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Analysis News:::2020-07-30

Irresolute responses in US, EU, and Asian Stock markets


Asia-Pacific stock markets barely moved on Thursday. The main indicators showed almost no dynamics. Market participants continue to focus on the results of the meeting of the Federal Reserve System of the United States of America.

Japan's Nikkei 225 Index slowed down and sank 0.22%. Even the good statistics on the level of retail sales in the country could not provide support. Thus, for the first month of summer, the indicator decreased by 1.2% per year, although the previous drop was much more significant which was around 12.5%. Experts' preliminary forecasts expect a more serious reduction at around 6.5%. However, there are still concerns: they are based on the fact that the decline in the level of retail sales has been taking place for the fourth month in a row, which indicates that the crisis in the Japanese economy continues, the consequences of which will have to be fought for a long time. The monthly indicator of the level of retail sales, on the contrary, became much higher in the first month of summer by 13.1%.

China's Shanghai Composite Index rose 0.15%. The Hong Kong Hang Seng Index supported the positive sentiment of its colleague and increased even more by 0.75%.

South Korea's Kospi index climbed 0.25%.

The S & P / ASX 200 in Australia rose 0.65%.

Analysts' forecasts turned out to be correct: during a meeting this week, the Fed decided to leave the base interest rate unchanged at an extremely low level ranging from 0% to 0.25% per annum. At the same time, it is noted that this decision was practically not criticized and was immediately approved by all committee members, a total of ten people.

The preservation of the interest rate is dictated by the ongoing coronavirus pandemic, which the country still cannot cope with. The difficult epidemiological situation is putting very serious pressure on the American economy particularly in indicators such as business activity, employment, and inflation. These indicators continue to show negative and poor statistics which might get even worse if people and the government will not take decisive steps. This means that a more global decline awaits the US economy in the medium and long term.

In this regard, the country's authorities, including Fed Chairman Jerome Powell, hastened to reassure stock market participants by announcing the continuation of a soft stimulating policy for at least the end of this year. At the same time, it is specified that the Central Bank will use the entire arsenal of funds available to it in order to change the negative dynamics and finally move on to recovery.

Investors did not deny that this news inspired them, which immediately affected the main indicators.

The Federal Reserve did one very important thing: by its decision to keep interest rates, it prepared the market participants for the next meeting, which should take place in September this year. Thus, investors will have no reason to believe that the regulator's policy will sharply tighten, and work on the stock exchanges will become less intense.

The US stock exchange, on the other hand, reigned with enthusiasm on Wednesday as all the main indicators showed growth. The positive dynamics was provided by the rise in the value of shares in the technology sector, which happened immediately after the announcement of the results of the Fed meeting.

The attention of market participants here, among other things, is occupied by the ongoing seasonal corporate reporting, as well as the possible introduction of a new portion of financial stimuli for the economy with a total volume of $ 1 trillion.

Some statistics cause a small share of positive among investors. Thus, the deficit of foreign trade in goods in the country in the first month of this summer decreased by 6.1% and reached $ 70.64 billion in comparison with the previous period. As a reminder, in May 2020, the deficit stopped at $ 75.26 billion. Moreover, analysts were less encouraged: they talked about a possible reduction in the figure to $ 74.9 billion.

The Dow Jones Industrial Average index at the closing of trading on Wednesday rose 0.61% or 160.29 points. Its current level is located at around 26,539.57 points.

The Standard & Poor's 500 index gained 1.24% or 40 points, which allowed it to move to the level of 3,258.44 points.

The growth leader was the Nasdaq Composite indicator, which jumped immediately by 1.35% or 140.85 points. Its position moved to the level of 10,542.94 points.

European stock markets did not find any supporting factors on Thursday and moved to a negative correction, the main reason for which lies in the growing fears about the too slow and uncertain recovery of the economies of the region. In addition, the possibility of a repeat of the coronavirus pandemic continues to haunt market participants.

The Stoxx Europe 600 fell 1.3% and reached 362.69 points.

The UK's FTSE 100 also fell by 1.65%. France's CAC 40 Index lost 1.16%. Spain's IBEX 35 Index fell 2.06%. Italy's FTSE MIB Index dropped 2.21%. The leader of the fall was the German DAX index, which immediately sank 2.43%.

The region's economic statistics did not impress the markets. Thus, it became known yesterday that the German economy became significantly smaller in the second quarter of this year by 10.1% compared to the three previous periods. On an annualized basis, the country's GDP fell by 11.7%.

By contrast, the unemployment rate in Germany is declining. As it became known, unemployment decreased by 18 thousand and reached 2.923 million. This is a good sign, as this figure is declining for the first time in five months. The unemployment rate remains at its maximum level of around 6.4%.

The composite index of consumer confidence in the EU economy for the second month of summer has strengthened significantly up to 82.3 points compared to the previous indicator of 75.8 points. However, even this could not overcome the negativity that arose in the stock markets.

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