It was a great day for global stock markets yesterday as the rally in Chinese equities rippled out across the world. 

A front page editorial in the China Securities Journal was basically bullish on stocks, and it suggested that it would be good to create a positive image in relation to the domestic economy to help shake off the negativity associated with the lockdown. Some people viewed the article as a sign that the Beijing authorities were signalling to its citizens that now is the time to boost domestic morale.

The editorial did the job as far as the Chinese government were concerned as the CSI 300 rallied over 5% and the index hit a level last seen in 2015. Keep in mind the highs that were seen on the S&P 500 last month were shy of the pre-Covid-19 levels posted in February. The bullish move in China on Monday drowned out the noise of the health crisis, so European and US equity benchmarks registered decent gains. US states like Georgia, Arizona, Florida and Texas are still enduring high levels of cases but that didn’t derail the bullish mood. 

The NASDAQ 100 closed above the 10,600 mark, a new record high for the index. Tech giants such as Netflix, Amazon and Apple set new all-time highs. The runaway success of the tech sector has been a common theme of the past few months.

Stocks in mainland China built on yesterday’s gains, but the upward move was more measured today. The Hong Kong market has handed back most of its earlier gains and it is now just about up on the session. Australia is in focus as its central bank kept rates on hold at 0.25%, meeting forecasts. There is talk the state of Victoria might look to re-introduce a four week lockdown amid rising coronavirus cases.   

The US stock market was closed on Friday as it was a public holiday so the services data for June was announced yesterday. The final reading of the services PMI report was 47.9, which was a slight improvement on the flash report of 46.7. The updated figure was a huge improvement on the 37.5 posted in May. The non-manufacturing ISM jumped to a three-month high of 57.1. The readings from the US chimed in with the big rebounds in services seen in China and Europe – those reports were released on Friday.

The US dollar index sold off yesterday as traders adopted a risk-on stance. The greenback has been a common flight-to-quality trade in recent months, so yesterday the opposite was the case. Last Thursday, the dollar pushed higher on the back of the much higher than predicted non-farm payrolls report and the fall in the US jobless rate. Looking back at it, the upward move wasn’t that big when you take into account the strength of the report, which suggests there isn’t a huge amount of appetite for the dollar.

Metals received a boost yesterday as they are traded in US dollars – so the slide in the greenback made the commodities relatively cheaper to buy. The feel-good factor from China was a factor too as the nation is a major importer of minerals. Copper, platinum, silver and palladium all saw decent gains, while gold’s positive move was more modest.

The Fed’s Main Street lending programme is now operational. The scheme was set up to provide financing to businesses that found it difficult to obtain financing, and ultimately it is about keeping funds flowing around the economy. Not too long ago the US central bank altered the lending criteria so a wider range of companies could assess the funds. In the weeks ahead, traders will be interested to see how many companies take advantage of the programme.

German industrial production will be posted at 7am (UK time) and economists are expecting 10%, which would be an enormous rebound from the -17.9% posted in April. 

The Halifax house price index report for June is expected to be -0.6% on a monthly basis, and it will be posted at 8.30am (UK time).

The US JOLTS report will be announced at 3pm (UK time) and economists are anticipating 4.85 million, and that would be down from 5.04 million in April. 

EUR/USD – since early May it has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1038, the 200 day moving average, to be targeted.

GBP/USD – for more than three weeks it has been in a downtrend and if the bearish move continues, it might hit 1.2163. A move higher from here might see it target 1.2685, the 200-day moving average.

EUR/GBP – has been in an uptrend for over two months and if it holds above 0.9000, it might target 0.9239. A move lower might find support at 0.8931, the 50-day moving average.  

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.38, the 200-day moving average. 

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