Intraday Market Thoughts

Summer Stimulus on Standbye

by Adam Button
Aug 14, 2020 17:09

If you didn't know it is summer, NASDAQ is up 0.2% on the week--the smallest +(-) weekly change of the year. S&P500 posts its smaller weekly change in over 3 1/2 months. Something will have to change to get US stimulus discussions moving and that might be a shudder in financial markets. USD is on the backfoot but metals remain weak. Watch the latest Virus developments below. US retail sales beat expectations in July but at a slower pace than June, while GBP is the strongest perfomer of the day, while silver is the biggest loser, highlighting once again that inverse GBP/XAG relation between the two that Ashraf has often tweeted about. Below is the chart of mainly consistent upside econ surprises, while oil remains hesistant in the short-term, but could be set for a break-out in autumn. Ashraf returns from holiday next week and he will update subscribers on last week's XAU-XAG call, days prior to their sharp pullback.

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Summer Stimulus on Standbye - Citi Surprise Index Aug 14 2020 (Chart 1)

Another week has gone by and US policymakers are deadlocked on further stimulus. White House economic advisor Larry Kudlow said that executive orders – to some extent – fill the need for a second stimulus package.

That comment sent a small shudder through the market but it was a soft bond auction later that sparked a US dollar bid and some stronger risk aversion.

The number of trend changes this week has been notable – bonds, precious metals, and USD. Yet the broader theme of complacency around the recovery, the election and stimulus remains the dominant theme.

Initial jobless claims placated some of the worries on Thursday as they fell to a 21-week low of 963K compared to 1100K expected. However there are still 28.2m Americans on some form of unemployment benefit and the absence of the $600/week bonus has to be hurting consumers at the moment.

Keep an eye on #Covid19 developments as the numer of cases in France rebounds strongly, while Germany warns about Spain and Greece and in the meantime deaths in Florida jumped back up. Some express puzzlement at how the rise in new cases is not causing new deaths, which could suggest a sign of world-wide immunity. 



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