(A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own.) Interactive graphic tracking the coronavirus spread: open tmsnrt.rs/3aIRuz7 in an external browser. For all the worries about the equity rally stalling, world stocks are set to finish the week higher, as is the S&P 500. And the Nasdaq juggernaut keeps rolling, gaining 4% so far this week. European shares have risen 2.6% and have opened 0.5% higher this morning.
Another firm day ahead on Wall Street too, according to futures, and policy support hopes have fed a 1% rally in China
Yet, there is no denying stock markets are at least a tad disconnected from the real economy. That will make traders more prone to using sudden noise as an excuse to take profits — before jumping back in.
There’s certainly more noise from President Donald Trump, who is lagging prospective opponent Joe Biden in opinion polls with elections five months away. Two recent Supreme court rulings have overturned his causes, and social media firms, which are seen as contributing to Trump’s 2016 election win, aren’t playing along this time — most recently, Facebook took down some of his campaign ads, citing “organised hate”.
That could see him ramp up anti-China rhetoric, with a threat of “complete decoupling” with Beijing.
Stubbornly high coronavirus rates in some countries and U.S. states are undercutting economic recovery hopes. Japan slipped further into deflation, data today show. Weekly U.S. claims are falling but 46 million Americans have still been left unemployed since mid-March.
And we have some policy hints about eventually pulling back crisis-time stimulus. The Bank of England yesterday disappointed those expecting a further expansion of asset buying, and Norway’s central bank said interest rates would start rising from 2022 onwards.
Even if markets don’t fully believe this talk, data of the sort we saw this morning in the UK — debt ratios surpassing 100% — will certainly make some policymakers queasy.
The uneasy mood has put the dollar index on course for its best week in a month, and the euro has inched off two-week lows. Traders are awaiting news from a European Union online summit, where Germany and France are trying to swing other members behind them on a joint EU rescue fund.
Financial markets have factored in a deal coming together even if another summit — or even two — will be needed to get a deal done.
In European corporate news, Wirecard shares are down another 10% — adding to Thursday’s 60% plunge — after it said it could have been the victim of “fraud of considerable proportions”.
Lufthansa shares are up 2.7% on reports its biggest shareholder, billionaire Heinz Hermann Thiele, has reached out to Berlin politicians for talks
Shares in Softewareone are down after announcing changes in shareholder structure and board.
GAM shares have fallen after the company said it could report H1 loss of about 400 million Swiss francs.
Bombardier’s chief executive said a deal to sell its rail division to France’s Alstom SA remains “pretty much on track.
German store chain Galeria Karstadt Kaufhof will close 62 stores, putting about 5,000 jobs at risk.
In emerging markets, equities are up 0.4% for a fourth straight day of gains. Currencies are also gaining, with Mexico’s peso, South Africa’s rand and Russia’s rouble stronger, although they are set for weekly losses against the dollar. Russia’s central bank is widely expected to deliver at least a half-point interest rate cut and signal more ahead.
Later in the day, we get data on the U.S. current account deficit; a narrowing could be dollar-positive. Watch out for Federal Reserve Chair Jerome Powell and some of his colleagues to hit the wires. Plus of course, news from the EU summit.