Following Monday’s gains, European stocks and US index futures have extended their gains sharply with a number of leading indices closing in on their previous all-time highs. The
Nasdaq has already surpassed its old highs and now the likes of the
S&P 500 and the German DAX index (see chart below) are close to doing so as well. Against this backdrop, you would think “safe-haven” gold and silver would be struggling. Well, precious metals are shining brightly as they continue to rise along with equities. Gold is now just $95 shy of reaching its record high of $1920 hit in 2011. Silver has smashed through the $20 hurdle this morning, as we have been banging on about it over the past few days for example
THIS report. You can add copper and
crude oil to the mix, with both Brent and WTI breaking their recent highs. Commodity dollars and other risk-sensitive currencies such as the euro, pound and South African rand have all therefore risen in favour of safe havens US dollar and yen.
Source: TradingView.com and ThinkMarkets
So, why is everything rising?
In short, because of
more stimulus. Hopes over a faster economic recovery have been boosted after EU leaders finally reached an agreement on the
€750 billion coronavirus recovery fund, deciding that the stimulus package should be divided into grants of €390bn and loans worth €360bn. The fiscal package comes on the back of
vast monetary support from the European Central Bank, as well as other major central banks around the world. In the US, talks are about to kick off on the next virus relief plan, which could see at least an additional $1 trillion added to the previous stimulus measures – especially as some of the existing measures are about to expire:
Meanwhile
Australia’s government has decided to pump a further
A$20 billion into supporting jobs by extending the wage subsidy programme by six months until the end of March, even if at a lower rate.
In addition to stimulus and economic recovery, you have raised hopes over a
coronavirus vaccine as well as
reduced cases in US states of Florida and Arizona and a drop in the hospitalisation growth in California, all helping to boost risk assets.
Sentiment has been supported further by
company earnings not being as bad as expected so far in the reporting season.
IBM for example saw its share rise more than 5% in afterhours trading as its earnings topped expectation last night. IBM’s Q2 revenue fell 5.4% but still managed to beat consensus, as cloud sales rose 30% which offset falls in the consulting services unit. Today’s reporters include
Snap, Coca-Cola, Lockheed Martin and
TD Ameritrade. For a preview of what else is to come this week, you can read our week ahead report
HERE.