COVID cases, HK Security & Lufthansa – With Jasper Lawler, Head of Research.

 

COVID cases, HK Security & Lufthansa

07:39am BST | June 22nd 2020

Weaker open expected in Europe
Asian shares mixed
Hang Seng drops after China plans to open security office in Hong Kong
Global COVID cases rise by most on record
DAX drops as Germany R-rate rises to 2.88
Lufthansa bailout hangs in the balance


Inspiration

“Don’t focus on making money, focus on protecting what you have.” – Paul Tudor Jones

Opening Calls

FTSE 100: 6,225 (-67 pts)
DAX 12,165 (-165 pts)
S&P 500: 3,077 (-20 pts)

Markets

Markets are taking the concerning rise in coronavirus cases on the chin. Asian shares were mixed with the Hang Seng the biggest decliner. European shares are opening in the red but so far without a sense of panic. Wall Street looks on course for a lower open. Currency markets are mostly flat with the pound higher, unwinding some of last week’s big fall. Gold is hovering just under the key $1750 threshold while oil prices are positive as the US rig count continues to drop.

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COVID Update

A sharp rise in COVID cases in the Americas, specifically Brazil and the US caused the biggest daily rise in new global cases. At the same time, Germany’s virus reproduction rate jumped to 2.88 – meaning one infected person will on average infect almost three others. Germany’s economic reopening rested on the figure being bellow 1.0. The DAX is slipping close to 1%. If sustained, Germany will have to delay aspects of the reopening and slow the economic recovery. The losses are being contained since officials have so far dismissed the idea of another full lockdown.

‘Security Office’

The decline in Hong Kong shares were brought on by the release of more details on the new China security law. The central government will have jurisdiction in certain security cases and China will establish an office in Hong Kong. It looks like an incremental step toward the mainland taking complete control of Hong Kong. Shares are lower as investors react to the speed in which China is acting having just passed the law. 

Lufthansa

German airline will face a vote on its government bailout package this week. The bailout feels like its still not a done deal. Top shareholder Heinz Herman Thiele isn’t happy with the current terms and so few shareholders have registered to vote on the deal that a two-third majority is needed to carry it through. We think most shareholders will see that beggars can’t be choosers; a deal along the lines of the current conditions will likely be agreed.

Chart: DAX (6-months)

Germany’s DAX index has retraced 2/3rds of its drop from 12,900 – an area that can sometimes begin a second leg lower.


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.