Investors expect the US reaction to new protests in Hong Kong

The US dollar index has been traded narrowly for about 2 months already at around 100 points. Yesterday, it fell amid yet another disagreement between China and the United States over the protests of Hong Kong residents. They are not happy with the new national security law, which may limit urban self-government. US President Donald Trump said he would respond to the situation in Hong Kong by the end of this week. This caused a negative reaction from the Chinese authorities. Today, the US dollar strengthened slightly against the euro following a statement by ECB Executive Board member Isabel Schnabel that their department would act if necessary. Investors believe that the ECB will increase the issue of euros to expand the program of redemption of bonds known as PEPP (Pandemic Emergency Purchase Program). The New Zealand dollar showed noticeable growth yesterday thanks to the publication of improving data on foreign trade for April. Today the Beige Book economic review will be published in the United States.

On Tuesday, US stock indexes rose without any particular reasons. A number of US states have lifted or softened quarantine. Of course, this is good for the economy, but some market participants fear the second wave of the coronavirus pandemic. Yesterday, the shares of those companies that lagged far behind the positive dynamics of the indices (financial, industrial and oil and gas sectors) were the leaders of growth. Goldman Sachs and JPMorgan Chase stocks soared 9% and 7%. Securities of United Airlines (+ 16.3%), American Airlines (+ 14.7%), Southwest Airlines (+ 12.6%) advanced. While the stocks of companies that previously were in the lead, fell yesterday: Microsoft (-1.1%), Apple (-2.2%). The S&P 500 index tested the psychological level of 3000 points, but so far could not gain a foothold above it. Now, futures for US stock indexes have risen. Japanese Nikkei 225 index today rose for the third time in a row and updated the monthly maximum. European stock indexes also advanced today. The statement by the ECB Executive Board member Isabel Schnabel about a possible increase in currency issue to support the European economy slightly weakened the euro, but had a great positive effect on stock prices. The intention of the European Commission to develop an economic stimulus plan in the amount of 1 trillion euros was another positive factor.

Brent crude oil prices dropped insignificantly, but are still traded above the psychological level of $ 35 per barrel. Today the independent American Petroleum Institute (API) will publish its assessment of changes in oil reserves in the United States for the week. Official data will be released tomorrow. Investors fear that reserves rose after a decline a week earlier. As a result, oil quotes are now under pressure. According to the International Energy Agency (IEA), in the long run, they will be supported by reduced investment in the global oil industry due to coronavirus. The IEA estimates it at 20% (or at $ 400 billion) compared with 2019. This will inevitably lead to a decline in oil production.

Gold is getting cheaper for the third day in a row, but its quotes are still above the psychological level of $ 1,700 per ounce. Investors ignore the political risks of another conflict between the US and China over protests in Hong Kong. Precious metals have lost some of their attractiveness amid a powerful rally in the global stock market. In just 2 months, the US S&P500 soared by almost 40%, and the Nasdaq – by almost 45%.