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Warren Buffet is Back & $1 trillion MAGA

Chart of the Day: USD/CNH (Daily candlesticks)
Source: GKFX / MT4 (July 6, 2020)

•    Warren Buffet makes his first big deal since the pandemic
•    Chinese shares near 6% gain in best day since 2015
•    Alphabet price rise means #MAGA US tech darlings valued at $1 trillion
•    Chinese yuan surges to 3-month peak
•    DAY AHEAD: RBA rate decision, China reserves, API inventories
 

MARKETS


The optimism flowed through the rest of Monday with shares in Europe and in the United States rising after the surge in Chinese markets. The Dow Jones jumped over 300 points, while the S&P 500 rose 1.3% and the Nasdaq surged 1.9% led by tech stocks. The FTSE 100 was the outperformer in Europe, rising 2% led by bank shares.

The US dollar continued to slip as forex traders shunned havens in favour of growth and China-friendly currencies like the Aussie dollar. The Chinese currency itself was a top performer with the offshore yuan coming close to a 4-month peak.

A weaker US dollar and expectations for more central bank stimulus meant gold was on the cusp of a new 7-year peak. Positive economic data including US service-sector PMIs coming in ahead of expectations lifted oil prices.
 

GURUS


“The Stock market is the story of cycles and of the human behaviour that is responsible for the overreactions in both directions.” – Seth Klarman
 

Buffet moves


Warren Buffet made his first big deal since the outset of the pandemic, buying Dominion natural gas assets for $10 billion. Naysayers had been questioning Buffet’s magic touch after he sold airline shares before a big rise and seemed to get cold feet in the market decline, normally the best time to pull the trigger on new purchases according to his value investing doctrine. 

China shares


By the end of Monday,  the Shanghai Composite, China’s benchmark share index rose 5.7% for its biggest one-day gain since 2015 while the CSI 300, another widely followed China shares index finished at 5-year highs. A front page editorial of the state-owned China securities Journal played a part in boosting local morale after promoting the idea of a “healthy bull market.”
 

MAGA $1 trillion


The top four American tech stocks – now affectionately known as MAGA (not Make America Great Again) – but Microsoft, Apple, Google and Amazon all rose to a valuation of over $1 trillion on Monday. The first instance was in January this year, preceding the market collapse. 
 

Yuan Jump


The Chinese yuan had its best day of 2020, reaching close to four month highs as the US dollar dropped (see chart below). Optimism about the reopening in China, combined with a belief the Federal Reserve will loosen policy further and devalue the dollar have combined to send the currency pair lower.
 

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