Stocks Aim Higher On US China Trade Optimism, German GDP Revision

Encouraging news flow surrounding US – Sino trade talks has helped to keep the mood buoyant as has an upward revision for German Q2 GDP

Charts (1)

Markets both in the US and Europe saw a solid start to the week. On Wall Street, the S&P and the Nasdaq closed at record high. Coronavirus vaccine and treatment developments hopes of additional monetary stimulus as we look towards the Jackson Hole symposium and strong demand for US big tech stocks drove markets higher.

Overnight, encouraging news flow surrounding US – Sino trade talks has helped to keep the mood buoyant. Chinese and US officials have seen progress on the Phase 1 trade deal boosting Asian stocks and setting European bourses up for a stronger start.

German GDP -9.7% QoQ in Q2
Adding to the upbeat mood, data revealed that the German economy performed better in the April – June period than initially thought. The German GDP data saw an upward revision to -9.7% QoQ contraction, from an initial -10.1% record breaking contraction. 
All in all, Germany has fared the covid significantly better than many other countries.  With 9,276 deaths compared to the UK’s 40,000 plus, GDP of -9.7% compared to the UK’s -20.2%. These figures speak for themselves. 

German business outlook to improve
What’s more interesting for traders is how the German economy has been performing over more recent months and how German business see the outlook. The German IFO Business Climate Survey is likely to offer some insight here. 
The German IFO Business Climate is expected to continue rising in August to 92, up from 90.5 in July as the recovery from April’s 74.5 remains intact. Concerns over a second wave will be unnerving businesses and this could prevent the index from reaching pre-pandemic mid to high 90’s.

US consumer confidence 
Looking ahead attention will turn towards US consumer confidence data. We saw a sharp drop in morale in July after the Conference Board’s consumer confidence index slumped to 92.6, down from 98.5 in June as concerns over the second wave of covid dented confidence. With coronavirus statistics improving and the reopening of the economy continuing confidence is expected to improve mildly again in August to 93. However, the reality is that this could go either way, particularly given the expiry of the additional $600 unemployment benefit and Congress’ failure to agree to a new rescue package.

Dax Chart


More from DAX

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.