the first phase of the trade agreement and agreed to continue cooperation on this issue.

 Currency Market Affected by a Verdict

Euro fell on Tuesday due to the verdict of the German Constitutional Court, which concluded that the participation of the German Central Bank in the quantitative easing program of the ECB violates the German constitution. This decision is a dangerous precedent that calls into question the powers of pan-European institutions, which has put downward pressure on the single currency.

The Bank of England decided not to amend the monetary policy at the meeting held last week. The pound strengthened as there was a possibility of expanding the quantitative easing program. However, only two out of nine members of the Monetary Policy Committee voted for the expansion. However, the pound gains turned out to be short-term.

The Markets Main Events of the Current Week

  • On Tuesday, data on the consumer price index in the US and China will be published.
  • On Wednesday, data on UK GDP and industrial production, US producer price index and crude oil inventories will be presented. Fed Chairman Jerome Powell will speak at an event organized by the Peterson Institute for International Economics on current economic issues. A meeting of the Reserve Bank of New Zealand will also take place. RBZN is expected to leave the interest rate unchanged at the level of 0.25%. Earlier, Westpac bank economists predicted the possibility of introducing a negative interest rate in New Zealand, so this question will probably be asked to the head of the RBNZ Adrian Orr during a press conference.
  • On Thursday, data on employment change in Australia and jobless claims in the United States will be released. Governor of the Bank of Canada Stephen Poloz will deliver a speech.
  • On Friday, data on industrial production in China, German GDP, and US retail sales will be presented.

Corporate earnings reports

  • German payment company Wirecard will present a quarterly report on May 12 before the market open. A significant challenge for the company was accusations of financial statements falsifications aimed at inflating revenue and profit numbers.A statement by the audit company KPMG about the inability to confirm the accuracy of the financial statements led to a collapse in the company’s share price at the end of April.
  • Porsche will report earnings on May 12 before the market open. Porsche was the only German car manufacturer to increase sales in Germany in February compared to the same month last year.
  • Toyota will present a quarterly report on May 12 after the market close. Car sales in key markets declined significantly due to the coronavirus pandemic. The company announced a reduction in car production in Japan by 40% as demand shrinks around the world.
  • Chinese tech giant Tencent will report on May 13 after the market close. Tencent’s gaming, media streaming, cloud, and digital payments businesses likely benefited from stay-at-home directives.
  • JD, which is the second-largest e-commerce company after Alibaba in China, will release a quarterly report on May 15 before the market open. Lockdowns benefited online retailers, which experienced significant sales growth. In addition, the company entered into a partnership with Cloudflare to strengthen its cloud and artificial intelligence business.
Categories: Analysis

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