Market Weekly Review: Confrontation Escalates! China-US News Ignites Global Public Opinion; Is the Ultimate Anti-Epidemic Weapon About to Emerge? Beware of Unexpected Attacks Next Week
This week, the confrontation between China and the US further escalated. Major progress was reported on the vaccine front, leading to a dramatic plunge in A-shares, although other markets showed more restraint overall, with risk sentiment fluctuating. Overall, positive vaccine news at the beginning of the week boosted risk sentiment. However, a resurgence in coronavirus infections, increased US pressure on China over a range of disputes, and mixed US corporate earnings reports all made investors hesitant to increase their positions significantly, leading them to hope for more fiscal stimulus measures.
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2020-07-18 20:36
FX168 Finance News (Hong Kong) Financial Market Review: July 13-17 This week, the confrontation between China and the US further escalated. Major progress was reported on vaccine development, and the A-share market experienced a sharp drop, while other markets showed more restraint, with risk sentiment fluctuating.
Overall, positive vaccine news at the beginning of the week boosted risk sentiment. However, a resurgence in coronavirus infections, increased US pressure on China over various disputes, and mixed US corporate earnings reports prevented investors from significantly increasing their positions, leading them to hope for more fiscal stimulus measures.
Foreign Exchange Market: The US dollar fell sharply this week, rising only on one of the five trading days. It continuously fell from above 96.50, breaking below the key 96 level, and finally closed at 95.98, down 0.7% for the week, technically breaking below the key 200-week moving average support. The weakening dollar was partly due to the rise of the euro, as the market expects the EU to reach an agreement on a comprehensive rescue plan to limit the damage of the coronavirus pandemic to the eurozone economy.
The euro/dollar pair performed strongly this week, falling only on one of the five trading days. It rebounded strongly from above the 1.13 level, breaking through the key 1.14 level, reaching a high of 1.1452, up more than 100 points for the week, and breaking through the key 200-week moving average. Meanwhile, the pound performed poorly, closing down for the week, ending its two-week winning streak, breaking below the key 1.16 level, and falling to a low of 1.2480 before closing near 1.2560.
Global Stock Markets: The A-share market experienced a sharp drop this week, with the Shanghai Composite Index falling 5% for the week, its largest weekly decline in nearly five months. The Shenzhen Component Index, the SME Board Index, and the ChiNext Index all fell more than 4%.
Escalating US-China Tensions: Significant developments in Hong Kong, the South China Sea, and civil liberties…
US-China relations have become increasingly tense amid a continued surge in US coronavirus cases, with conflicts intensifying on multiple fronts.
This week, the US increased pressure on China over a range of disputes, including civil liberties, technological acquisition, and territorial claims. Some analysts have described this as a new Cold War.
Technological Decoupling Intensifies
Regarding Huawei: According to CNBC and Reuters, US Secretary of State Mike Pompeo said at a press conference on July 15 that the State Department will impose visa restrictions on some employees of Chinese technology companies like Huawei that provide material support to regimes that violate and trample on human rights around the world.
Pompeo also said, "Global telecommunications companies should all introspect: If they do business with Huawei, they are doing business with human rights abusers."
When asked about British Prime Minister Johnson's order to completely remove Huawei's equipment from Britain's 5G network by the end of 2027, Pompeo also said that getting Huawei out of telecommunications infrastructure "the sooner the better."
Most Provocative Action Since the Trade War! US Plans to Ban CCP Members and Their Families from Entering the US
The New York Times reported on July 15 that the Trump administration is considering a comprehensive ban on travel to the US for members of the Chinese Communist Party and their families.
The New York Times report states that the Trump administration is considering a comprehensive ban on travel to the US for members of the Chinese Communist Party and their families, a move that would almost certainly provoke retaliation against Americans seeking to enter or remain in China, further escalating tensions between the two countries.
South China Sea Dispute Reignited! US Reportedly Increasing Activity
US military ships and aircraft have been active in the South China Sea this week. On July 17, two rare US aircraft types were reported to have appeared in the South China Sea simultaneously, while a US dual-carrier strike group returned to the South China Sea. This follows a strong statement from the US Secretary of State on the South China Sea issue.
The US Navy's Pacific Fleet announced on Friday that a dual-carrier strike group, consisting of the USS Nimitz and the USS Ronald Reagan, returned to the South China Sea on Friday. This is the second time in recent weeks that this dual-carrier fleet has entered the area. The two fleets last conducted missions in the area from July 4 to 6.
Beijing strongly protested the US Navy's recent exercises in the South China Sea. Chinese Foreign Ministry spokesperson Zhao Lijian said that the large-scale US military exercises were "a show of force and completely ill-intentioned." He also stated that the US actions are intended to "undermine relations between countries in the region, promote militarization of the South China Sea, and undermine peace and stability in the South China Sea region."
Trump Signs Hong Kong Autonomy Act, Revokes Hong Kong's Special Status
On July 14, US President Trump announced at the White House that he had signed the Hong Kong Autonomy Act and signed an executive order to revoke Hong Kong's special status.
The Ultimate Anti-Epidemic Weapon is About to Appear?! Vaccine Development Enters the Final Stage
Although tensions between China and the US and the resurgence of coronavirus infections have unsettled investors, major progress in the development of the ultimate anti-epidemic weapon—the vaccine—has given the market a glimmer of hope in the dark tunnel.
US researchers said on Tuesday that an experimental coronavirus vaccine from Moderna showed it was safe in an ongoing early study, with all 45 healthy volunteers showing an immune response. The vaccine was developed by scientists at the US National Institute of Allergy and Infectious Diseases (NIAID), led by Fauci.
Market Outlook for Next Week
Looking ahead to next week, the market will continue to monitor the spread of the epidemic, especially in the US, where daily new cases have exceeded 70,000, setting new records.
The resurgence of coronavirus infections has forced California and other states to shut down again, raising concerns about the continued impact on the US economy and labor market.
In terms of economic data, Next week's data will be relatively dense, with Purchasing Managers' Indices (PMI) of major economies being a key focus.
Specifically, Monday will focus on Germany's June Producer Price Index; Tuesday will see attention on Japan's June nationwide consumer price index and Canada's May retail sales; Wednesday will bring Canada's June CPI and the US June NAR seasonally adjusted existing home sales; Thursday will focus on the US initial jobless claims and the US Conference Board Leading Index for June; Friday will be data-heavy, with important PMI data from Europe and the US, including the preliminary July Markit Manufacturing PMI for France, Germany, the Eurozone, and the UK, as well as the preliminary US June Markit Services and Manufacturing PMI.
Regarding central bank activities, The Federal Reserve will enter its pre-rate decision blackout period next week, so central bank activities will be relatively quiet. We can look to the minutes of the Bank of Japan's June monetary policy meeting and the minutes of the Reserve Bank of Australia's July monetary policy meeting.
Regarding financial events, The market will continue to monitor further developments between China and the US, as well as vaccine progress.
This week, the US increased pressure on China over a range of disputes, including civil liberties, technological acquisition, and territorial claims. Some analysts have described this as a new Cold War.
Regarding vaccines, Moderna's mRNA vaccine has been highly successful in the phase 1 and 2 clinical trials on COVID-19 patients. The final phase (phase 3 clinical trial) is expected to begin on July 27th, with approximately 30,000 US participants expected, and conclusions are expected by the end of the year.
On July 16, the Abu Dhabi Government Media Office announced on Twitter that UAE experts, together with Chinese partners, have been the first globally to enter the third and final phase of clinical trials for a COVID-19 vaccine.
The vaccine developed by BioNTech and Pfizer will also undergo phase 3 clinical trials on 30,000 people; while the Oxford University vaccine, after testing on 1,000 people, successfully produced antibodies and killer T cells to fight the virus.
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