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Chinese shares breakout

Chart of the Day: SP500 (4hr candlesticks)
Source: GKFX / MT4 (July 6, 2020)


•    Chinese shares reach 5-year high; extend gains Monday
•    Australian state of Victoria closes its internal border after virus cases rise
•    United States reporting over 50,000 virus cases per day
•    DAY AHEAD: Germany Factory orders, UK Construction PMI, ISM Non-manufacturing
 

MARKETS


Chinese shares made a strong start to trading on Monday, with the CSI 300 rising nearly 4% in early trading on renewed optimism about the economic reopening. Those gains come after a 5-year high was reached on Friday. Wall Street had finished the week early before the long July 4th holiday weekend with gains on Thursday after a surprisingly strong NFP report. European shares have been the laggards, dropping on Friday amid concerns of rising virus cases.


The dollar has been range-bound with most other currencies seeing little movement while American traders were absent on Friday despite a series of upside surprises in European services PMI data. The highlight for forex markets on Monday will be the US ISM non-manufacturing (services) PMI data.

Gold has been flat with $1770 per oz as a midpoint after have dropped and quickly rebounded in the aftermath of the NFP report. Oil markets were also treading water having given back some of the US-jobs gains on Friday amid the rising virus cases.

GURU WISDOM


“Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria”Sir John Templeton
 

China shares


Investors in China have looked through concerns about rising cases in other parts of the world, focusing on the economic recovery taking root in China. The CSI 300, an index of300 of the largest companies in China rose to 5-year highs on Friday. On Monday the gains continued with a 3.7% early rise, the biggest one-day rise in nearly 18-months. Likewise shares in Hong Kong were up in early trading Monday, rising 2%.

On Friday, data from Caixin showed China’s private services sector booming back into expansion with a reading of 58.4, well above 49.9 on the prior reading and the 55 expected by economists. The strong reading has encouraged buying into Chinese tech shares such as Tencent, which is leading the stock market with record highs and leading in the economic recovery after a big boost to its games business.
 

Australia


While China has taken two steps forward, Australia has taken one step back with rising cases in suburbs of the city of Melbourne forcing the state governor to shut the border of Victoria with other Australian states. Nonetheless, the Australian dollar is moving higher alongside Chinese shares, acting as more of a barometer for the global economy than for Australia.
 

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