Pre-Market Review Markets Did Not React to Protests

Unrest continued across the US last night as protestors defied curfews in many cities. President Trump yet again misjudged the mood of the American people. He tweeted that he had done more for the black community than any other president since Lincoln. He also mentioned that the “BEST IS YET TO COME”. This comes after Trump authorised the use of tear gas to move crowds in front of a church for posing. Markets continue to ignore the protests though.

Markets remain defiant, and traders are still buying into the rally on Wall Street. Historically, unrest such as the most recent one did not get the attention of the equity markets. It seems like the case again. Instead, investors continue to focus on the reopening of the economy, and how quickly that will affect the bottom line.

Markets test the Fed once again

The biggest reason markets remain in a buoyant mood is because of the Fed stimulus pumped into the economy. The Fed has already cut interest rates to zero and promised to add more stimulus if the economy needs it. The balance sheet, which the Fed worked intensely to reduce, now stands at an eye-watering $7.1trillion.

The Fed’s presence in the market has enabled companies to restructure debt at incredibly low rates. Meaning major corporations have managed to build cash stockpiles to fight their way through this crisis (COIVD-19 pandemic). It seems that for traders, this outweighs the negativity and political uncertainty that now clouds other areas of the US.

Later today, we will get a further reading concerning lost jobs in May in the private sector. The ADP payroll could show that another 9 million people became unemployed. This starts a busy few days for jobs data. On Thursday the weekly jobless claims reading will be out. On Friday will have the full jobs report including the non-farm payroll. Today we will also see a raft of data out of Europe in the form of services PMI’s. Later we will get the ISM non-Manufacturing PMI from the States.

Today will also see the first-rate setting meeting for new Bank of Canada Governor Tiff Macklem. However, no significant changes are in sight. The Loonie has rallied strongly over the last couple of days, especially against the greenback. However, any mention of negative rates, or further QE will be critical in that performance continuing. Despite a GDP contraction of over 7%, the economic outlook has been relatively upbeat for the coming months in Canada.