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16.07.202014:49 US stock market rises, Asia and Europe continues to sag

Exchange Rates 16.07.2020 analysis

Stock markets closed trading with great enthusiasm on Wednesday. Rapid growth was recorded in all major areas, and among the leaders of the upswing was the S&P 500 index, which was able to demonstrate a jump to the maximum level noted at the beginning of the first month of summer. The news about the immediate release of a vaccine against coronavirus infection, as well as very good statistics, including a quarterly report by Goldman Sachs brought positive on the US stocks exchange.

Companies from the United States of America unexpectedly spotted signs of economic recovery and noted an increase in business activity at the beginning of this month. This coincided with the moment when restrictive quarantine measures related to the COVID-19 pandemic gradually began to be lifted. All this ultimately made the quarterly profit of enterprises much higher than the level that was recorded in the previous period of stagnation. The business came to life and gradually began to return to normal life, which may soon be interrupted again, as COVID-19 patients in the world and in America is growing rapidly, which hints at the possibility of a reimposition of quarantine measures.

The Dow Jones Index showed an increase of 0.85%, which allowed it to move to the mark of 26,870.03 points. The S&P 500 index was able to increase by 0.91% and went to the level of 3,226.55 points. The Nasdaq index grew by 0.59% and was in the range of 10,550.49 points.

Meanwhile, the Asia-Pacific stock markets, on the contrary, were subjected to serious pressure which led to a fall in almost all directions. Market participants thought hard about the situation around China. The bottom line is that the country will not be able to demonstrate the fast pace of recovery after the crisis and will go a long way towards normalizing the economy.

The increase in GDP in China for the second quarter was 3.2% on a yearly basis. These figures, although they were much higher than the preliminary forecasts of analysts who spoke of growth not exceeding 2.5%, still have not been able to compensate for the serious losses that occurred in the first quarter. Note that the decline in Chinese GDP was at 6.8%. In addition, some negative trends continue to unfold, an example is a recorded decrease in the retail sales sector in the second quarter by 3.9% compared to the same period a year earlier. During the first quarter, the country had to deal with much larger losses, which turned out to be within 11.4%.

Aside from statistics, the situation is also aggravated by a new round of tension between China and the United States. The escalation of the long-running conflict continues, which is another factor of concern for investors. The situation could not be corrected even when US President Donald Trump refused a series of sanctions against Chinese officials, whom Washington considers responsible for ratifying the Hong Kong National Security Act. Beijing continues to threaten America with a new set of sanctions on its part.

The Shanghai Composite China index fell sharply against this background by 1.74%, while the Shenzhen Component index showed smaller losses with a decrease of 0.6%. Followed by the Hong Kong Hang Seng Index declining to 1.41%.

Japan's Nikkei 225 Index also went down by 0.75%

The South Korean KOSPI Index supported this negative trend and fell 0.77%. Even the decision of the Central Bank of the country that the base interest rate remained unchanged at the level of 0.5% could not support it.

Australia's ASX 200 Index sagged 0.8% despite good news which seems to not affect the general negative mood. It was announced on Wednesday that the number of new jobs in the country for the first month of summer increased by 210 800, which is much higher than experts' preliminary expectations of 112 500. However, the partial introduction of new quarantine in certain parts of the state may again bring Australia back to an economic recession, which market participants are so worried about.

Europe stock markets also reacted negatively on the news about the worsening epidemiological situation of the spread of coronavirus infection in the world. In addition, market participants are very tense in anticipation of the next meeting of the ECB.

Germany's DAX index fell by 0.8%. The French CAC 40 index fell 0.9%. The UK FTSE index has so far suffered less than others declining to 0.7%.

Market participants have mixed feelings ahead of the meeting of the European Central Bank. Meanwhile, they have practically no hope that the regulator will decide to ratify yet another package of incentive measures since, in the first month of summer, unprecedented generosity was shown on its part.

In this regard, it should be noted that economic recovery will continue to go jerky, and not smoothly. Some sectors and industries will grow rapidly, while others will have to face even greater difficulties. Moreover, the entire recovery process risks dragging on for a rather long period of time.

Performed by Maria Shablon,
Analytical expert
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