DAILY MARKET REPORT

01.06.2020

INTERNATIONAL MARKETS

Index Last Change DJIA 25,383.11 17.53 S&P 500 3,044.31 14.58 NASDAQ 9489.872 120.88 NIKKEI 22,057.63 179.74 HANG SENG 23,772.86 811.39 DJ EURSTOXX 50 3,050.20 44.27 FTSE 100 6,076.60 142.19 CAC 40 4,695.44 75.95 DAXX 11,586.85 194.28

 US

Stock futures little changed, with Wall Street set to hold on to May’s strong gains

U.S. futures hovered around the flatline on Sunday night as Wall Street prepared to kick off June trading after consecutive monthly gains. Dow Jones Industrial Average futures traded 29 points lower, with an implied Monday opening loss of 5 points. S&P 500 and Nasdaq 100 futures also pointed to a little changed open for the two indexes. The moves in futures had earlier followed positive momentum in Monday trade for Asia, with Hong Kong’s surging more than 3% in the morning. That came as data showed China’s manufacturing activity in expanding in May. Investors have been monitoring China’s economic data for signs of recovery in the country, where the coronavirus was first reported. Looking ahead, here’s what traders were monitoring heading into the new month:

 States continue to reopen their economies after the coronavirus pandemic forced the country to shutter nonessential businesses. The reopening is now taking place amid widespread protests across the U.S. over police brutality.

 Traders are also grappling with rising tensions between China and the U.S. President Donald Trump said Friday the U.S. would end its special treatment towards Hong Kong.

 The announcement came after China had approved a national security bill that would increase the mainland’s power over the city. However, Wall Street breathed a sigh of relief as Trump did not say he would pull the U.S. out of the phase one trade deal reached earlier this year.

 Disappointing trial results from Pfizer for a breast cancer drug dampened market sentiment. The company made the announcement Friday evening, sending its stock down more than 6% in after-hours trading. “Nothing that has happened since the market closed on Friday has been market positive,” said Art Hogan, chief market strategist at National Securities. “When you think about clearly we’re beginning to take U.S.-China tensions seriously and you add on to that the massive amount of disruption going on in almost every major city in the country right now, none of that could be seen as market positive.” “At the levels we’re at, I wouldn’t be surprised to see the market take a pause and pull back,” Hogan added. The S&P 500 and Dow each gained at least 3% last week while the Nasdaq Composite advanced 1.8% to close out May. Those gains were propelled by increasing bets by traders that the global economy will successfully reopen after the coronavirus forces a shutdown of most economic activity.

Last week’s gains led the major averages to their first back-to-back monthly advances since late 2019. The Dow and S&P 500 gained 4.3% and 4.5%, respectively, for May while the Nasdaq Composite advanced 6.8%.

That advance also put the S&P 500 up 38% from its intraday low set on March 23. “The main downside risk facing is a second wave of the disease,” said Peter Berezin, chief global strategist at BCA Research, in a note to clients. “If fears of a new outbreak were to escalate, risk assets would suffer.”

Berezin added, however, he recommends a “modest overweight” portfolio allocation to stocks, noting: “Even if a vaccine does not become available later this year, increased testing should allow for a more economically palatable approach to containment strategies.”

More than 6 million coronavirus cases have been confirmed globally, including over 1.7 million in the U.S., according to Johns Hopkins University. However, Novavax said last week is started Phase 1 clinical trials for its coronavirus vaccine candidate while Moderna said May 18 its early stage vaccine trial had yielded positive results.

 EUROPE & UK

European markets head for lower open as U.S. protests shake confidence

 London’s FTSE is seen opening 55 points lower at 6,174, France’s CAC 40 is expected to open 148 points lower at 11,660 and Italy’s FTSE MIB is seen 97 points lower at 18,181, according to IG.

 MarkEts are closed in Austria, Denmark, Germany, Norway, Sweden and Switzerland for a public holiday.

 Investors around the world will be focused on widespread civil unrest unfolding in the U.S.

European stocks are expected to open lower Monday as protests continue across the U.S. following the death of George Floyd, an unarmed black man, at the hands of the Minneapolis police last week.

London’s FTSE is seen opening 55 points lower at 6,174, France’s CAC 40 is expected to open 148 points lower at 11,660 and Italy’s FTSE MIB is seen 97 points lower at 18,181, according to IG. Markets are closed in Austria, Denmark, Germany, Norway, Sweden and Switzerland for a public holiday.

Investors around the world will be focused on widespread civil unrest unfolding in the U.S.; hundreds of people were arrested over the weekend as protesters and police clashed in cities across America after the killing of George Floyd sparked more than 100 protests, rallies and vigils, according to NBC News.

Derek Chauvin, the officer filmed kneeling on Floyd’s neck, was arrested and charged with murder and manslaughter.

The arrest and charges failed to quell public anger over the death, however, and protests, some violent, have continued. Mayors of major cities from Los Angeles to Philadelphia to Atlanta imposed curfews and at least 12 states, as well as Washington, D.C., activated National Guard troops.

At the same time, the coronavirus pandemic remains in the spotlight. The number of coronavirus cases globally has now topped more than 6.1 million and the death toll stands at 372,037, a tally from Johns Hopkins University shows.

Stocks in Asia Pacific were higher in Monday morning trade as Chinese data release over the weekend showed the country’s factory activity expanding in May, with the official manufacturing Purchasing Manager’s Index (PMI) coming in at 50.6. That was a decline from the 50.8 print in April and below the 51.0 level expected by analysts, according to Reuters. Still, the figure for May was above the 50 level, which separates expansion from contraction in PMI readings.

There are no major earnings Monday. Spanish new car registrations data for May is due, as well as final manufacturing PMI data for several European countries.

 ASIA

Hong Kong surges more than 3%; China’s Shenzhen stocks up 3% as China’s May factory activity expands

 Shares in Asia Pacific were higher on Monday, with Hong Kong’s Hang Seng index surging more than 3% in morning trade.  Investor focus on Monday was likely also on Chinese economic data for a better gauge of the state of the country’s economic recovery from the coronavirus pandemic.

Stocks in Asia Pacific were higher in Monday afternoon trade as a Chinese data release over the weekend showed the country’s factory activity expanding in May. Hong Kong’s Hang Seng index led gains among the region’s major indexes, surging 3.22% by the afternoon, with shares of life insurer AIA soaring 5.57%. U.S. President Donald Trump announced Friday he would be taking action to eliminate special treatment for Hong Kong, following China’s approval of a controversial national security bill for the city. “Admittedly, Trump’s presser on action against China for implementing the Hong Kong Security Bill, which the White House has alleged strips Hong Kong of any autonomy,

proved to be more bark than bite,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note. “With specific and verifiable measures against China appearing to be weak, markets may draw hollow consolation that the US is treading carefully; especially given risks of unintended economic consequences of far more damage being caused to Hong Kong and non-negligible harm to US economic interests,” Varathan said. Mainland Chinese stocks also saw robust gains, with the Shanghai composite up around 2% while the Shenzhen component surged 3.05%.

In Japan, the added 0.93% in afternoon trade as shares of index heavyweight and conglomerate Softbank Group jumped 3.7%. The Topix index also traded 0.34% higher. South Korea’s Kospi rose 1.34%. Reuters reported Monday that the country’s exports in May fell 23.7% year-on-year. That was worse than expectations in a Reuters poll of a median drop of 22.1% year-on-year. Meanwhile, shares in Australia edged higher, with the S&P/ASX 200 up 0.64%. Overall, the MSCI Asia ex-Japan index jumped 2.13%.

Investor focus on Monday was likely on Chinese economic data for a better gauge of the state of the country’s economic recovery from the coronavirus pandemic. Data released over the weekend by China’s National Bureau of Statistics showed factory activity in the country expanding in May, with the official manufacturing Purchasing Manager’s Index (PMI) coming in at 50.6. That was a decline from the 50.8 print in April and below the 51.0 level expected by analysts, according to Reuters. Still, the figure for May was above the 50 level, which separates expansion from contraction in PMI readings.

Meanwhile, a private survey also showed China’s manufacturing activity expanding in May. The Caixin/Markit manufacturing PMI for May came in at 50.7, according to Reuters. That was higher than a 49.6 print expected by analysts in a Reuters poll.

Economic Release

 Europe and UK

Event Survey Prior GE :GERMAN MANUFACTURING PMI 36.8 34.5 FR :FRENCH MANUFACTURING PMI 40.3 31.5 GBP : MANUFACTURING PMI 40.7 32.6 EUR : FRENCH 12 MONTH BTF AUCTION - -0.517%

 US and Canada

Event Survey Prior US: MANUFACTURING PMI 39.8 36.1 US :CONSTRUCTION SPENDING -6.0% 0.9%

CAD: RBC MANUFACTURING PMI - 33.0

DOMESTIC MARKET

Stocks Last Close Change Volume

SOLIDERE A 10.48 10.46 0.02 29551 SOLIDERE B 10.33 10.35 0.02 2648 HOLCIM 10 10 0.00 0 BLOM GDR 1.5 1.5 0.00 76866 BLOM BANK 3.29 3.29 0.00 0 AUDI GDR 0.43 0.43 0.00 0 AUDI 1 1 0.00 60212 BYBLOS GDR 70 70 0.00 0 BYBLOS BANK 0.64 0.64 0.00 0

FOREIGN EXCHANGE

Currency Spot NY Closing EUR 1.1139 1.1106 GBP 1.2385 1.2350 AUD 0.6735 0.6670 JPY 107.55 107.80 CHF 0.9604 0.9613 CAD 1.3723 1.3770 AMD 482.8100 484.5600 RUB 69.8145 70.1833 Commodities Spot Closing GOLD 1744.61 1730.27 SILVER 18.3453 17.8655 CRUDE OIL 35.33 35.49

Market Summary

Commodities

Oil prices slip as wary traders eye upcoming OPEC+ meeting

 Brent crude fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month.  West Texas Intermediate (WTI) crude futures for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT.

Oil prices fell nearly 1% on Monday as traders hedged bets with the Organization of the Petroleum Exporting Countries (OPEC) considering meeting as soon as this week to discuss whether to extend record production cuts beyond end-June. Brent crude fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month. West Texas Intermediate (WTI) crude futures for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT. The price falls come after front-month Brent and WTI prices posted their strongest monthly gains in years in May. Gains were boosted by OPEC crude production dropping to its lowest in two decades with demand is expected to recover as more nations emerge from coronavirus lockdowns. “The focus is very much on OPEC+,” OCBC economist Howie Lee said, referring to the grouping of OPEC and its allies including Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day (bpd) in May and June after the coronavirus pandemic ravaged demand. “We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up ... but if OPEC+ does come up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Lee said.

Still, tensions between the United States and China weighed on global financial markets while traders are also keeping an eye on riots over the weekend that have engulfed major U.S. cities. Saudi Arabia is proposing to extend record cuts from May and June until the end of the year, but has yet to win support from Russia, sources have told Reuters. Algeria, which currently holds the OPEC presidency, has proposed an OPEC+ meeting planned for June 9-10 be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no objection to the meeting being brought forward to June 4. Meanwhile supply in North America is also falling as data from Baker Hughes showed that the U.S. and Canada oil and gas rigs count dropped to a record low in the week to May 29.

Gold rises as U.S. riots, Hong Kong tensions lift safe-haven appeal

 Spot gold was up 0.6% at $1,736.31 per ounce, as of 1243 GMT. U.S. gold futures were flat at $1,751.30.

 Reflecting investor sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings, rose 0.3% to 1,123.14 tonnes on Friday.

 Palladium inched up 0.1% to $1,947.01 per ounce, and silver rose 1.1% to $18.04, while platinum declined 0.7% to $830.81.

Gold prices climbed on Monday as reports of riots in the United States rattled investors already reeling from the deepening China-U.S. rift, fanning concerns of a fresh economic setback and drove traders towards the safe-haven metal. Spot gold was up 0.6% at $1,736.31 per ounce, as of 1243 GMT. U.S. gold futures were flat at $1,751.30.

Protesters in the United States have flooded the streets over the death of George Floyd in police custody, in a wave of outrage sweeping a politically and racially divided nation. The closely packed crowds and demonstrators not wearing masks sparked fears of a resurgence of Covid-19, which has killed more than 101,000 Americans.

The retreat from riskier assets followed China’s state media and the government of Hong Kong lashing out at U.S. President Donald Trump’s pledge to end Hong Kong’s special status if Beijing imposes new national security laws on the city.

Factory activity in China grew at a slower pace in May, but momentum picked up in the services and construction sectors — pointing to an uneven recovery in Beijing as businesses emerge from a lockdown.

Denting risk appetite further were Federal Reserve Chair Jerome Powell’s comments on Friday that signaled a potential surge in U.S. coronavirus infections could derail recovery from the downturn caused by the pandemic.

Speculators cut their bullish positions in COMEX gold, and increased them in silver contracts in the week to May 26, the U.S. Commodity Futures Trading Commission said on Friday. Reflecting investor sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings, rose 0.3% to 1,123.14 tonnes on Friday. Asian shares inched up on cautious trade.

Palladium inched up 0.1% to $1,947.01 per ounce, and silver rose 1.1% to $18.04, while platinum declined 0.7% to $830.81.

FX

Dollar slips as investors focus on recovery outlook

 Against a basket of currencies the dollar had its worst month this year in May and was under pressure on Monday, dipping by a fraction to 98.166.

 The risk-sensitive Australian dollar shrugged off early pressure and gained 0.4% to hit a three-month high of $0.6703

The dollar slipped on Monday as investors looked past unrest in the United States to the global economic recovery from the coronavirus and hoped for an easing in China-U.S. tensions.

The risk-sensitive Australian dollar shrugged off early pressure and gained 0.4% to hit a three- month high of $0.6703.

The euro was firm and sterling tested a three-week high. The kiwi and the oil sensitive Canadian dollar and Norwegian krone all rose about 0.3%, even as oil prices eased.

“Market participants believe that the worst of the health and financial and economic crises are now behind us,” said Commonwealth Bank of Australia FX analyst Joe Capurso.

“That’s supportive for commodity prices...and if we’re past the worst of it, then commodity currencies tend to do well and the U.S. dollar tends to do poorly in the early stages of a recovery,” he said.

Data on Sunday painted a mixed picture of China’s recovery, with momentum gaining in the construction and services sector even as factory activity growth slowed a touch.

Against a basket of currencies the dollar had its worst month this year in May and was under pressure on Monday, dipping by a fraction to 98.166.

At-times violent demonstrations against police brutality in the United States, which weighed on the mood in early trade and perhaps capped further gains, were unlikely to move the dial on the outlook for the U.S. economy, Capurso said.

What began as peaceful demonstrations over the death of George Floyd, who died as a white Minneapolis police officer knelt on his neck, has become a wave of outrage that has many cities braced for another night of violence.

Stocks dipped on unrest rippling across the country.

But currencies seemed to carry over the tone from last week, which ended with relief that U.S. President Donald Trump made no move to junk the Phase 1 with China.

Relations between Beijing and Washington have nosedived through the Covid-19 pandemic, but investors were relieved that Trump’s move did not — so far — escalate tension over Hong Kong into a broader trade dispute.

“It’s tough to be a bear at the moment and the path of least resistance for risk remains to the upside in my opinion,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

“We’ve moved past Trump’s China speech without the market hearing anything that will upset China too greatly and promote an immediate reaction.”

The Chinese yuan, which had firmed sharply on Friday, was steady near where it left off at 7.1367 per dollar.

The euro held steady at $1.1118, just below a two-month high of $1.1145 hit on Friday as investors drew confidence from the European Union’s plans for a coronavirus recovery fund.

The pound rose 0.3% to $1.2379, close to a three-week peak hit on Friday, as Britain moves out of lockdown.

Competitive sport can resume from Monday, the government said on Sunday.

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