On one hand, the prospect of economies opening up post lockdown boosted risk assets like stocks and commodities this week. However, on the other hand, rising US COVID-19 cases limited the rise in risk assets. The fear is that a strong rise in cases will result in further shutdowns in the US. The US is now the most infected nation in the world with a current total of 2.7 million cases. This represents one-quarter of the entire global caseload. Top disease researcher Dr. Anthony Fauci told the US Senate that he “would not be surprised” if new virus cases in the US reach 100,000 per day. Next week will be key in gauging global stock reaction to these rising cases.

Key events from the past week

  • US Stocks: Ending the quarter higher, Tuesday, June 30. US & European stocks ended the quarter with record gains. The Nasdaq had the best quarter since 2011, the Dow since 1987 and the S&P the best quarter in 22 years, but will US stocks be able to match these gains with COVID fears mounting each day?
  • China: PMI data improves, Wednesday, July 01. The official PMI data from China showed an improvement in manufacturing at 50.9 vs expected 50.4 and ser-vice data 54.4 vs 53.5. This was matched by the private Caixin data on Wednesday which came in at 51.2 vs 50.5 expected. This was positive for risk assets.
  • US: Non-Farm Payrolls, Thursday, July 02. The US jobs number showed a positive beat with unemployment ticking down to 11.1% from 12.3% and jobs in-creasing to 4.8mln vs the 3mln figure expected. All in all a solid jobs report.

Key events for the coming week

  • AUD: Interest rate decision, July 07. The chances of an RBA rate move are unlikely this month. The OIS markets have priced in a ~50% chance of 0.25% rate cut, but the overall OIS curve remains steady for the next 12 months, so in practical terms that means no change is expected.
  • USD: ISM Service PMI July 06. The services PMI data will need to show an above-expected print in order to keep the hopes of a ‘V’ shaped recovery alive for the US. However, unless demand picks up to pre-COVID-19 levels then any recovery in US stocks is likely to be short-lived.
  • US second wave fears. The US is facing a fresh wave of new COVID-19 infections. The centre of this new outbreak is Texas, Florida, Arizona, and California. If these cases keep rising in the US the USD may start to weaken on concerns about the US economy shutting down.