Morning Report – Friday 26th June

Main Headlines

At least 20 million people in the US may already have been infected with Covid-19, according to the latest estimate by health officials. The Centers for Disease Control (CDC) says the true number of cases is likely to be 10 times higher than the reported figure. Texas and Florida halted the process of reopening as virus infections spiked. Nationwide infections rose 1.7%, the biggest jump since May 30, setting a new record for daily cases. VP Mike Pence highlighted progress: “In some 38 states across the country, cases are stable or even declining.” The resurgence spurred hopes for more economic stimulus.

The Nikkei 225 led gains in Asia, with equity benchmarks in South Korea and Australia also posting advances. S&P 500 and FTSE 100 futures drifted higher after Wall Street rallied late on hopes more pandemic aid is on the way. Bank shares fell in extended trading after the Fed capped dividends and nixed buybacks. China was closed for a holiday. Oil rose on news Russia will curb some exports. Treasuries gained and gold slipped.

The Fed said an extended economic slump could leave the biggest U.S. banks with up to $700 billion in losses on soured loans. It ordered them to cap dividends and suspend buybacks through at least the third quarter to ensure they have ample funds. The central bank “is taking action to assess banks’ conditions more intensively and to require the largest banks to adopt prudent measures to preserve capital,” Vice Chairman Randal Quarles said.

GBP

Sterling gained yesterday as some support returned following its recent move lower however, worries about a second wave of COVID-19 infections and negotiations over a Brexit deal kept the rebound in check. There was no specific new development that pushed the pound higher, but with European equities steadying after earlier falls and some calm returning to markets, sterling was able to claw its back some recent losses.

EUR

The euro is broadly weaker and is weighed down as riskier assets in the region, including Italian bonds, weakened, and as the European Central Bank fought back against a German court challenge to its money-printing plans.

USD

The dollar is holding firm this morning as caution over rapid rises in U.S. coronavirus cases cast doubt over the reopening of the economy, keeping demand for the safe-haven currency intact. The U.S. health crisis continued as new daily cases around the country climbed to record levels and governor of Texas temporarily halted the state’s reopening as infections and hospitalisations surged.

Main Economic Data/Central Banks/Government (All Times BST)

7:00 a.m.: Germany May Import Price Index
7:45 a.m.: France June consumer confidence
8:00 a.m.: Spain May retail sales
9:00 a.m.: Euro-Area May M3 money supply
10:00 a.m.: Italy June consumer, manufacturing confidence
1:30 p.m.: U.S. May Personal Income/Spending

Corporate Highlights

Nike fell 3.9% after reporting a fourth-quarter loss per share of 51 cents versus the consensus for profit of 10 cents. The company said results “were significantly impacted” by store closures, and shipments to wholesalers fell by half. Digital sales increased 75% in the quarter and 90% of all Nike stores globally have now reopened. Jordan brand revenue rose 15%, buoyed by the Netflix documentary The Last Dance.