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Market Commentary 13/05

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US equity markets continued to drift lower overnight, after key medical adviser Dr Fauci, warned of the downside risks to the economy re-opening. Dr Fauci appeared remotely from self-isolation, in front of the US Senate, balancing the downside infection risks with the economy re-opening. Markets continue to watch infection rates closely, as economies open across Europe and the USA, while Asian markets manage the ‘second wave’. This is the narrative driving markets and impacting confidence, while risk is driving asset allocation. The US Budget exploded into negative territory for the month, jumping to $738 Billion, while inflation numbers contracted resulting in an annualised rate of 0.3%. Meanwhile the Fed were out in the market buying up corporate debt.

Chinese inflation data was much more healthy, as they have advanced through the pandemic cycle, ahead of most. Chinese inflation contracted for the month, but remains at 3.3% for the year, as their economies attempt to return to normal. The GBP fell back to 1.2285, after the Bank of England warned they were considering introducing negative interest rates, while leaving current rates on hold and expanding their bond-buying program. The EUR rallied back to 1.0850, as Europe returns to work, looking to do so safely.

The Chinese inflation data and growing confidence, allowed the trade exposed, commodity currencies to regain some ground. The NZD pushed back up towards 0.6100, while the AUD looked to regain 0.6500, despite another dreadful Business Confidence number being released.

Weekly Market Calendar

11/5 NZ Retail Sales, Bank of Japan minutes

12/5 US Inflation, NFIB Small Business Optimism, US Inflation

13/5 Japan Current Account, Australia Consumer Confidence, RBNZ Rate Decision, UK GDP, UK Trade, UK Industrial/Manufacturing Production, EU Industrial Production, US Weekly Mortgage Applications

14/5 Australia Inflation, Australia Employment, German Inflation, US Weekly Jobless Claims

15/5 NZ PMI, China Industrial Production, China Retail Sales, China Employment, EU GDP, EU Trade, US Retail Sales, Empire State Manufacturing, US Industrial/Manufacturing Production

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