World financial markets are ending the month in a challenging situation. COVID-19 outbreak in Europe, together with an unabated pandemic in the United States, cause investors to fear that European countries and the United States may need to introduce new quarantine measures. Some of them already occur in the US, and the British government decided to close local pubs for visiting.
Another negative news for the markets was the problems of creating a vaccine against COVID-19. The United States strongly hoped that AstraZeneca would succeed during the third vaccine trial, but this did not happen, putting pressure once again on investors’ decisions.
Fortunately, positive news came from Nancy Pelosi. She announced that the Democratic’s assistance program to support Americans and businesses would be announced this week. This information helped to stop the sell-off of shares in the United States and around the world. If the program is approved, we can expect a surge in demand for shares.
All these events and the fixation of the previously obtained profit in companies’ shares, primarily in the technology sector, led to a rather deep correction in the stock markets.
After the major stock indexes roll back up in the American market and the likelihood of such a development in Europe, I can assume that we will witness a local change in investors’ sentiment. If the new economic statistics are optimistic, we can expect the end of the American and European markets’ correction and their upward movement.
The main events of the coming week.
This week, the markets will focus on ECB President Lagarde’s speeches, Fed members Mester, Clarida, Bowman, Kaplan, Quarles, Harker and Williams. Sabine Mauder’s, the head of the Bundesbank statement, is also expected.
Among other events, I want to single out the EU summit, the data publication of consumer inflation values in Germany and the Eurozone, the USA and the UK GDP values for the 2nd quarter. I’m also waiting for the PMI in the manufacturing and non-manufacturing sectors of China, the Eurozone and Germany, employment values in Germany, the Eurozone and the United States.
We should also pay attention to the upcoming numbers of the business activity index (PMI), the unfinished sales in the real estate market, and the basic index of personal spending and individuals income in the United States. The week will be full of events that can have a noticeable impact on world markets’ dynamics.
Thoughts and conclusions:
I expect that the focus in the United States will be on nonfarm payrolls. If they fall below the forecasted 850K, it could hurt the markets’ attempts to continue recovering from the fall this month. Simultaneously, if they come out at least a little higher, it will spur American stock indices’ growth and European and Asian ones.