Beijing tackles new COVID-19 outbreak - DAILY MARKET UPDATE

Beijing locks down

The Beijing local government raised its emergency response level to 2 from 3 in response to new coronavirus outbreaks in the city. The new response level meant the closure of schools and advise not to travel out of the city unless necessary. Businesses remain open in order to continue the economic recovery. Haven assets like gold gained ground amid the heightened uncertainty and regional equities could be pressured if the lockdown tightening risks impairing the Chinese economy.
 

Powell testimony

Having already committed to corporate bond purchases the day prior, it was difficult for Powell to do any wrong in the eyes of the market. However Powell caused some ruption in testimony to the Senate Banking Committee today when he said “if market function continues to improve, we will taper the corporate bond program.” Emphasising the point he added; “I don't see us wanting to run through the corporate bond market like an elephant.” 

From a direct market forces perspective, the more the Fed buys and the quicker it does it, the more encouraged investors will be to do the same. So of course any talking of tapering – or specifically reducing – corporate bond purchase before they begin was a drag on buying momentum.
 

Retail Sales Impress

May US retail sales blew above expectations, rising 17.7% month-over-month – the most on record. 

Coming up on Wednesday, inflation data for May will be in focus. UK CPI is expected to fall to 0.5% from 0.8% year-over-year, a day before the Bank of England meeting. Eurozone CPI is expected to hold steady at 0.1% y/y and Canada CPI is forecast to fall to 0% from 0.2% prior.