Monday’s Bullseye: 27 July 2020

Here is our week ahead preview for the week commencing 27 July 2020. 

This week was all about precious metals with gold and especially silver surging higher as we have been highlighting the opportunity in the previous weeks, for example HERE. Investors bought the metals and sold the US dollar, with the likes of the euro and commodity dollars finding good support instead. Yields remained under pressure as talk of more central bank support lifted bond prices even higher. The falling yields supported low- and noninterest-bearing assets such as precious metals, Japanese yen and Swiss franc. Stocks struggled to add to their gains as investors digested company earnings and guidance and wondered what the future might look like with coronavirus still wreaking havoc in some US states such as Florida and California.
As we head into the final week of July, the focus will remain roughly on similar themes as recent weeks, namely: company earnings, economic data and of course Covid-19 infections and death rates.
Major economic data and selected corporate earnings for the upcoming week
There are a handful of key numbers to look forward to in the coming week, including growth figures from Germany, the Eurozone and US, as well as Chinese manufacturing PMI. But it will likely be the big tech earnings which will garner most of the attention, with Apple, Google and Amazon all reporting on Thursday.  Here are the data and earnings highlights for the week ahead:
  • Company earnings: Louis Vuitton, SAP (BMO), Michelin (AMC), Anglo American Platinum (BMO)
  • Company earnings: Visa (AMC), Pfizer (BMO), Amgen (AMC), McDonald’s (BMO), Starbucks (AMC)
  • Data highlights: US pending home sales, crude inventories and FOMC rate decision and press conference
  • Company earnings: Facebook (AMC), GlaxoSmithKline (BMO), Boeing (BMO)
  • German Prelim GDP, US Advance GDP and unemployment claims
  • Company earnings: Mitsubishi Electric, Panasonic, Apple (AMC), Amazon (AMC), Alphabet (AMC)
  • Chinese Manufacturing PMI, German Retail Sales, Eurozone CPI and GDP, and US Personal Spending
  • Company earnings: DSV, Audi AG, Exxon Mobil (BMO), Merck & Co (BMO)
On the economic front, we have seen a growing divergence appearing between US and European data. While European data have been pointing to economic recovery, US numbers have been mixed. Indeed, on Friday the flash services and manufacturing PMIs from the US disappointed, adding to concerns that the stimulus-fuelled economic recovery may already be faltering. In contrast, the latest European PMIs rose at a much sharper pace than expected. This is undoubtedly because of the fact lockdown measures have eased quicker here than in the US and virus cases have fallen sharply. As services re-opened purchasing managers reported a sharp improvement in conditions. The UK services PMI for example improved to 56.6 from 47.1; German PMI rose to 56.7 from 47.3 and across the Eurozone it was a similar picture: the PMI printed 55.1, up from 48.3 previously. What’s more, UK retail sales again jumped by more than 10%, beating expectations for a smaller bounce.
That said, the sudden jump in European data improvement is due to pent-up demand. It will be interesting to see how consumer spending will evolve in the coming months. For now, though, this should help to keep both the pound and euro supported against the buck, even if concerns over Brexit may mean the upside will be limited for the cable going forward. The greenback will likely struggle further unless something fundamentally changes. The latest stats on coronavirus point to a grim picture. Reported deaths relating to Covid-19 in Florida and California have broken records, while cases of the virus have remained stubbornly high across many US states. Florida’s daily coronavirus-related hospitalizations have risen to a new record. As a result, the top infectious disease expert Dr. Anthony Fauci, who is a member of the White House coronavirus task force, urged for a pause in re-opening of some place on Friday. Elsewhere, South African schools are closing again, this time for four weeks. Meanwhile Hong Kong reported 123 new confirmed cases of COVID-19, hitting a new daily high.
Adding to the above concerns is the deteriorating tensions between the US and China.
Thus, with safe haven assets surging higher this week, it is possible equities might start to breakdown after their impressive gains since the March low, as fears over the pace of the economic recovery and valuation concerns mount. The US equity markets have been pricing in a V-shaped recovery amid all the fiscal and monetary stimulus packages that have been announced. However, coming out of lockdown has proven to be trickier than many had expected. So, it is possible that investors will start being more conservative going forward, potentially leading to a sell-off in the coming week(s).
Chart to watch: Nasdaq
With so many big tech companies reporting their results, our featured chart for the week ahead is the Nasdaq 100:

Nasdaq 100
Source: and ThinkMarkets
The index tested its bullish trend line on Friday before bouncing a little off the lows. A potential close below support around 10310-1070 would be a bearish outcome because it will create our first major lower low.  If that happens, a retracement to the pre-lockdown high of 9750ish would become likely. However, if the chart instead prints a hammer candle off the trend line then this would keep the bullish bias intact. Friday’s close is therefore important to watch.