Markets continue to react in a predominantly positive way to the information coming from news feeds using a clearly risk-on approach. Such a conclusion seems to be confirmed at the moment, not so much by some new summer records for the U.S. S&P500 broad market index, where the fresh upward movements are still accompanied by pullbacks almost every day, but more by the fact that safe-haven potential of the U.S. Dollar is seemingly being ignored.
For example, Pfizer and BioNTech yesterday announced a new agreement with the U.S. Government that already placed an initial $1.
the markets had a greater appetite for risk. European Union leaders have agreed
on a recovery plan. Good prospects for an Oxford vaccine are also enlivening
Europe 600 index rose 0.3%, after European officials reached a historic
agreement on the terms of the recovery plan. In the United States, the Dow
Jones appreciated 0.60% while the S&P500 grew 0.17% and the Nasdaq fall 0.81%.
Treasurys and European bonds showed a moderate reaction on Tuesday to the deal
on the European Union recovery fund.
While European and global stock markets are making a pullback after a spectacular jump at the beginning of the week, the U.S. Dollar is crawling just a little higher against the basket of major reserve currencies keeping its weakening overall trend intact. In particular, after a brief decline to the area of 1.1505 before noon, the single European currency soared again above 1.1540 vs its American competitor, as the Euro-nominated assets are getting support by the New Generation EU stimulus package adopted by the Old World leaders.
The recent decline of the U.S. Dollar prompted a “mainstream” suggestion that the American currency is moving towards the underworld. For example, some expect the Euro to climb to the 1.30 level versus the Dollar. Mizuho Bank analysts suggest that the recently approved UE recovery fund worth 750 billion Euros will complement this decline as this recovery plan suggests huge EU nations’ borrowings denominated in Euros. This move will create a steady cash inflow in government bonds and may raise the demand for the Euro.
was marked by a reversal of market sentiment. The day started out with a
feeling of risk aversion, but ended with the possible conclusion of the negotiations
on the European recovery fund, as well as with positive expectations regarding
an Oxford vaccine, which is most probably the cause of greater confidence in
Stoxx600, an index that aggregates the 600 highest quoted shares in the Old
Continent, closed at 0.75% to 375.51 points. The US indexes appreciated, with a
rise of the Dow Jones by 0.03% while the
S&P500 appreciated by 0.
Even before the happy end of the five-day historical European summit, this summer's newly updated record above the 3,250 mark on the broad-based U.S. S&P500 index late in New York set a very positive tone for the global markets. This American mood was caught by the European wings and was then raised even higher with fresh four-month highs of the Euro Stoxx 50 composite index and also by national German and Italian stock indexes. The French CAC40 index is still on track to repeat its peak values of June.
The long-awaited EU summit in Brussels lingers, as Monday happens to be the fourth day of haggling. It seems like the forecasts of Hungarian Prime Minister Viktor Orban, who said that the summit would reach an agreement even if the negotiations drag on for a week, are beginning to come true. At least, in terms of the length of the country leaders' talks. The summit was originally supposed to be completed in two days.
The European Central Bank (ECB) kept its ultra-loose policy on Thursday after taking unprecedented measures over the past several months to fight the recession. At a post-policy meeting press conference, the ECB President Christine Lagarde commented that incoming information "signals a resumption of Euro area economic activity, although the level of activity remains well below the levels prevailing before the coronavirus pandemic, and the outlook remains highly uncertain".
Indeed, the composite Eurozone ZEW Economic Sentiment for July showed a five-year record of 59.
Yesterday the market sentiment was one of
risk aversion. Fears surrounding the sharp rise in cases of covid-19
infection in the US also continue to weigh on investor sentiment, notably due
to the impact this will most likely have on the economy.
In particular, the Stoxx 600 – the
European benchmark index - fell 0.47%. In the United States,
the Dow Jones index depreciated by 0.50% while the S&P500 index
lost 0.34%, with the technological Nasdaq index being the only
one that won - although only by 0.73%.
European stocks are slightly dropping after yesterday's take-off due to uncertainty on whether the recovery fund will eventually be approved with some possible intermediary news this Friday, when EU leaders will gather in person to seek a deal. Meanwhile, the epidemic situation in North and South America continues to threaten the global investment climate. The U.S. has recorded an all-time daily peak of 71,500 new positive viral tests on July 15, although the daily COVID-related death numbers in July remains half of what it was in spring, before the economy began to re-open.