Better than forecast US manufacturing data calmed fears that the rising number of coronavirus cases there was hampering the economic recovery. Whilst this is just the first data point of many this week, it is at least a step in the right direction. The figures boosted risk sentiment lifting stocks whilst also providing a rare up day for the greenback yesterday.
Big tech reigned supreme leading the NASDAQ Composite to yet another all-time high. The sector got a boost as Microsoft (NASDAQ:MSFT) looked to pursuit a deal to buy Tik Tok before the Trump administration closes the video app on 15th September.
RBA holds steady
The RBA, as expected kept interest rates on hold. Whilst RBA governor Dr. Philip Lowe warned of the deepest recession since the 1930s, he also repeated that the downturn hadn’t been as severe as initially feared. With Melbourne back under lockdown, what is clear is that the road to recovery will be long and bumpy. The outbreak in Victoria will impact on the Australian economy. Dr Lowe indicated that more stimulus both fiscal and monetary would be needed and for some time to pop up the economy.
The Australian dollar is advancing following the central bank’s update, supported in part by the weaker US dollar.
Whilst the greenback jumped in the previous session thanks to strong manufacturing data, the move higher was short-lived. Today the Dollar index has returned to that all familiar red territory. With little progress over on Capitol Hill, the USD is remaining out of favor. The Democrats and Republicans have failed to agree on the new rescue package. With summer recess starting on Friday, the clock is ticking.
Oil slides
Oil is slipping lower on Tuesday amid fresh concerns that the rising coronavirus case across the globe could see lockdown measures tightened and demand for fuel stall just as major producers are ramping up production.
Whilst on the one hand encouraging manufacturing data from Asia, Europe and the US is supportive of oil prices, fears concerning future demand is acting as a drag. With Manila and Melbourne for example tightening lockdown measures and Norway halting cruise ship traffic, fears are growing that global demand could start to move in the wrong direction.
At the same time, the OPEC+ group are stepping up out put this month with plans to produce around 1.5 million more barrels a day.
With demand waning under COVID and OPEC upping supply, expectations are for the price of oil to come under increasing pressure.
Looking ahead
Concerns over rising coronavirus cases could hamper both the pound and sentiment in the UK after 938 new coronavirus cases were reported on Monday, the highest number since June.