Welcome to Pessimism, population 7.5 Billion – Market Analysis – July 31

By: Miguel A. Rodriguez

09:45, 14 September 2020

1596435101.jpg
Not even massive earnings from tech giants can bring market optimism

AppleAmazon, and Facebook rose in the pre-market yesterday after quarterly results showed that the pandemic increased dependence on their products and services.

US tech sector

These massive technology companies' positive earnings boosted the American stock markets and supported some of the Europeans.

But even though earnings beat the expected results in these cases, the market is still concerned about the negative evolution of the pandemic and its effect on a total recovery of the global economy.

China is the only economic zone where the control of the disease and the financial figures show more considerable progress. In this country, July manufacturing PMI rose to 51.1, somewhat above the expected value, and already in an expansion or growth zone.

But the European YoY GDP fell by 15%, below the 13.9% expected. 

The death toll in some states of the United States continues to grow with unprecedented figures, and in Europe, the outbreaks, although controlled, are increasingly numerous. 

In the United Kingdom, a partial lockdown has been ordered in the north of England. The fear that new measures to close activities in other countries and even in the United States are spreading among investors.

The current state of the market, both the stock and commodity markets, anticipate a swift recovery in the economy. The enormous and unprecedented collapses of GDP must be corrected with an immediate return to economic activity and a notable increase in domestic consumption with the stimulus of fiscal policies that governments have already implemented to a great extent.

Everything seems to indicate investors are beginning to be aware of the unstable equilibrium in which the market finds itself, which depends on rapid and immediate recovery, and which may be threatened if it is not possible to stop the outbreaks, and if it is once again necessary to interrupt economic activity with the lockdown. 


The news about the advances in vaccines against the disease has served at times to raise the mood of the market, this would undoubtedly be the perfect solution, but as more technical information becomes available, this will not be possible until at least, being optimistic, end of the year, beginning of the next. This is too long for a market that has already anticipated recovery in the economy.

Commodities

The first reflection of this situation of uncertainty about the future was witnessed yesterday in the OIL market. 

This is a market that is highly dependent on the fact that demand remains stable, even more, it would need an increase in it in the coming months to maintain its current price level. 

After the publication of the GDP data, with massive falls, and the bad news about the pandemic's lack of control, OIL fell yesterday by 6% to the support area of 38.75, from where it recovered.



This support level is essential to consider since its loss would cause a new scenario to the downside with targets around the $36 zone.

The correlation of crude oil with the Canadian Dollar is high. 

The Canadian currency has been gradually depreciating due to the lack of a continuous upward trend in crude oil. 

EUR /CAD is at a significant resistance level of 1.5970, which, if surpassed, mainly driven by a weak movement in crude oil, would open the way for this currency pair towards the 1.6500 zone and even 1.7000.


Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.