The $8 trillion surge in global stocks is the result of a near 17% leap in MSCI's world index. That is challenging the dot.com boom days of 1997 as the best H1 in its near 40-year history.
The S&P 500 is up 18.4%, the Euro Stoxx 50 is up 19.5% and China’s CSI 300 has jumped 30.3%, which is a lot of what it lost this year, even factoring in that it has given back 5% since the trade tensions erupted again in early May.
Oil
Oil has raced almost 25% higher following its best first quarter since 2009. That has helped Russia's rouble top the currency charts and though industrial metals have buckled badly in Q2, safe-haven gold is now scaling a six-year high.
Gold
Gold was on track for its biggest sell-off in more than a year as relatively positive results from the G20 summit in Japan triggered a retreat from defensive assets.
G20 meeting
Markets reacted positively to signs that the trade and technology war between the US and China might be easing up, after Donald Trump and Xi Jinping agreed to resume talks and hold off on further tariffs at the G20 over the weekend.
ECB seen cutting rates in September
The European Central Bank is expected to flag this month that it’s ready to reduce interest rates and then deliver a cut in September as policy makers step up their efforts to revive the eurozone economy. The push for additional support was set in motion by President Mario Draghi last week when he said more stimulus will be needed if the outlook doesn’t improve.
He said prolonged uncertainty, largely driven by trade tensions, means the downside risks to growth and inflation have now materialized. It is likely that the Governing Council will change its policy language at its July 25 meeting to show that rates might fall. The current wording says they will stay at “present levels at least through the first half of 2020.”
Fed rate cuts
Heading into the weekend, futures traders had expected the US central bank to lower rates by about a percentage point in the coming year. The market had priced in a 100% probability of a quarter-point cut in July, with some observers even predicting a half-point reduction. While rate-cut expectations were damped today post the G20 meeeting, a quarter-point cut in July and around 1% of total reduction by end of next year still remains fully priced in.
Earnings season is upon us
Companies will soon start reporting results for the first half of the year. Traders will look closely at what the companies have to say about the next six months given the fact that markets are at an all time high.
Conclusion
President Donald Trump needs to cut a trade deal with China because his re-election prospects rest on keeping the stock market and the economy strong. He cannot afford to let that slip. He knows it. His political advisors know that. A year from now, we can’t be lower on the stock market than we are, and the US economy has to be better. So it’s up to Trump make a deal.
Disclaimer:
This article was issued by Kristian Camenzuli, investment manager at Calamatta Cuschieri at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.