Market Overview

30 June 2020

Market is Fragmented Ahead of the Expected Storm

The windstorm hadn't even started yesterday as the charts of all global indexes slowly straightened up from their crouch week's opening position. However, the stresses of market weather are still possible, although June is threatening to end with a rare fine and calm view. Any day free from turbulence just helps to continue this strange "coronatennis" game with mixed results and many game points for both of the parties. It will be a hard challenge for the markets to get to the end of the set soon, let alone the end of the entire match, in this quasi-Wimbledon.

That's exactly what Jeffrey Halley from Toronto-based Market Pulse called as "the schizophrenic range trading seen across multiple asset classes". It's true because too much in the market's mood is being shaped for now by individual circumstances that are important in themselves, but not critical to form a clear overall tendency. Among the latest significant details extraordinary rally in Boeing Co shares may be highlighted, the sharp fall in Facebook price, also still high levels of gold spot and futures, which are just in two steps below the desired $1,800 per troy ounce, and perhaps the reaction of the British pound to the U.K. economy's biggest official drop in 40 years.

Boeing shares jumped and lifted especially the Dow Jones Industrial Average stock index, where the biggest aircraft maker is heavily weighted. Boeing stocks rose as much as 6.5% to almost $195 compared with $170 on Friday's close after official reports that the Federal Aviation Administration had approved the start of test flights for 737 MAX after various fixes applied during a 15-month break. Some airline stocks also made modest gains because of the resumption of Boeing 737 Max tests is a step closer to having a large part of their aviation assets cleared to fly again.

Facebook dropped more than 16% off from its fresh historical highs made on the previous week as more major advertisers joined a boycott of the platform started with the “Stop Hate For Profit” solidarity actionBig corporations felt that they are smutting their image because of what they considered to be too mild a moderation policy on Facebook, which do not algorithmically block content considered hateful or with a racial prejudice signs amid the Black Lives Matter movement spreads all over the world. For example, the Coca-Cola company has completely stopped advertising on all social networks for at least 30 days until August. Coca-Cola CEO James Quincey said in a statement on the company’s website: “We will take this time to reassess our advertising standards and policies to determine whether revisions are needed internally, and what more we should expect of our social media partners to rid the platforms of hate, violence and inappropriate content. We will let them know we expect greater accountability, action and transparency from them.”

“Continuing to advertise on these platforms at this time would not add value to people and society. We will be monitoring ongoing and will revisit our current position if necessary,” Luis Di Como, Unilever’s executive vice president of global media, said in a statement, citing hate speech and divisive content on the social platforms. In a live broadcast on his Facebook profile page on Friday Mark Zuckerberg, who is a media magnate and the creator of Facebook, said Facebook will hide or block such kind of content or a content that could harm voting with no exception for politicians as Tweeter did, but Zuckerberg had previously spoken out against such approach.

“We’ve opened ourselves up to a civil rights audit, and we have banned 250 white supremacist organizations from Facebook and Instagram. The investments we have made in AI mean that we find nearly 90% of Hate Speech we action before users report it to us, while a recent EU report found Facebook assessed more hate speech reports in 24 hours than Twitter and YouTube," he stressed. Nick Clegg, Facebook’s vice president of global affairs and communications, conceded Sunday on CNN that “people want to put pressure on Facebook to do more. That’s why we made those additional announcements on Friday. That’s why we’ll continue to redouble our efforts, because, you know, we have a zero tolerance approach to hate speech.” These statements helped to stop the further price decline below $208, so Facebook finished its Monday's trading session near $220 per share after more than $245 just several days ago.

With regard to British statistics, the gross domestic product dropped by a quarterly 2.2% between January and March, the Office for National Statistics (ONS) said. However, that was not too much below the median forecast in a Reuters poll of experts that expected a fall of 2.0%. At the same time, this Q1 2020 data is already outdated since the depth of the current drop is much worse. The U.K. economy may have contracted by 20% in the first half of 2020, the Bank of England (BoE) said earlier this month as the full effects of the lockdown hammered most sectors in April-June. So, the BoE has said "the slump in the economy this year could be the worst in three centuries". However, none of this information is a surprise today. So the British Pound is performing frustrated with GBP/USD approaching the level of 1.2250, but in reality it is still unclear what levels a decline of British currency will be limited to.

All of the above are just some cogs in a complex market machine, which now makes a lot of noise but is not ready to pull away. As more drivers become available, this mechanism could be able to go somewhere in the course of time. Specifically today, Steven Mnuchin, the Secretary of the U.S. Treasury, could add a little inspiration to this machine since he is set to testify before the House Financial Services Committee. But it's not the fact that the mood of markets will not become spoiled by his testifying "partner" Jerome Powell, the Federal Reserve Chairman, who was already rather negative in his forecasts before.


Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Lysakov Sergey
Market Focus
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