Equity benchmarks have been hit by health concerns again. 

Europe

Yesterday, Dr Anthony Fauci, a US health official, warned that Covid-19 might have mutated, and it might be able to spread at a faster rate. Research is being conducted into this idea, but the expert in infectious diseases believes that is likely to be the case.

Stocks enjoyed a big rally yesterday on the back of the optimism about a possible Covid-19 vaccine - that is being developed by Pfizer and BioNTech – and the very well-received US non-farm payrolls report. All of the gains the FTSE 100 made yesterday have been lost today on renewed health fears. Trading volumes have been low as the US market is closed as it is a public holiday.     

German car sales in June slumped by 40%, according to Tagesspiegel. The dreadful numbers suggests the yearly reading will be the lowest since 1989. On the back of the report, BMW, Daimler and Volkswagen shares are in the red.

Land Securities announced that all its shopping centres, retail parks and outlets are open. The footfall at its English retail assets is 60% of the level it was last year. 88% of its leisure centres are open too. The property group has had to be flexible in regards to collecting rents as many of its tenants have fallen behind – which has been common on account of the pandemic. Demand for commercial property is low these days, so it is not like Land Securities have many options at the moment. On 24 June the company had £122 million due in rent, and keep in mind the total gross rent last year was £676 million. Despite the fragile economic environment and the rent situation, Land Securities confirmed it will resume paying a dividend after its first half year results in November.

Essentra shares hit their highest level since early June on the back of a positive trading update. The plastics company confirmed that all of its 71 manufacturing and distribution sites are open, but the business was impacted by the health crisis. Like-for-like sales revenue in April dropped by 17%, but it rebounded somewhat in May, as revenue was down by 10%. The June reading is tipped to be -1%. Business is picking up as the order book for the packaging unit is higher on the year. The components division is seeing an increase in activity too as the order book is up approximately 10% on the month.

Pubs and restaurants in England will be allowed to reopen tomorrow and the social distancing guidelines will be reduced from two metres to one metre. The changes were announced over one week ago, which initially pushed up JD Wetherspoon, Restaurant Group and Marston’s. Those stocks are in the red as optimism has faded away. It is highly likely the hospitability industry will incur higher costs as health and safety guidelines will be strict.              

US

The NYSE remains closed today as it is a public holiday in the US.

FX

The US dollar index was a little higher earlier as dealers are in risk-off mode, but it is now flat on the day. Yesterday the currency was pushed up by the impressive non-farm payrolls figure, 4.8 million jobs were added in June, and the unemployment rate fell to 11.1% from 13.3%. In the past few months the dollar has been a popular flight to quality play, which is why it was higher today.

The major eurozone economies, Germany, France, Italy and Spain, all posted respectable services data this morning, but it failed to garner much of a market reaction. The services PMI readings from France and Spain were 50.7 and 50.2 respectively, so the industries are witnessing positive growth. Which is remarkable seeing as the April levels were 10.2 and 7.2 respectively. EUR/USD is largely unchanged.

GBP/USD is also basically flat today. The final reading of the UK services PMI report for June was 47.1, which was a tiny improvement on the flash reading of 47. Keep in mind the May level was 29. 

Commodities

WTI and Brent crude are both down over 1.5% as health woes have hit the oil market. Traders are concerned about the number of new coronavirus cases in the US, and the cautious commentary from Dr Fauci has hit sentiment too. The energy market is sensitive to the perceptions about demand, and seeing as several US states are undoing the reopening of their economies, there are fears that demand will dip. The 4 July weekend is likely to be push up gasoline demand so traders will be watching out for that in the next inventory reports.    

Gold hasn’t moved much today as it seems that traders are sitting on the fence as the US is on holiday. It is common for macro instruments to have a quiet trading session when US traders are on holiday, and that is what were are seeing today. Earlier this week the metal hit its highest level since October 2012, so clearly the sentiment is bullish. Should the uptrend continue it is likely to test the $1,800 mark.

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