Week to July 10th

US COVID cases rising, NDX outperforms to ATH, Gold hits 9-year high

MY CALL THIS WEEK : BUY EURGBP

This week there was no doubt that new highs in COVID cases, greater than the April high, are hitting the US, and South America, and after a brief rally on Monday, the trend was flat, the exception being NDX which continued to rise, diverging substantially from other markets. It is as though a Fed wall of money has to go somewhere, and tech is the only candidate, as it has been for the last ten years.

The dollar has had a whipsaw V-shaped week, trending slightly down but  helped by an equally weak euro, and a positive Jobless Claims report. Gold made a new 9-year high, showing the fragility of the rally.

Next week is much busier on the data front. We have rate decisions from the ECB, BoJ and BoC, and plenty of other data. But more importantly, a crucial earnings season starts where we will see the full effect of COVID on a quarter. As always JPM and Citi lead the way on Tuesday, but with AA, UNH, NFLX and JNJ following, we will get a wider picture in several sectors.

Mon Jul 6

Starting in Asia with the CSI300 up 5.7%, markets rallied today, with tech leading, and lockdown favourites AMZN and NFLX making all-time highs, the former going above $3,000 for the first time. This was despite reports of coronavirus surging globally. The dollar continued its pattern from last week, falling further. Gold was up slightly, but bonds and Oil were fairly flat.

Tuesday July 7

The six day equity rally came to an end today, as US COVID cases continued to rise, with no further drug or vaccine news. SPX was down 1.08%, NDX slightly less so. USD was up across the board, but less so against JPY, and haven assets Gold and bonds were up. Oil was down in line.

Wednesday July 8

After fading earlier in the day, markets rallied into the US close (meaning Europe and Asia closed red), despite further increases in new US COVID-19 cases. Once again, NDX significantly outperformed, with AAPL, which is a heavyweight in all three indices hitting an all-time high. Oil was up in line. The dollar fell more sharply today, down across the board, and Gold was up in line, breaking the $1,800 barrier for the first time in nearly nine years, despite the green equity day. Bonds were slightly down in line.

Thursday July 9

A fourth turnaround day saw SPX and DJIA slip, as Florida reported the biggest single day jump in new cases since the start of the pandemic. However, the wall of money continued instead to buy NDX. An earnings miss by WBA and a 3.3% rally in AMZN meant a 2.21% variance in NDX and DJIA. NDX has now outperformed DJI by 36.28% since the beginning of the year. The dollar reversed back up today, against all currencies except JPY which was up along with bonds in line with the equity fade. Gold however retreated, possibly hitting short stops but held the $1,800 level. Oil was down in line.

Friday July 10

Yet another turn today, as markets shot up on another positive report about remdesivir (although GILD only rose 2%). German firm BNTX was up 7% on news that their vaccine candidate might be available in December. There was a small shift back out of tech, with airlines up, and DJIA beating NDX by 0.68%. Oil was up, and Gold and bonds were down in line, however a weak dollar prevented USDJPY from falling.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• Earnings Season opens
• ECB, Canada, Japan Rate Decisions
• Heavy macro week
• Option expiration

Monday July 13

A quiet day before the earnings storm, with only BoE Governor Andrew Bailey by webinar on “LIBOR: Entering the Endgame”. There is a rate decision in Romania.

02:00 China FDI (time approx.)

15:30 BoE Governor Bailey speech

18:00 Monthly Budget Statement (Jun)

Tuesday July 14

Earnings season starts today, with as always JPM first out of the gate, swiftly followed by fellow banks C and WFC, and airline DAL, all before the opening bell. SNB Governor Jordan speaks today at 1330. Banks but not markets are closed in France for Bastille Day. There is a rate decision in Poland.

03:00 China Imports/Exports/TB (time approx.)

06:00 UK GDP (May p-20.4%)

06:00 Germany CPI (YoY e0.5% p0.8%)

08:00 ECB Bank Lending Survey

09:00 Germany ZEW Economic Sentiment (Jul e60, p63.4))

12:30 US CPI (YoY Core e1.3% p1.2%)

Wednesday July 15

Earnings today come from Dow giants GS and UNH before the bell. There are also rate decisions in the Philippines and Colombia. Markets are closed in Turkey.

00:30 Aus Westpac Consumer Confidence (Jul)

01:00 Aus HIA New Home Sales (MoM)(May)

03:00 BoJ Rate Decision/Statement (e-0.1% hold)

06:00 UK CPI (YoY Jun e0.5% p0.5%)

06:00 BoJ Press Conference

08:00 BoE Tenreyro speech

10:00 Germany 10Y Bond Auction (time approx.)

13:15 US Industrial Production (MoM)(Jun)

14:00 BoC Rate Decision/Statement (e0.25% hold)

15:00 BoC MPC Minutes

15:15 BoC Press Conference

18:00 Fed Beige Book

22:45 NZ CPI (YoY e2.1% p2.5%)

Thursday July 16

Earnings today before the bell are from BAC and JNJ, with the first of the FANGs NFLX reporting after the close. There are also rate decisions in South Korea and Indonesia.

01:00 Aus Consumer Inflation Expectations (Jul)

01:30 Aus NAB Business Confidence (QoQ)(Q2)

01:30 Aus NFP/UnEmp (NFP e-100k p-228k)

02:00 China 20Q2 GDP (QoQ e-9.9% p-9.8%)

06:00 UK ILO Unemployment Rate (e4.7% p3.9%)

08:30 BoE Credit Conditions Survey(Q2)

11:45 ECB Rate Decision/Statement (e0% hold)

12:30 US Retail Sales (Control Group p11%)

12:30 Philly Fed Manufacturing Survey (Jul)

12:30 Initial Jobless Claims (p1314k)

12:30 ECB Lagarde Presser

22:30 Business NZ PMI(Jun)

Friday July 17

No significant earnings today, but it’s July option expiration, so expect additional volatility, particularly from the earnings report stocks. A special two-day EU leaders summit in Brussels (yes, physical!) starts. The topic is the EU COVID recovery package.

00:00 EU Leaders Special COVID Summit (continues Saturday)

09:00 Eurozone CPI

12:30 US Building Permits/Housing Starts

12:30 Canada Retail Sales (MoM May p19.1%)

14:00 Michigan CSI (e80 p78.1)