· Safety bid supports dollar as coronavirus surge shakes confidence
A firm dollar kept riskier currencies under pressure on Monday, as a surge in coronavirus cases and the re-imposition of curbs to stop its spread had investors worried that a global economic recovery could be derailed even before it had taken root.
California ordered some bars to close on Sunday, following similar moves in Texas and Florida, as cases nationwide soar to record levels each day. Washington state and the city of San Francisco have paused re-opening plans.
Against a basket of currencies the dollar was steady not far below a four-week peak on Monday at 97.466. The safe-haven Japanese yen also held at 108.18 per dollar.
“A double-dip U.S. recession is possible if widespread restrictions are re-imposed, leading to a surge in the dollar,” said Commonwealth Bank of Australia FX analyst Joe Capurso.
“Lockdowns are the key indicator to watch.”
The jump in U.S. cases has been most pronounced in a handful of Southern and Western states that reopened earlier and more aggressively, serving as a warning to the potentially illusory nature of perceived progress in controlling the virus.
New restrictions on movement have also been imposed in parts of Beijing and Lisbon and in two municipalities in western Germany. Argentina extended and tightened a lockdown around Buenos Aires following a sharp rise in cases.
Globally half a million people have died from COVID-19, about a quarter them in the United States.
Elsewhere sterling nursed losses and sat at $1.2341, just a fraction above a one-month low it hit on Friday amid fresh doubts over whether Britain can settle a post-Brexit trade pact with the European Union.
The euro is set to wrap up its best two months against the dollar in a year and a half, as hopes for a united EU response to the virus and a swift regional recovery propel the single currency ahead about 2.5% since the beginning of May.
Investors are looking to eurozone confidence data due at 0900 GMT and German inflation figures at 1200 GMT for the latest gauge of the region’s economic health.
· EUR/USD attempting recovery amid coronavirus concerns
EUR/USD is trading around 1.1250, up from the lows as markets are trying to recover from worrying coronavirus developments. Eurozone inflation figures, US Pending Home Sales, and COVID-10 figures are eyed.
From a technical perspective, the pair, so far, has managed to defend the neckline support of a bearish double-top formation on short-term charts. This makes it prudent to wait for a sustained break through the mentioned support, around the 1.1200-1.1190 region, before placing any aggressive bearish bets. Some follow-through weakness below the 1.1175-70 support zone will confirm a near-term bearish breakdown and set the stage for a further near-term depreciating move. The pair might then accelerate the fall towards the 1.1100 round-figure mark before eventually dropping to test the very important 200-day SMA, currently near the 1.1030 region.
On the flip side, any subsequent positive move beyond mid-1.1200s might now assist the pair to aim back to reclaim the 1.1300 mark. Bulls might then target to retest the 1.1350 supply zone, which if cleared decisively might negate any near-term bearish bias and trigger a fresh leg up. A convincing breakthrough should pave the way for a move beyond the 1.1400 round-figure mark, back towards testing YTD tops, just ahead of the key 1.1500 psychological mark.
· Treasury yields rise despite surge in U.S. coronavirus cases
U.S. government debt prices were lower Monday morning as risk-on sentiment sought a rebound, after record new coronavirus cases tempered optimism over an imminent economic recovery.
At around 2:45 a.m. ET, the yield on the benchmark 10-year Treasury note was higher at 0.6512% and the yield on the 30-year Treasury bond rose to 1.3845%. Yields move inversely to prices.
· China reports another plunge in tourism revenue as the recovery from the coronavirus shock drags on
China’s struggle against the economic overhang of the coronavirus is far from over.
Renewed limits on social activities has dampened the pace of recovery, as evident from the nearly 69% drop in tourism revenue during the three-day Dragon Boat Festival that officially ended Saturday.
This year, the roughly 48.81 million tourist trips during the festival brought in revenue of 12.28 billion yuan ($1.73 billion), according to China’s Ministry of Culture and Tourism. That marked a drop of 68.8% from the 39.33 billion yuan in tourism revenue during the festival last year, which fell in early June. Nearly 95.98 million tourist trips were made then, according to official figures.
“Tourism and other activity data from the past Dragon Boat Festival holiday (25-27 June) suggest that the recovery in services sector remains weak for some understandable reasons,” Ting Lu, chief China economist at Nomura, said in a note. He pointed to increased social distancing measures and consumer confidence “clouded by elevated uncertainty and high unemployment rate.”
“Due to the travel bans (a)lmost no cross-border trips were made during the Dragon Boat Festival holiday this year,” Lu said. “These data suggest no significant improvement from the Labour Day holiday (in May).”
· China says will put visa restrictions on U.S individuals over Hong Kong
China’s foreign ministry said on Monday it will impose visa restrictions on U.S. individuals with egregious conduct related to Hong Kong, after Washington announced visa restrictions on some Chinese officials over the city.
Ministry spokesman Zhao Lijian told reporters during a briefing that China is urging the United States to stop meddling in Hong Kong affairs and warned that China will react with strong countermeasures if the United States continues with its actions.
· China's factory activity likely slowed in June on subdued global demand, Reuters poll shows
China’s factory activity likely grew for the fourth month June but the pace may be waning, as global demand stayed subdued while a fresh coronavirus outbreak in the Chinese capital and rising worldwide cases threaten to undermine a gradual domestic recovery.
The official manufacturing Purchasing Manager’s Index (PMI), due for release on Tuesday, is expected to ease to 50.4 in June, from 50.6 in May, according to the median forecast of 29 economists polled by Reuters. A reading above 50 indicates an expansion in activity.
· Russia reports lowest number of coronavirus infections since April 29
Russia on Monday reported 6,719 new cases of the novel coronavirus, the lowest one-day reported increase since April 29, pushing its nationwide tally to 641,156.
The national coronavirus taskforce said 93 people had died in the last 24 hours, bringing the official death toll to 9,166.
· Tokyo confirms 58 new cases of coronavirus infection
Tokyo on Monday recorded 58 new cases of coronavirus infection, marking the fourth straight day that infections had exceeded 50, broadcaster TV Asahi reported.
The Japanese capital had reported 60 cases the previous day, which was the highest daily tally since early May.
· UK's Johnson says he will double down on spending plans
British Prime Minister Boris Johnson said he planned to double down on his plans to increase public investment and a return to austerity would be a mistake as the country tries to recover from the coronavirus hit to the economy.
Johnson told Times Radio on Monday that he wanted a “Rooseveltian” approach to the economy, a reference to former U.S. President Franklin D. Roosevelt whose “New Deal” programme helped the United States recover from the Great Depression.
· Airbus CEO sees production down 40% over the next two years
Airbus (AIR.PA) is assuming a 40% drop in production over the next two years due to the coronavirus crisis, Chief Executive Guillaume Faury was quoted on Monday as saying.
“For the next two years - 2020/21 - we assume that production and deliveries will be 40% lower than originally planned,” Faury told Die Welt newspaper.
Airbus has so far said it could cut output by a third on average. On June 3, however, Reuters reported it was looking to hold underlying jet output at 40% below pre-pandemic plans for two years, adding pressure to cut thousands of jobs.
· South Korea exports to fall for fourth month but at a slower pace, poll shows
South Korean exports likely shrunk for a fourth month but at a slower pace in June due to easing global virus lockdowns and more working days, yet a second wave of infection and Sino-U.S. tension were seen clouding near-term recovery, a poll showed on Monday.
Overseas sales were expected to decline 7.8% year-on-year, according to the median forecast in a Reuters poll of 12 economists. That compared with a 23.6% plunge in May and a 7.5% fall in preliminary data for the first 20 days of the month.
· Japan automakers' May global sales drop 38% as lockdowns weigh
Japanese automakers’ global sales declined 38% in May, in the third straight month of big falls as most automotive factories and dealerships remained closed due to coronavirus lockdowns.
The country’s seven major automakers sold a total of 1.47 million vehicles last month, down sharply from 2.38 million units a year ago, according to Reuters calculations based on sales data released by these companies. But the decrease was smaller than the 50% tumble posted in April.
Global production at these automakers fell 62% to 918,974 units in May, compared to a production slump of 55% in April.
· Vietnam's second-quarter GDP growth hits record low due to pandemic
Vietnam’s economic growth fell to its slowest pace in at least 30 years in the second quarter due to the impact of the coronavirus pandemic, putting the government’s 2020 economic targets well out of reach.
Gross domestic product in the April-June period grew 0.36% from a year earlier, compared with an expansion of 6.73% in the same period last year, the General Statistics Office said in a statement on Monday.
The official said the anaemic growth meant the economy would need to expand 10% in the second half of the year to achieve the government’s official 2020 target of 6.8%, which was set before the pandemic.
The services sector in the second quarter contracted 1.76% from a year earlier, while the industrial sector rose 1.38% and the agriculture sector was up 1.72%, the GSO said.
· Oil prices extend losses as coronavirus spike cools demand hopes
Oil prices slid for a second straight session on Monday as coronavirus cases rose in the United States and other places, leading some countries to resume partial lockdowns that could hurt fuel demand.
Brent crude dropped 81 cents, or 2%, to $40.21 a barrel by 0653 GMT, while U.S. crude was at $37.74, down 75 cents, or 2%.
Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.
However, global coronavirus cases exceeded 10 million on Sunday as India and Brazil battled outbreaks of over 10,000 cases daily. New outbreaks are reported in countries including China, New Zealand and Australia, prompting governments to impose restrictions again.
Reference: CNBC, Reuters
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