Stock market review
Global stock markets continue to recover, despite the risks of the second wave of the pandemic and the re-introduction of lockdown restrictions. The number of confirmed cases of Covid-19 infections in the world exceeded 11 million. Several US states reported a record number of new cases since the beginning of July, which forced state authorities to suspend the process of lifting lockdown restrictions, and in some states, restrictions were re-introduced.
However, the demand for risky assets remains high due to unprecedented monetary and fiscal stimulus, as well as against the backdrop of positive macroeconomic statistics. Last week, data on non-farm payrolls was presented and it indicated that a record number of jobs was created in June. The number of jobs increased by 4.8 million, and the unemployment rate fell to 11.1%.
The growth of stock market indices was also caused by the restoration of economic activity in China, as data on manufacturing and services PMI revealed.
Last week, the dollar lost ground against major currencies due to decreased demand for safe-haven assets. Euro was boosted by positive data on business activity and employment in Germany. British pound managed to recover some of its lost positions, despite the lack of progress in negotiations on the trade agreement between the EU and the UK, due to the high demand for risky assets. The Australian dollar and the New Zealand dollar also strengthened, in part due to optimistic data from China.
The oil price has been approaching 4-month maximum due to the high demand for risky assets, boosted by encouraging macroeconomic data. The increase in the price of the resource was also facilitated by the information that OPEC + countries exceeded the plan on production cuts in June.
The price of gold reached a new 7-year maximum amid weakening the dollar.
Main events of the current week
- On Tuesday, Canada Ivey Purchasing Managers Index and data job openings in the United States will be released. The Reserve Bank of Australia will hold a monetary policy meeting.
- On Wednesday, data on crude oil inventories will be published and hearings of the Monetary Policy Committee of the Bank of England will take place.
- On Thursday, data on US initial jobless claims will be released. Finance ministers of the EU member countries will hold a meeting, at which the creation of the EU recovery fund will be discussed.
- On Friday, data on employment change in Canada, and the producer price index in the United States will be presented.
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