Shares timid after Fed minutes, oil highest since March – With Jasper Lawler, Head of Research

 

Shares timid after Fed minutes, oil highest since March

09:45am BST | May 21st 2020

A more timid approach to trading is happening on Thursday as markets digest strong gains from Wednesday. Fears of heightening US-China tensions and soft economic data are outweighing hopes for extra Fed stimulus and a joint-Euro area recovery fund.  

Shares on Wall Street finished higher after Fed minutes opened the door to more policy stimulus- but the gains are not following through to Asia and Europe.

South Korea exports – a warning

A slump in South Korean exports in May is foretelling the kind of economic difficulty others can expect. Exports tumbled 20% May 1-20. The demand slowdown ran into a second month and serves to show the difficulty in returning to previous economic performance even as the worst of the pandemic passes. South Korea’s larger Northern neighbour China is likely to suffer a similar fate and that has big repercussions for the global economy. Even if you have the virus under control in your own country, if you’re exporting to countries that don’t, your exports and your economy will suffer.

Lufthansa state rescue

German national carrier Lufthansa looks close to securing a state rescue of up to €9 billion. The package as reported would involve the German government becoming the top shareholder in Lufthansa. The government would gain a 20% stake via newly issued shares as well as a convertible bond worth another 5%. The shares gained on hopes for a deal that keep Lufthansa in business. The coming dilution of shareholder value after the deal will likely limit the upside.

Euro making moves

The euro is edging up against major currencies including the dollar, pound and Swiss franc as PMIs released for France, Germany and the Eurozone. The single currency remains elevated on optimism for jointly-issued European debt.

The chart below for EUR/CHF is one of a number of currency pairs showing

USD: fed minutes

The dollar has been gaining since Fed minutes dismissed the idea of negative US interest rates. Demand for the dollar has been bolstered by cooling market sentiment. The minutes are little stale since we’ve just heard fresher comments from Fed Chair Jerome Powell in his testimony to Congress this week.

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Oil highest since March

The price of oil continues to surge in a return to price levels last seen in March. Oil prices continue to push higher after data showed a second weekly drop in US inventories. Both sides of the oil price squeeze have eased off. Demand is coming back slowly but surely as lockdowns gradually end and OPEC+ supply cuts as well as lower shale output has reduced the excess in supply.

Opening calls

Dow Jones to open 188 points lower at 24,387 S&P 500 to open 23 points lower at 2948

Chart: EUR/CHF (6-months)
Kind Regards,
Jasper Lawler Head of Research
@jasperlawler

Financial Markets and Political Commentary
 

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About the author

Jasper delivers regular commentary, seminars and webinars on market news, trading analysis, strategy and psychology. He is regularly interviewed by BBC News, Bloomberg, CNBC and Sky News, and has featured in The Times, Guardian and Daily Telegraph. Jasper hosts a weekly charting analysis webinar. He is qualified as a Chartered Market Technician (CMT) with the Market Technician Association, and has a degree in Finance and Economics.