Is this the end of the good streak in the stock markets? After seven days of gains in a row, the US S&P 500 index may now move to a local correction. Likewise, the German DAX, which has recently gone up for four days in a row, or the Japanese Nikkei 225, which has been rising for two weeks without major corrections.
Today, sentiment has worsened in Asia, where Shanghai Composite has fallen by 0.14 percent. Investor sentiment seemed to be waning after news that Donald Trump banned Chinese passenger carriers from flying to the United States. Thus, the relationship between Washington and Beijing, which the market seemed to pay no attention to recently, may come to the fore. These relations continue to deteriorate, threatening to break the initial trade agreement, and this could be a threat to the economy and consequently to the markets.
In the United States, US index futures are falling on Thursday morning, now pointing to the possibility of opening the spot market for the first time this week in the negative territory. Investor optimism about the hopes for rapid economic recovery after the coronavirus pandemic has slowed down, and tensions between the US and China have increased again. Meanwhile, as far as protests in the US are concerned, there were signs of change on Wednesday after adding new charges against former police officers who killed George Floyd. The mayor of Los Angeles has announced that he will redirect $250 million from departments, including police, to health and education for the local community.
The European stock exchanges are also seeing a correction today. Shares fell from three months' highs on the Thursday before the European Central Bank's decision on monetary policy. The ECB could likely decide to extend the asset purchase programme (PEPP) and may announce that it will last longer than originally planned. There will also be the latest macroeconomic projections of the ECB, which will allow to estimate how the second most important central bank in the world, after the Fed, views the current situation. Let us recall that the ECB's decision today will be announced at 1:45 p.m. and the press conference will take place at 2:30 p.m.
In Germany, it was agreed to allocate new funds worth €130 billion for 2020/2021 to speed up the country's economic recovery.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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