US macroeconomic benchmarks keep improving and this is breathing life into global equity markets. Manufacturing, employment and consumer confidence numbers continue to recover from COVID-19's impact.
A surge of infections in several countries, including the US has led to fears of a second wave of CV19 cases. This and surpassing a global death toll of 500,000 has spooked Asian markets at the start of the trading week. Japanese, Australian, Korean and Chinese stock markets all opened lower this morning. Expect contagion for western markets.
On the FX side, we can expect volatility levels to remain elevated but while historically significant, these do not have to be harmful. Volatility is not our enemy. Significant returns can be achieved if we manage it properly. Keep a close eye on stop-loss levels to manage risk.This advise would be well-remembered especially when considering Sterling.
Tuesday the 23rd marked the fourth anniversary of Britain's Brexit vote. The milestone was celebrated by banks and research houses writing about the negative sentiment towards Sterling since. Several compared new Sterling to emerging market currencies and forecast further falls to come and "disaster" if the UK failed to reach a deal with the EU. Today, UK-EU face-to-face negotiations are resumed. Expect volatility with every leak from these.
Last week, we learned about Wirecard's insolvency. Germany's biggest FinTech collapsed over the weekend after years of rumour about its accounting methods and pressure from short sellers.The first defaulted company in the history of the German stock market index, the DAX 30.
Another stock that investors will be watching this week is Facebook. Led by Unilever, several multinationals have pulled all advertising from Facebook in protest at its handling of hate speech on the platform. The growing list of multinationals includes Coca-Cola, Verizon, Starbucks and Diageo. Expect downward pressure on the shares of Facebook and other social media companies.
A key trend we have seen on the stock markets over the past month's is the surge in the stock value of the so-called 'Work at Home' companies. Fund manager Direxion has jumped on the bandwagon and created a new ETF called WFH, tracking the performance of stocks which benefit from the remote working trend. The question on investors minds is - Will corporates do away with the office forever or are the share prices of WFH companies like Zoom at their peak?
When considering investing in a company, first you have to analyse its number and results in depth. Knowing how to read its price chart is key as well.
Key Market Events
On Monday, the US Pending Home Sales release is expected to show a strong recovery due to last week's good New Home Sales figures.
On Tuesday, stronger movements are anticipated in the currency market due to the higher number of worldwide economic data releases due:
- China will announce its Manufacturing PMI, a small fall is expected
- Quarterly UK GDP Growth Rate is expected to drop, quarter on quarter
- Europe CPI flat at 0,1%
- US CB Consumer Confidence report
Wednesday will also bring important economic data with high levels of volatility expected as a result.
- Germany will reveal its unemployment levels and Manufacturing PMI data, along with the UK
- US will report its ADP Non-Farm Employment Change and ISM Manufacturing PMI figures, both of which are expected to show a significant recovery
On Thursday, the US will release Unemployment Claims, Non-Farm Payrolls and its Unemployment Rate. Once again, significant recoveries are expected.
On Friday the UK Services Final PMI from Market is expected to also show a recovery.
Pending Home Sales MoM
GDP Growth Rate QoQ
Inflation Rate YoY
CB Consumer Confidence
Manufacturing PMI Final
ADP Non-Farm Employment Change
ISM Manufacturing PMI
UK Services PMI Final
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
1.This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2.Any investment decision is made by each client alone whereas Admiral Markets AS (Admiral Markets) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3.With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
4.The Analysis is prepared by an independent analyst Juan Enrique Cadiñanos Moriano (hereinafter "Author") based on personal estimations.
5.Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
6.Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
7.Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.