10 top events at financial market during Q2 2020
1. Stock markets turned around very quickly
The stock markets wrote off tens of percent in the first quarter due to the spread of coronavirus and the subsequent introduction of quarantine measures, and no one expected how far the whole situation could go. However, the second quarter has shown that there is nothing to worry about, as the US Fed would not let the markets fall and stock indices have concluded one of the best quarters within two decades. The stock index benchmark - the S&P 500 - closed on 30.6.2020 as its best quarter since 1998.
S&P 500: +20%
DOW JONES: +17.8%
Tesla: + 106.1%
2. The Fed drove money printers at full throttle
The US Fed has largely contributed to the recovery in stock market growth, sending unprecedented liquidity into the market. The central bank's balance sheet has swelled to over $ 7 trillion and the Fed is buying everything that can be bought. We are talking about government as well as individual corporate bonds, both in the investment and speculative levels. This is a clear signal that it will not let the markets fall at any cost.
Chart: US FED balance (source: federalreserve.gov)
3. Oil from -40 to +40
The oil market has had the wildest quarter in its history, which ended in the biggest profit. This was due to the fact that American WTI oil reached up to - $ 40 per barrel. This was due to declining demand and growing oil supply in the market. The OPEC oil cartel had to intervene and introduced historic production cuts of 10% of the total supply. This helped oil to stabilize and grow to $ 40 a barrel.
Chart: Crude Oil WTI Futures (source: investing.com)
4. Gold at $1800 an ounce
The price of gold remained at elevated levels throughout the second quarter, despite record growth in stock markets. Gold has even reached up to $ 1,800 per ounce at the futures market, the highest since 2012. Investors still perceive a high degree of risk as well as huge amounts of money in economies, which reduces their real value.
5. The second wave of coronavirus might come earlier
In Europe, various quarantine measures began to be released at the end of the second quarter, and the decline in new infections led to a gradual return to normal life. Other countries are in a similar situation, but in the United States, newly infected people grew at a record pace again at the end of the quarter. However, the economy continues to loosen restrictions, which could result in a second wave and an economic catastrophe.
Chart: Daily New Coronavirus Cases in the USA since the beginning of pandemic (source: worldometers.info)
6. China has introduced a security law on Hong Kong
The trade dispute between the US and China seemed to be over, but everything was thwarted by China's steps to introduce a security law in Hong Kong. According to the proposal, it should make it possible to suppress terrorist and separatist activities and foreign interference. Whenever necessary, the Chinese government may establish authorities in Hong Kong to oversee national security. However, according to the Western world, this law paralyzes the autonomy of the city-state, which guarantees it a certain freedom, such as the freedom of the press and the courts.
7. The United States incorrectly reports labor market data
The last numbers looked amazing at first glance, and very quickly there was talk of a rapid recovery in economic growth in the shape of a "V". However, the US Labor Office reported some numbers wrongly. Specifically, there were 4.9 million citizens who were classified as employed by the employment office, even though they were unemployed because they were forced to take unpaid leave. April unemployment rate would thus reach 19.5%, compared to the reported 14.7%, and May unemployment would rise to 16.1%.
8. The Czech koruna strengthened to 26.5 CZK per euro
The spread of coronavirus and the transfer of foreign capital to safer assets got the crown to the level of 28 crowns per euro. The gradual easing of quarantine measures and the economy, together with the appetite of foreign investors for risky assets, helped get the koruna to 26.50 per pair with the euro and even at one time completely erased coronavirus losses against strengthening to 23.20. Even in the coming weeks and months, it will depend on the risks and the taste of foreign investors to move money into riskier currencies.
Chart: Day chart EURCZK (source: ctrader PurpleTrading)
9. Several companies are starting to test for a coronavirus vaccine
Everything may be over early next year, when scientists expect the coronavirus vaccine to arrive. More than 180 companies are developing their own vaccine, but only 29 of them have already reached at least the first phase of testing. The CanSino Biologics vaccine was even the first to be approved for military use. Three companies have already entered the third phase of testing, including Moderna, which is supported by the Melinda and Bill Gates Foundation, and its shares grew by more than 100% in the second quarter.
10. The Swedish koruna is a surprising winner in the foreign exchange markets
The second quarter was already a little more marked by the return of risk to the financial markets, so some riskier currencies prospered. However, the Swedish koruna was most interesting, which, thanks to keeping the economy open and to the central bank's loosened approach, managed to strengthen the most of all currencies. The Swedish koruna strengthened against the euro by 5.5% and against the US dollar by 7.1%. In the long run, however, it threatens the economic recovery and exports, on which the economy depends by 50% of GDP.