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Analysis News:::2020-08-07

American stock indices continue their rally while market sentiment in Asia and Europe deteriorates


Yesterday, the US stock market closed in positive territory as all major stock indicators went up. The excitement came after the news that the US authorities were planning to launch another stimulus package. However, no agreement has been reached so far on this issue. Moreover, the Dow Jones and S&P 500 have been rising for five days in a row, and the Nasdaq is closing with gains for the seventh consecutive session. So, thirty two times in a row the Nasdaq index is breaking all records.

Moreover, the Nasdaq was able to achieve incredible performance in just forty trading days: it rose by more than 1,000 points from the previous level. Such rapid growth was last recorded twenty years ago in 2000 when the index jumped within 49 days from the level of 4,000 to the mark above 5,000 points.

Yesterday the news about the intention of the American leader to sign the document ratifying a new stimulus package in the next two days improved investors' sentiment. They have long been waiting for this decision. The document will specify the size and principles of additional payments and unemployment benefits, as well as the introduction of tax holidays on employee salaries, etc.

Meanwhile, the number of unemployed Americans fell by 249,000 for the first time last week. Now the unemployment rate has reached 1.186 million. The preliminary forecast was less optimistic: it was assumed that the new unemployment rate would be at around 1,415 thousand people.

Today, the US Ministry of Labor is due to reveal the report of on the unemployment rate in the country for July. Market participants hope to see positive data here as well.

The Dow Jones Industrial Average increased by 0.68%, or 185.59 points. Currently, it has reached the level of 27,387.05.

The Standard & Poor's 500 index rose by 0.64%, which corresponds to 21.39 points. As a result, the index is set at around 3,349.17 points.

The Nasdaq Composite index became the best performer: it rose by 1%, or 109.67 points, and it is currently holding at 11,108.07 points.

On the contrary, the Asian stock exchange is facing the overall downtrend. Major indicators are heading to the downside this morning and are very likely to close in the red by the end of the week. This was probably caused by a new round of conflict escalation between the US and China.

Yesterday, the users and creators of TikTok and WeChat finally faced the scenario they were so afraid of. The American president made the final decision to ban the use of these applications in the United States. According to the new legislation, American companies are prohibited from conducting various kinds of transactions with the owners of the banned applications. In case of violation of this law, extremely tough sanctions are envisaged. The document was signed yesterday and will come into full force in 45 days.

Donald Trump's decision followed immediately after the urgent request of Secretary of State Mike Pompeo to remove these applications from all application stores operating in the country. Moreover, the requirements for almost all Chinese companies operating on the US stock exchanges have become much stricter. Now they have to provide regular detailed reports on their activity to the American authorities.

China's Shanghai Composite Index has posted considerable losses: this morning it declined by 1.45%. China's Shenzhen Component Index also went down by 1.23%. However, an even greater drop was recorded in the Hang Seng index of Hong Kong which fell by as much as 2.28%.

Japan's Nikkei 225 fell 0.83%.

South Korea's KOSPI index suffered less than the rest: it showed only a 0.31%.decline.

Australia's ASX 200 index went down by 0.71%. Meanwhile, the country's main regulator pointed out in its report that the lockdown measures reintroduced in certain parts of the state could negatively affect Australia's GDP. According to some estimates, the indicator may decline by 2% in the current quarter.

The European stock markets are also pessimistic today. Most of the indices went through negative correction.

In the morning session, the general index of large enterprises of the European region, Stoxx Europe 600, decreased by 0.13%, hitting 362.02 points.

The UK FTSE Index dropped 0.37%. The German DAX Index fell 0.39%. The French CAC 40 Index sank 0.71%. The leaders of the collapse were the indices of Italy FTSE MIB and Spain IBEX 35, having lost 0.93%, and 0.94% respectively.

The indicators were seriously shaken by the news about the deterioration of relations between the US and China. The situation is steadily moving towards its logical end, which may become a complete termination of trade relations. In this regard, any news of the escalation of the conflict makes the market participants panic.

Yet, investors take into account the statistics of the European region. Thus, the total volume of production in the German industrial sector in June increased by 8.9% indicating a good recovery rate. The data came in much better than expected. Analysts predicted the growth of no more than 8.1%.

German exports also increased by 14.9% in June compared to the previous month. However, analysts expected only a 13.3% growth.

In the meantime, experts at Bank of America Securities have improved their forecast regarding the GDP level in the euro zone. According to new data, the drop should be 7.9%, while previous estimates showed at least 8.3% decline. However, next year the GDP is expected to rise by 4.3% instead of 4.8% estimated earlier.

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