Equity rally takes a pause ahead of ECB policy decision today

Equity rally takes a pause ahead of ECB policy decision today 981 980 Realm

Markets are anticipating that the European Central Bank will today announce an increase in its pandemic emergency purchase program. Disappoint on this front would likely sour market sentiment and stock-markets have paused this morning ahead of the announcement.

 

Global Macro

  • The yield on the US 10-year Treasury note rose for a third day to 0.75% on Wednesday, its highest level since April 15th, after ADP reported private sector jobs declined less than expected in May; an ISM survey showed services sector contracted at a softer pace than forecasted and final results from Markit PMI survey also indicated that services activity shrank less than previously predicted. Sentiment has been lifted by prospects of an economic recovery amid the reopening of economies.
  • The ISM Non-Manufacturing PMI for the US increased to 45.4 in May of 2020 from 41.8 in the previous month which was the first contraction in the services sector since December of 2009 and the sharpest since March of 2009, due to coronavirus lockdown restrictions. It compares with market forecasts of 44 although it still points to a sharp contraction in the services sector. Production (41 from 26), new orders (41.9 from 32.9), employment (31.8 from 30) and inventories (48 from 46.9) fell less than in April. “Respondents remain concerned about the ongoing impact of the coronavirus. Additionally, many of the respondents’ respective companies are hoping and/or planning for a resumption of business,” Anthony Nieves, Chair of the ISM, said.
  • The IHS Markit/CIPS UK Composite PMI was revised higher to 30.0 in May 2020 from a preliminary estimate of 28.9, above the previous month’s all-time low of 13.8. Manufacturing output and service sector activity both contracted at sharp rates, with the overall pace of job shedding the second-fastest since the series began in January 1998. Looking ahead, business expectations improved further from March’s low.
  • On Wednesday: European stocks ended notably higher, extending gains to a third straight session, thanks to fairly strong services sector data from China and Europe. US stocks moved sharply higher over the course of the trading session on Wednesday, extending the upward trend seen in recent sessions. The rally lifted the Dow and the S&P 500 three-month closing highs, while the tech-heavy Nasdaq continued to close in on the record highs set in February. Asian stocks posted strong gains on Wednesday amid optimism about an economic recovery and on hopes of more stimulus measures to counter the fallout from the coronavirus
  • Wednesday’s data below:

Disclaimer:  ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy. This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.