Slow day for global equities – Market Analysis – June 17

Von: Miguel A. Rodriguez

09:45, 14 September 2020

Equities find themselves without direction in a fuzzy trading environment coaxed on consolidating current trends

Today's session has been mostly quiet after days of high volatility but with no clear direction on most assets. 

The fronts of concern continue to be present, such as the increase in the number of infected in the United States and China and the tugs of war between the Koreas, on one hand, and China with India, on the other. 

Yesterday, the President of the Federal Reserve, in his appearance in the Senate, cooled the bullish impulse of the stock markets by declaring that the purchase of corporate bonds will not be implemented yet and that it will be a measure of last resort in case the situation worsens and its use is necessary. 

In short, investor focus is on the feeling of market risk rather than on fundamental data that has been showing a trend towards the recovery of the economy.

Macro data

Despite the better performance or at least the stability of the stock markets, the US Dollar had behaved slightly more robust against the usual behavior of the last weeks in which the North American currency tended to weaken when the market sentiment was risk-on. 

A slight rebound in Treasury yields motivated by the outflow of investments in American bonds that previously used this asset as a safe-haven may be the conjunctural cause of this marginal strength of the Dollar.

The figures published today have had no impact on the market: European CPI and US building permits, both with results close to expectations, but no market movers.

BOE Meeting

For tomorrow, the most relevant event is the Bank of England meeting, where they will decide on interest rates. Since the BOE governor stated that they did not rule out negative interest rates, the market has been very attentive to this possibility. 

Still, sentiment has been changing, and no change is predicted in the reference rates currently at 0.10%. In any case, the outcome of this meeting will have to be closely watched as a rate cut would be a surprise that would negatively and strongly impact the Sterling Pound. 

Similarly, any statement in the press release that may hint at this possibility at future meetings would also affect the market.

GBP/USD, from a technical perspective, is performing a lateral consolidation phase of the last bullish leg, between the 200-day SMA, which it has not managed to overcome, and the 100-day SMA that it needs to drill to start a downtrend. 

The critical point is in the 1.2460 zone, where the current bullish leg would be terminated and open the way for further losses.

The Copper Market

Another asset that may spark investor interest soon is COPPER. There is talk of a US government investment project in infrastructures valued at $1 trillion. 

If this project were to start up, the demand for COPPER, the primary industrial metal, would increase significantly, leading to an upward price. Besides, adding another bullish element to the metal, a reduction in its production due to labor causes, in the primary producer Chile.

It is currently within a trading range between 2,5365 and 2.6185. Exceeding the upper level would be the first signal for a potential new uptrend that would target the 2.7000 level first. It is crucial to take into account the high correlation of COPPER with the North American indices, especially the USA500, so obviously, the approval of this infrastructure investment plan would also be a bullish factor for the stock markets.


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