Week in a Glance: earnings season, Chinese GDP, EU, OPEC and pan

20 ก.ค. 2020

The past week was exceptionally rich in all sorts of events: the start of the earnings season in the United States, meetings of the three leading world central banks (Banks of Japan and Canada, as well as the ECB), the OPEC + meeting, the EU summit, China's GDP, as well as news from Moderna, continued growth of bankruptcies in the United States; and much more.

Central banks decided to leave the parameters of monetary policy in the Eurozone, Japan and Canada unchanged. At the same time, the Bank of Japan has significantly worsened its own forecasts for economic growth.

The main positive news of the week can be considered information from Moderna about the next successful round of testing a vaccine against coronavirus, as well as statistics on China's GDP, which not only did not slip into a recession, but also showed results much higher than analysts' expectations (+ 3.2%).

But this positive is so far covered by pandemic news: the total number of cases in the world has exceeded 14.5 million with 600K+ deaths, and last week was characterized by new highs in the number of new cases, both in the world and in the United States. As a result, California (the largest US economy and the 5th largest economy in the world among all countries in terms of GDP) went into lockdown # 2.

The key event for the oil market was the OPEC + meeting. There will be no further record reduction of 9.7 million barrels per day. From August, the voluntary cuts will drop to 7.7 million barrels per day. And although OPEC tried to sweeten the pill (a number of countries will increase the size of reductions in order to fulfill the obligations violated in May-June, and Saudi Arabia promised not to increase exports in August), this news is generally negative for the oil market. So, this week we will be looking for points to sell oil.

We will also continue to sell in the US stock market. The earnings season, which kicked off last week, doesn't look as disastrous as it could have been. But the banks' reservation of billions to cover future loan losses suggests that businesses are preparing for a further deterioration in the situation. And there are enough reasons for this: if Congress does not extend payments to the unemployed and small businesses (the current aid expires next week), then the United States risks facing a real picture of the crisis. However, the continuing increase in the number of bankruptcies of large companies (retailers, restaurants, oil workers, etc.) suggests that the situation is already very negative.

Last week ended on a very minor note: the EU summit, at which the fate of the 750 billion aid fund was decided, failed again. This is a very serious blow to the euro. So today we will sell it against both the dollar and other currencies.