There is finally some questioning among investors that the latest equity rally may have gone too far and a part of gains may be unfounded due to weak economic data, rising political unrest in US and Hong Kong and tenser trade relations between the US and China. The commemoration of Tiananmen events in Hong Kong added fuel to fire on Thursday.
If the human and political dimension of street protests do not worry investors, the fact that such gatherings increase the risk of a renewed rise in new coronavirus cases should.
Equities in Asia were mixed following a mostly negative European and US sessions.
The Nikkei (+0.49%) and ASX 200 (+0.27%) extended gains, as stocks in mainland China retreated. Hang Seng was flat.
But safe haven assets gave no sign of emergency regarding a further risk sell-off and activity on European equity futures hint at a positive start on Friday.
The US dollar index extended losses for the ninth consecutive session, the US 10-year yield advanced past 0.80%, gold traded a touch above the $1700 per oz, as the USDJPY advanced to 109.23, a two-month high. Only the Swiss franc gained against the greenback.
On the data deck, the jobless claims in the US rose 1.8 million last week, less than the past weeks’ average, but the continuing claims rose above 21 million, hinting that the pool of unemployed continued bloating despite relaxed confinement measures across the US. Today, the US nonfarm payrolls should confirm near 8 million additional job losses in May and a significant slump in average earnings to 1.0% from 4.7% printed a month earlier. Hence, despite the market’s rising hope for faster post-Covid recovery, the reality remains somewhat short of expectations.
While bad economic data may not dampen the mood, the delayed announcement of further fiscal stimulus from the Trump administration could. According to latest news, the discussions that were scheduled for this week are postponed and new fiscal aid measures may not be effective before July in the US.
