TODAY ON WALL STREET: What will summer look like?

07/01/2020 | 08:24am

The second half of 2020 starts today, with markets slightly down as coronavirus cases increase in the U.S. Will the summer be calm and sunny or restless and stormy? It is clear that markets are hoping for a peaceful summer while waiting for the microeconomy to return to the forefront with the season of half-yearly results.

And we can only agree with them, since, excluding the worsening of the pandemic in the Americas, economic recovery is well and truly on the horizon and markets have been on an upward trend for the past three months, generously supported by the policies of central banks and the fiscal stimulus measures launched in the world's largest economies.

This might have been the fastest crisis in history, and the worst could be over, at least that's the sentiment shared by New York Federal Reserve Chairman John Williams, who told a video meeting organized by the Institute of International Finance that the US economy has probably bottomed out in the recession.

However, it is important to keep a close eye on the clouds that are looming on the horizon, and more specifically in Southeast Asia.

Yesterday, Beijing adopted its controversial law on national security in Hong Kong, condemned by the European Union and Washington. The cooling of bilateral relations between the United States and China could worsen as the Trump administration announced that it would halt exports of sensitive defense equipment to Hong Kong. Beijing promises "retaliation"…

Meanwhile, Markit releases final PMIs today. The flash data brought us a good surprise in Europe and the rebound seems to be coming in Asia as well. Indices are rising for all countries, including Japan, where the fall accelerated in May. In China, the Caixin PMI manufacturing index came out at 51.2.

Yesterday, American immunologist Anthony Fauci warned that U.S. control over the spread of the infection is not "total", pointing to the risk of up to 100,000 cases per day. Texas has seen an increase of more than 340% in the number of daily cases since the end of May.

The final reading of June's Service IMPs are published throughout the day in Europe and North America. In the US, the ADP Employment Survey, Factory Orders and Oil Inventories are expected.

Romain Fournier
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