The market is being pushed and pulled around by two key narratives. On one hand the prospect and reality of economies opening up post lockdowns is boosting risk assets: stocks, commodities and the high beta AUD & NZD. On the other hand it is the rising US COVID-19 cases that is capping the rise in risk assets. These two market stories are pushing and pulling the risk trade. So on Tuesday European PMI’s were strong, boosting risk assets. However, by Wednesday Texas hospitalisations increased by +7.3% to 4389,California cases rose a record +3.9%, and Florida’s positivity rate jumped to 15.9%. This caused risk markets to slide. This has been the ‘push/pull’ narrative of the market this week.

Key events from the past week

  • EUR: Promising European PMI data, Tuesday, June 24. PMI data is a leading indicator that hints at what is ahead for economies. European PMI data beat expectations on Tuesday and France’s PMI readings all came in above 50 showing an expansionary reading. This was positive for the economic growth story
  • NZD: Ready for more QE, Wednesday, June 24. The RBNZ struck a more dov-ish tone in its interest rate report titling it ‘Monetary Policy Easing to Continue’. Consequently, the NZD weakened midweek, but the RBNZ could still change their future outlook as New Zealand is now virtually COVID-19 free.
  • US: EU Tariff announcement, Wednesday, June 24. The US is reportedly targeting $3.1bln of exports from France, Germany, Spain and the UK with new tariffs. This marks an escalation in ongoing tensions between the EU and the US.

Key events for the coming week

  • China: Manufacturing PMI, June 30. The hopes of a V shaped recovery were fueled last week by strong European PMI data. A strong PMI reading here from China will help keep the ‘V’ shaped recovery hopes alive.
  • USD: US Payroll Data, July 02. The last set of payroll data from the US was a huge upside surprise. Will US jobs data surprise again this week or will we see falling jobs, earnings, and rising unemployment numbers? Expect the US payroll data to be a key risk driver into the end of next week.
  • Q2 earnings loom. There are growing concerns about the size of global stocks gains since COVID-19 induced falls in March. A key focus going forward will be Q2 earnings and whether these recent gains have been overdone.