Stocks rally, dollar falls on dovish Fed remarks

US stocks advanced with Treasuries, while the dollar retreated after the Federal Reserve signaled continued stimulus to prop up the economy. The S&P 500 rose by 1.2% to 3,258.44 while Dow Jones was up 160.29 points (0.6%) to 26,539.57.

Fed sticks to whatever it takes with no sign of virus easing

The Federal Reserve left interest rates near zero and vowed to use all its tools to support the recovery from an economic downturn that Chair Jerome Powell called the most severe “in our lifetime.” “The path forward for the economy is extraordinarily uncertain, and will depend in large part on our success in keeping the virus in check,” he told after the Fed left interest rates near zero.

US pending home sales exceed forecast as mortgage rates fall

An index of US pending home sales exceeded forecasts in June as borrowing costs fell, adding to evidence that the housing market is the bright spot in an economy stunted by Covid-19. The National Association of Realtors’ index of contract signings to purchase previously owned homes increased 16.6% after a 44.3% jump in May, according to data released. Pending sales are up 12.7% yoy on an unadjusted basis.

Euro-area furloughs may only have delayed virus jobs damage

The damage to European jobs from virus lockdowns may only be temporarily held at bay and unemployment rates will probably increase later this year, according to European Central Bank (ECB) researchers. Furlough programs have kept millions on payrolls, allowing countries like Germany, France or Spain to avoid a massive jump in unemployment that the US experienced since the start of the pandemic. But a sluggish recovery means some companies won’t be able to afford to bring back all workers.

Two ECB officials set high bar for end to crisis stimulus plan

Two European Central Bank (ECB) policy makers set a high bar for a potential exit from the institution’s pandemic bond-buying program in comments suggesting they support keeping the crisis-fighting tool active for the foreseeable future. Yannis Stournaras, Greece’s member of the ECB’s Governing Council, said the fate of the plan will depend mostly on the outlook for inflation, which currently shows consumer prices undershooting its target at least through the end of 2022.

Hong Kong’s recession extends with 9% drop in second quarter

Hong Kong’s economy contracted for the fourth straight quarter as the coronavirus pandemic and political tensions extend the city’s first recession in a decade. The territory’s economy contracted 9% yoy in the second quarter, according to an advance reading from the Census and Statistics Department Hong Kong. That’s worse than the median forecast of -8.3% and follows a revised 9.1% drop in the first quarter that was the worst dating to 1974 data.

Australia consumer prices fall as deflationary pulse emerges

Australia slipped into deflation in the three months through June, reflecting a combination of cheap oil and government intervention to pause some service charges in order to nurse households through the Covid-19 lockdown. The consumer price index fell 1.9% from the first quarter, the biggest decline in 72 years, data from the Australian Bureau of Statistics showed.

Oil edges up after US crude supplies shrink most this year

Oil was propped up by the biggest decline in US crude inventories this year, signaling a bright spot in a market weakened by Covid-19. Brent crude for September settlement climbed US$0.53 to US$43.75 per barrel.

Source: Affin Hwang Research - 30 Jul 2020