Bassanese Bites: Temperature check – June 22 2020

Global markets

Global equities tried hard to remain positive last week even as new CV-19 cases continued to emerge in Beijing and some U.S. states. After the previous Thursday’s collapse in prices, equities bounced higher early last week following the Fed’s (rehashed) announcement that it would buy corporate bonds. Stocks also got a boost from a surprisingly strong rebound in U.S. May retail sales. That said, the inescapable evidence of rising CV-19 infection rates continued to gnaw away at stubbornly bullish sentiment, not helped by Apple’s decision on Friday to again temporarily close some retail stores in a few CV-vulnerable states.

So far at least, tough new social distancing restrictions (such as lockdowns) have not been imposed in these vulnerable U.S. States, which may give markets some hope this week – if this remains the case and/or the rate of new daily infections begins to stabilise. Of course, if the case count skyrockets and restrictions are finally imposed, one would think equities should weaken – subject to whatever reactive new stimulus announcements are then forthcoming from either the Fed or the White House.

Meanwhile, in what is now the third decent corrective move since the late-March rebound, the U.S. S&P 500 ended the week delicately poised mid-way between its recent 3,233 high on June 8 and its 2,965 low on June 15. To the bear’s dismay, the previous two corrections were resolved to the upside – it could now be a case of third time lucky. If not, new market highs potentially await – even with, thanks to the ‘Fed put’, the market trading at 22 times forward earnings!

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