June 01, 2020

 

Global Commentary

Asian markets were mostly lower on Friday as investors remained cautious ahead of a news conference scheduled for Friday in the U.S. where President Trump is planning to announce the U.S. response to Chinese national security laws which have taken away the autonomy of Hong Kong. In mainland China, the Shanghai Composite was 0.22% higher as investors there were unfazed, however the Hang Seng in Hong Kong slipped 0.74%. Australian investors were more bearish, sending the S&P/ASX 200 1.63% lower. In Japan, the Nikkei finished with a small 0.18% loss, while South Korea’s Kospi edged up by 0.05%.

European markets fell on Friday as worries over rising tensions between the U.S. and China overshadowed optimism regarding the reopening of economies. The pan-European Stoxx Europe 600 fell 1.44% on the day, but still recorded a gain of more than 3% for the month of May, giving the index a second consecutive winning month. In Germany, the DAX finished 1.65% lower, and the CAC 40 in France retreated 1.59%. London’s FTSE also retreated, outpacing the declines in Europe and ending the session with a 2.29% loss. 

In the U.S., markets pulled into positive territory in the final hour of trade after President Trump spoke about China and made no indication he intended to pull the U.S. out of the phase 1 trade deal with the rival superpower. At the close, the Dow Industrials were down slightly by 0.07 %, while the S&P 500 added 0.48%, and the Nasdaq rose 1.29%.

 

Cryptocurrencies

Cryptocurrency markets finished mixed on Friday, with leading cryptocurrency Bitcoin falling 0.3%. There were also losses of 0.6% for Bitcoin SV and 0.4% for Ripple. Number ten altcoin Tezos led gains as it added 3%, and number two cryptocurrency Ethereum advanced 2%, while Litecoin and Bitcoin Cash were both flat. Overall, 53 of the top 100 cryptocurrencies posted gains as markets were nearly evenly matched.

 

FOREX

EUR/USD – The pair continued climbing on Friday, but pulled back following President Trump’s press conference as the U.S. dollar strengthened on the news of the U.S. remaining committed to the phase 1 trade deal with China. The pullback erased roughly 40 pips from gains, but the pair remained above the supportive 1.1100 level.

USD/JPY – The pair looked set to break out of its range-bound trade to the downside on Friday as it dipped to 107.07 early in the session. However, the pair reversed off that level and finished at the top of the recent range, just shy of the 108.00 level. The reduced U.S.-China tensions were responsible for it and the pair could continue higher when trading resumes on Monday.

 

Commodities

Metals – Precious metals gained Friday as traders awaited the news conference with President Trump that’s expected to see the U.S. reintroduce sanctions against the country in retaliation for the recently passed national security laws that have effectively removed the autonomy of Hong Kong. August gold rose $23.40, or about 1.4%, to $1,751.70 an ounce. Gold tacked on 3.4% for the month. Meanwhile, July silver picked up $0.53, or 3%, to end at $18.499 an ounce. For the month, it gained nearly 24%, its best monthly performance since April 2011.

Oil – Crude markets reversed course and soared higher on Friday after President Trump indicated that the U.S. will not be pulling out of the phase 1 trade deal with China. West Texas Intermediate crude for July delivery rose $1.78, or 5.3%, to settle at $35.49 a barrel, while global benchmark Brent crude saw its July contract tack on $0.04, or 0.1%, to end at $35.33 a barrel.

 

Indices

FTSE 100 – London’s benchmark equity index outpaced losses across Europe on Friday, falling 2.29% on the day. Travel stocks, which were leading the way higher earlier in the week, led losses on Friday. Shares of Carnival fell 10.68% and easyJet was down 8.11%. Also falling were shares of aircraft engine manufacturer Rolls Royce, which was the worst performer in the FTSE 100 as it dropped 14.86%.

S&P/ASX 200 – The Australian benchmark equity index led losses across Asia on Friday as it fell 1.63%, but that didn’t stop it from posting a weekly gain of 4.7% as banks have led gains on the index for much of the week. By the close, on Thursday the big four banks were up an average of 18.3%. Not so on Friday as the big four banks were leading losses, not gains. At the close ANZ was 4.54% lower, while NAB fell 5.22%, Commonwealth Bank lost 3.01%, and Westpac traded 6.36% lower making it the third worst performer on the index for the day.


Stocks

Boeing – It’s been a heck of a ride for Boeing investors in May. After beginning the month at $127.11 a share the stock dropped almost 10% to a low of $117.78 on May 14. Since then shares have rallied strongly on optimism over easing lockdowns, the reopening of global economies, and news of the resumption of MAX 737 production. By the close, on Thursday May 28 shares were up to $149.82 for a gain of roughly 25% in just two weeks. Friday saw some of the optimism draining from investors however as they awaited commentary from President Trump regarding the situation in Hong Kong, with expectations for the President to adopt a hard-line stance against Beijing that could severely hurt trade between the U.S. and both mainland China and Hong Kong. Shares were down 2.65% at the close, with more potential losses coming when markets reopen on Monday. Given the current situation, with travel and tourism at a near standstill and not expected to recover for some time, the losses for Boeing shouldn’t be a surprise.

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