Equities rebound, dollar lower, yields higher

US and European equities are higher following yesterday’s extraordinary sell-off driven by investor concerns over a second wave of Covid-19 infections and slower-than-expected economic growth. The dollar is slightly lower overnight and Treasury yields are higher. Oil and gold prices also are higher. The pound is only slightly lower on the day despite release of a grim UK GDP for April, which showed a contraction of 20.4%. The University of Michigan’s consumer sentiment index for June will be released this morning at 10am.

“If you cannot do great things, do small things in a great way.”
Napoleon Hill
  • FX Rates
    June 12, 2020

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  • USD

    The dollar moved lower overnight, but did manage a 0.5% gain against the Japanese yen. S&P 500 futures are up 1.6% as of 8:20am, and yields on UST 10-year rose 3 bps to 0.70%. The University of Michigan’s consumer sentiment index for June to be released today at 10am is expected to rise over May’s figure.


    As a result of the lockdown to contain Covid-19, the UK economy shrank by a record 20.4% in April versus expectations of -18.7% and the previous month’s -5.8%. The pound fell slightly on the news, but is lower on the week after PM Boris Johnson faced blame from politicians and scientific advisors during the week for several key mistakes in handling Covid-19.


    Better-than-expected EU industrial production fueled a modest up move in the euro, as it remains right in the middle of the week’s 1.1245 – 1.1420 range.


    The Canadian dollar edged higher versus the US dollar amid the rebound in risk assets. USD/CAD implied volatility fell this week. Canada’s Capacity Utilization Rate for Q1 fell to 79.8% from the previous quarter’s 81.2%, and less than the survey’s 80.0%.


    Asian equities fell overnight. Hong Kong students said they'll hold a referendum on June 20 to gain backing for student and worker-led strikes.

    Japan announced that it will extend by a month its entry ban that was due to expire at the end of June. Japan’s parliament passed a record 31.9 trillion-yen ($300 billion) extra budget, which is designed to help stressed firms, payroll subsidies and its medical system.

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Scott Petruska, CFA
Scott Petruska, CFA

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