05.06.202017:19 Forex Analysis & Reviews: Stock market race stopped

Exchange Rates 05.06.2020 analysis

The stock markets of the United States of America were unable to decide on a single vector of movement following yesterday's session, so trading closed with multidirectional dynamics.

Markets are in search of new stimulating factors that can make them grow again, but so far nothing more or less convincing has been happening. And statistics on the restoration of economic growth is also not too positive, which could speak of a confident increase in lost profits. Analysts believe that investors have few positive points that can strengthen their position. The ECB's decision to continue its stimulus policy, as well as the slower pace of job cuts in the United States, no longer supports market participants to the extent they would like.

Yesterday's decision of the European Central Bank regarding the increase in the repurchase of Pandemic Emergency Purchase Program securities to 600 billion euros, although it was not expected, still did not cause a surge of emotions. The total amount was, therefore, to be about 1.350 trillion euros. Recall that, according to preliminary data, the next buyback should not exceed $ 500 billion.

In addition, the European regulator did not make changes to the base interest rate on loans, which means that it still remains at a zero level. Without transformations, the deposit rate remained at the level of 0.5%. The same policy was noted with regard to the margin lending rate: it was decided to maintain it at 0.25%. All these actions of the ECB were very predictable, investors and experts did not expect anything else, so this did not add any dynamics to the market.

However, in her speech, the chairman of the regulator Christine Lagarde noted that the scale of the fall of the EU economy is enormous. In view of this, the ECB has revised its forecasts for GDP and inflation for the worse this year. The next shifts were demonstrated by expectations of economic decline by 8.7% this year. Inflation should also be at the level of 0.3%. The second quarter of this year should reflect an even larger drop, namely a 13% reduction in GDP.

As for the situation in the United States, the statistics released here on the number of applicants for unemployment benefits last week, which came to an end on May 30, showed a decrease of 249 thousand people compared to the same period earlier. Thus, the growth amounted to 1.877 million people. In general, this figure at the end of March is now at 42.6 million people. This positive is offset by other statistics, which turned out to be multidirectional in their movement.

Thus, the deficit of the foreign trade balance of America in April grew and was at around $ 49.4 billion, the previous value was $ 42.3 billion. Labor productivity declined in the first quarter of 2020 by 0.9%, which is much lower than preliminary forecasts. Experts expected to see a decrease of no less than 2.7%. The cost of labor in the country since the beginning of the year has increased by 5.1%, although it was previously stated that growth will not exceed 4.8%.

All of this, of course, forced the markets to begin downward adjustment.

Yesterday, The Dow Jones Industrial Average closed in a weak plus, which amounted to 0.05%, or 11.93 points, which sent it to the level of 26,281.82 points.

The Standard & Poor's 500 index, on the contrary, started a downward trend and as a result of trading, it fell by 0.34% or 10.52 points. This pushed to the mark of 3 112.35 points.

The Nasdaq Composite Index fell 0.69%, or 67.10 points, and began to be in the region of 9 615.81 points.

The stock markets of the Asia-Pacific region also lost stable ground under their feet, which stopped their rise, and trading became multidirectional.

According to experts, the rapid growth of the indices in the Asia-Pacific region was not due to some stable factor and came as a complete surprise. He should have stopped soon because he did not receive support.

The most likely scenario here will be reaching a plateau that will determine the range of trade in a narrow corridor. This will happen until a powerful external stimulator appears, which will make you move in one direction or another.

In the meantime, market participants are closely watching the growing conflict between Washington and Beijing. Recall that on Thursday, US authorities began to discuss the next portion of sanctions against China.

Hong Kong's Hang Seng Index gained 0.12%, which allowed it to almost completely compensate for all of its past losses, which began when the National Security Bill was passed.

China's Shanghai Composite Index increased by 0.05%, which, of course, is very insignificant, but in this situation a positive point.

Japan's Nikkei 225 Index, on the other hand, showed a 0.24% decline, while the South Korean index jumped 0.67%.

Australia's ASX 200 Index fell by 0.09%.

In general, we can say that stock markets on the eve of the weekend turned out to be without significant incentives, however, these may appear already at the beginning of next week.

Maria Shablon,
Experto analítico de InstaForex
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