Positive economic data for the Chinese economy overshadowed by rising COVID-19 cases in the U.S. and Europe - Market Overview

Positive economic data for the Chinese economy overshadowed by rising COVID-19 cases in the U.S. and Europe - Market Overview

Data for China’s June exports surprised the markets, with the trade balance revealing a higher figure, $51.53 bln, compared to the $44.20 bln forecasted.

The numbers were expected to turn out weaker due to the impact of the coronavirus worldwide. However, the outcome shows that commercial activity continues to grow at a good pace, boding well for the economic recovery that could be reflected in the rest of the growth figures.

Such a result happened even though the evolution of the pandemic keeps showing us that it is far from being controlled. Cases are rebounding in Europe and the United States, although the health impact is less severe due to the increase in vaccination.

This could have an impact on the inflation data published today in the United States. The June CPI is expected to continue rising with a forecasted interannual Core CPI forecast of 4% vs 3.8% the previous month.

The Fed has already made its stance on inflation clear – it considers the current rebound to be transitory. However, the more it lasts, the more it could lead the markets to discount a tapering by the Fed earlier than expected. We recall that the Fed had already postponed the tapering process at its last meeting when there was much more significant progress towards achieving the dual objective of full employment and price stability. In this regard, Powell's appearance will be important, as he will speak today and tomorrow at the semi-annual conference on monetary policy before Congress, where he is expected to keep the same message.

The U.S. Dollar is awaiting these figures and Powell's statements without relevant movements after the strengthening it experienced in recent weeks.

USD/JPY, with a high positive correlation with U.S. bond yields, is moving slowly towards the near-term resistance zone around 110.40, but without much momentum at the moment. Above this level, it would find the first resistance at 111.00 before the last high at 111.60.

On the other hand, the United States Senate resumes talks today to approve the infrastructure plan valued at $1.2 trillion that should go ahead before August. If approved, this plan could positively impact the North American stock markets, which remain at their highest levels with minimal advances on a day-to-day basis.

The USA30 index is near the resistance level located at 34865 above, which new all-time highs will be reached, paving the way for further gains and predictably more bullish momentum.

Sources: Bloomberg, reuters.com.

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors