Optimism in China’s recovery has made a comeback and investors are buying into hopes that decisive stimulus action from Beijing will boost domestic demand. The Chinese equities jumped on Tuesday, after the country’s ruling politburo vowed to boost employment and revive a “tortuous” economic recovery. China’s powerful 24-member politburo said it would tackle unemployment, speed up issuance of local government special bonds and boost consumption of electronics, electric vehicles and other goods. The JPN225 struggled through and gains in Australia were much more muted. Futures in Europe and the US haven’t moved much as markets turn cautious ahead of this week’s key central bank announcements in Germany, the US and Japan. Wheat prices climbed to a 5-month high on Tuesday, as Russian assaults against Ukrainian ports that ship the grain intensified.
- FX – The USDIndex is at 101.26. USDJPY is struggling for a third day in a row to overcome 142.00. GBP closed below 20-DMA yesterday and holds below it so far at 1.2840, while EUR holds above 1.11.
- Stocks – Hong Kong jumped as much as 5% and the Hang Seng is currently up 4.0%, while the CSI 300 has rallied 2.9%.
- Commodities – USOil spiked to $79 area. Oil is heading for a solid monthly gain, as output cuts start to bite and counterbalance concern that the sluggish recovery in China will cap demand. There are now more signs that Russia is making good on its pledge to rein in supplies with data showing that the country’s crude shipments fell to a 6-month low in the 4 weeks to July 16. Supply could further tighten in August, as Russian oil exports are set to be reduced further. A decline in drilling activity in the US is adding to supply concerns and the US Energy Information Administration has already revised down its short-term outlook for US production with further corrections possible unless the trend in drilling activity reverses. Also China flagged more measures to boost economic growth, aiding the outlook for energy demand just as the global market shows signs of tightening.
- Gold – holds a floor above 50-DMA at $1955.
Today – Germany’s Ifo business survey and IMF publishes an update to its World Economic Outlook. Earnings: Microsoft, Alphabet, Visa, Verizon, UBS, Nextera.
Biggest Mover: USOIL spiked to $79.16 while today it sustains gains above 78 territory.
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Andria Pichidi
Market Analyst
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