China record trade surplus, Nasdaq Record high - DAILY MARKET UPDATE

By GKFX Research Team (June 8, 2020)

•    Record China trade surplus in May, yuan at 1-month peak
•    Nasdaq hits a record high after shock US jobs creation
•    S&P 500 now -1% YTD, recovering from -30% plunge
•    Big drop in gold under $1700 per oz. 

MARKETS

As we start the new week in Asia, it comes on the back of a huge Friday on Wall Street. Quite easily the biggest monthly jobs surprise on record has given rise to a new level of investor confidence. The Dow Jones had weekly gains of 6.8% and the S&P 500 was up 4.9% for the week while the Nasdaq touched an intraday record high.

The Chinese yuan is in a position to build on one-month highs after Chinese FX reserves were higher than expected and China’s trade surplus hit a new record high in May. The US dollar ended Friday higher on the evidence of a quick American economic recovery but closed lower for a third week running.
 

GURU WISDOM

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” - Paul Tudor Jones
 

Record China trade surplus 

A jump in medical exports helped China’s trade surplus reach a record high in May. Lower energy prices thanks to chaos in oil markets saw the value of imports plunge -16.7% even as import volumes actually rose. The recovery in Chinese industrial output as well as sales of medical equipment meant exports fell only -3.3%, less than expected. At the same time, China FX reserves rose on the month. The strong data paints a picture of economic recovery in China. Traders have pushed the offshore yuan well off the record lows (USD/CNH record highs) reached two weeks ago. 
 

Nasdaq record high

Pretty much any asset class that benefits from an improving economic outlook was higher last week – the Australian dollar, base metals, banks shares, airline shares and of course tech shares. The tech-heavy Nasdaq index has been leading the recovery in stock markets and was the first of the major US average to hit a new all-time high since the March sell-off. The final leg up was thanks to Friday’s stunning US jobs report. Instead of rising towards a 20% unemployment rate, the US economy in fact added 2.5million jobs- the most on record- causing the unemployment rate to fall to 13.3%.
 

Gold & havens roll over

The “optimism” trade is running rampant, and as a result the havens are all rolling over. The 10-year US Treasury yield jumped above 0.9% and USD/JPY rallied to just shy of 110, both 2-month highs. Gold has fared better but might be the next haven ‘shoe to drop’ if the optimism continues.