Stocks Slip As US Stimulus Optimism Fades
Fiona Cincotta July 22, 2020 7:08 AM
In the US the Republicans and Democrats are struggling to reach an agreement over the next relief package, causing optimism to stutter.
European bourses are looking towards a mildly softer start after a mixed session on Wall Street. European stimulus news boosted sentiment and stocks in the previous session. However, in the US the Republicans and Democrats are struggling to reach an agreement over the next relief package, causing optimism to stutter.Whilst the Republicans are supporting another $1 trillion package, the Democrats are supporting a significantly larger $3 billion stimulus bill. With still considerable distance between the two sides an agreement still looks to be some time off. When an agreement is within reaching distance, we can expect to see the markets run on the stimulus high. We are not there yet.
Gold hits 9 year high
All this talk of stimulus and the US Dollar trading at a 4 month low has seen gold and silver shoot higher. Gold reached a nine year high of $1858.60 as US coronavirus cases passed the grim 4 million milestone, over stimulus uncertainty and as US – China relations soured after the US Justice department accused China of sponsoring hackers who were attempting to steal covid-19 vaccine data. Silver is trading at a 6 year high
Oil snaps winning run
Oil is sliding lower in early trade, shedding almost 1% after 3 straight days of gains after data showed larger than forecast inventory gains in the US and following Trump’s covid warning. Coronavirus cases in the US continue to climb with 60,000 new daily cases. California is heading back into lockdown raising fears of oil demand being dented further and President Trump warned that the situation could get worse before it improves, in his first acknowledgement that the problem is spreading.
Brexit fears linger
In the UK, Brexit concerns continue to haunt Pound traders amid reports that the British government has given up hope of reaching an outline deal by the self-imposed July deadline. Negotiations remain deadlocked over fishing waters, the role of the European Court of Justice and the so called level playing field, with the British government now assuming that the two sides with trade on the unfavourable WTO terms after the transition period ends.
Looking ahead the economic calendar is quiet in the European session and with existing home sales in the US. Attention will also fall on Tesla and Microsoft as they report later today.
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.