Today is the last day of June and the end of the second quarter of 2020, but much of the same old issues continue pestering the markets and will most likely carry over into the next quarter too.
The day began with major news from China. First off, the most recent PMI reports from the world’s second largest economy showed numbers above 50, indicating economic growth once again. It seems that despite the coronavirus pandemic, China has been able to recover fairly quickly.
The second piece of news from China, one which will likely have long-term consequences, is that the full legislation for the controversial Hong Kong security law is ready and has been passed into effect.
As a result, Hong Kong has lost its special trading status it had with the United States and will now be subjected to the same tariffs and rules that apply to mainland China. Moreover, the United States could impose additional sanctions on China because of this new law, since it intentionally curbs the autonomy of Hong Kong, which was supposed to be guaranteed by an agreement between China and the UK. Other countries might also seek to punish China.
Meanwhile, the coronavirus also remains a hotly debated issue on the financial markets. Today we expect a speech by Fed Chairman Jerome Powell, who will most likely warn that the economic recovery of the United States will be slower than expected, likely causing risk appetite to decline further with this statement.
The speech will come amid many US territories facing second massive outbreaks of Covid-19. Some states have reintroduced social distancing rules and have made masks mandatory again. Others are looking to limit public gatherings, especially as July 4th is approaching and crowds are very likely to form. Florida and California, two of the most affected states at present, elected to close down their beaches so people don’t gather there for the holiday.
Speaking of the coronavirus, today the total number of cases is 10.4 million. The United States had almost 2.7 million and may well surpass 3 million infections if the situation doesn’t improve. After a few days of declines in the daily Covid-19 tally, yesterday the US reported another record-breaking 44,000 new cases.
The pandemic situation also remains dire in Brazil and Russia. Besides Brazil, other Latin American countries are seeing massive outbreaks too, though at nowhere near the same numbers.
Stock induced are somewhat mixed today. Nasdaq is increasing due to improved company earnings in the tech sector, while Dow and S&P 500 futures are falling amid the coronavirus panic.
