Published in


The Feeding Frenzy

The wall of worry continues to be climbed, and the relentless liquidity-driven rally continues.

7 Jul 2020


As of New York Close 6 Jul 2020,


U.S. Dollar Index, -0.43%, 96.75
USDJPY, -0.14%, $107.36
EURUSD, +0.56%, $1.1312
GBPUSD, +0.09%, $1.2496
USDCAD, -0.05%, $1.3540
AUDUSD, +0.46%, $0.6974
NZDUSD, +0.35%, $0.6558


S&P 500, +1.59%, 3,179.72
Dow Jones, +1.78%, 26.287.03
Nasdaq, +2.21%, 10.433.65
Nikkei 225, +1.83%, 22,714.44


Gold Spot, +0.61%, 1785.93
Brent Oil Spot, +0.75%, 43.05


The Chinese Yuan (-0.78%, 7.0130) on Monday recorded its best day against the Dollar since December as investors lapped up risky assets on growing expectations of a strong Chinese economic rebound and as glimmers of good news in U.S. data drove down demand for the safe haven Dollar. The move lower in the Dollar Index triggered a significant technical event called a death cross — in which the dollar index’s 50-day moving average crossed below its 200-day moving average — indicating the potential for a sell-off.

USD weakened modestly across the board, especially against the risk currencies such as AUD and NZD, on the day where risk assets were rallying hard.

U.S. The ISM Non-Manufacturing Index for June increased to 57.1% (consensus 49.0%) from 45.4% in May. A reading above 50.0% connotes an expansion in activity. June represented the first month of expanding activity since March.

Equity futures started out strong in early morning Asia despite a weekend of just bad news on the Covid-19 front (more cases in more places) and political front (divisive 4 July speech from Trump). The positive bias in equities was ignited by a front-page editorial in one of China’s state-run news outlets that implied that a “healthy bull market” was imminent. China’s Shanghai Composite surged 5.7% and the Hang Seng Index climbed 3.81% on Monday.

The U.S. stock market saw a noticeable bump after the ISM Non-Manufacturing Index for June returned to expansionary territory with a 57.1% reading (consensus 49.0%). The market was supported heavily by mega-cap, and momentum, stocks, including Amazon (AMZN 3057.04, +166.74, +5.8%) and Tesla (TSLA 1371.58, +162.92, +13.5%). S&P 500 rose 1.6% on Monday in a bullish start to the week, but it was the Nasdaq Composite (+2.2%) and Dow Jones Industrial Average (+1.8%) that outperformed today. The Nasdaq closed at another record high, while the Russell 2000 underperformed the large-cap indices with a mere 0.8% gain.

In the energy space, Dominion Energy (D 73.59, -9.10) shares fell 11.0% following a pair of noteworthy actions. The company agreed sell its natural gas assets to Berkshire Hathaway (BRK.B 182.72, +3.89, +2.2%) for $4 billion in cash, which will also assume $5.7 billion in debt, and announced the cancellation of the Atlantic Coast Pipeline that was jointly owned by Duke Energy (DUK 79.81, -2.03, -2.5%).

This was Warren Buffett’s first major deal during the pandemic, but it wasn’t as alluring as Uber (UBER 32.52, +1.84, +6.0%) agreeing to acquire Postmates for $2.65 billion.

Headlines about the daily record in new virus cases in the U.S. remained in the news, but the market remained steadfast in the view that growing cooperation in mask-wearing and increased testing would slow the outbreak. On a related note, Regeneron Pharma (REGN 627.25, +4.80, +0.8%) said it started a Phase 3 trial for its COVID-19 antibody treatment.


The chief executives of, Apple, Alphabet’s Google and Facebook will appear before a U.S. House of Representatives panel on July 27, the committee said in a statement on Monday.

Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Google’s Sundar Pichai and Apple’s Tim Cook will appear before the House Judiciary Antitrust Subcommittee as part of its probe into the companies, the statement said.

The U.S. Justice Department is also probing the big four tech platforms. Facebook and Amazon are also facing inquiries by the Federal Trade Commission, while U.S. states attorneys general are looking at Facebook, Apple and Google. Apple is being scrutinized for its App Store business, so-called “Sherlocking” of third-party apps and systematic removal of parental control apps. Cook will likely be pressed over recent App Store controversies, including a dustup over Apple’s customary 30% cut of in-app purchases and subscriptions.

COMMENTS/IMPACT: House Antitrust Subcommittee began investigating the four tech giants last spring, probing for answers through five public hearings and hundreds of written queries on how these titans have accumulated so much wealth and power, and whether they’ve done so through anti-competitive or other unlawful means. The Federal Trade Commission can sue companies to stop anti-competitive behavior, as well as take them to court or agree to a settlement that may include a financial penalty. It can also block mergers or acquisitions or even unwind acquisitions or mergers that have already been consummated.

This is a crucial theme to watch as big tech has been the one carrying the recovery and makes up a huge percentage of market capitalization in the U.S. If investors are spooked by any pursuit of the matter, all the fiscal and monetary printing to prop up the markets would have been for naught. This is a wing risk investors should be cognizant of.


Russia said on Monday it had stepped up patrols to stop people hunting marmots near its border with China and Mongolia after the countries reported possible cases of bubonic plague, which can be carried by the animals.

Authorities in Bayan Nur, a city in the Chinese region of Inner Mongolia, issued a warning on Sunday after a hospital reported a suspected case of the deadly disease.

The Chinese region forbade the hunting and eating of the large rodents and asked the public to report any suspected cases, as well as any sick or dead marmots. Neighbouring Mongolia also reported two cases of bubonic plague linked to people eating marmot meat in its western Khovd province last week.

Authorities in Russia’s Altai region, which borders Kazakhstan, China and Mongolia, said officials were patrolling the area to enforce a ban on hunting marmots and to warn people about the dangers, TASS news agency reported.

COMMENTS/IMPACT: The bubonic plague, known as the “Black Death” in the Middle Ages, is a highly infectious and often fatal disease that is spread mostly by rodents. Although vaccines against plague have been developed in the past, there is currently no plague vaccine that’s approved by the U.S. Food and Drug Administration. As if the world needed another disastrous event, 2020 will get even more harrowing if this should start to become an issue.


The Federal Reserve Bank of Boston said on Monday the Main Street Lending Program is now fully operational and ready to purchase eligible loans. The Main Street lending facility, which opened for lender registration in mid-June, is meant to extend easy credit to small and mid-sized businesses that cannot get it elsewhere.

The central bank tweaked its plan in response to many of those suggestions by lowering the minimum loan amount, making the program available to a wider range of businesses and introducing a proposal that would open it up to nonprofit groups.

So far 300 lenders have signed up to participate, Fed Chair Jerome Powell said last week. He also indicated the Fed was open to making further adjustments to the program.

COMMENTS/IMPACT: The Fed and government is doing whatever it takes to get money into the hands of businesses, even making adjustments to ensure that happens. One cannot expect a more accommodative policy or question the absolute resolve to bail out the economy in the bid to save jobs, quell social unrest and anxiety. The clear intentions project a reliable trajectory that the markets will be supported and the incessant money printing is not stopping in the near future, both are positive for the Nasdaq, Hard Assets (Gold & Silver) and the Risk Currencies (AUD & NZD).


European fund negotiations and Brexit talks eyed

Over in Europe, the EU will table a compromise proposal on the recovery fund to breach the gap between the nations that want to give out grants that don’t need to be repaid to the economies devastated by the virus, and those that prefer to give out loans. In short, any signs towards more grants would be a positive sign for EUR, while any signs for more loans would likely be negative.

Across the British channel, Brexit talks will resume in London, though it seems almost no progress has been made lately. The longer this deadlock continues, the greater the risks for GBP.


OVERALL SENTIMENT: An article in the Chinese press talking about a healthy bull market is important for the economy now more than ever and a report from the China International Capital Corp forecasting a doubling of the stock market in 5–10 years seem to set the stage that a stock market rally is something that the government is supporting triggered a feeding frenzy in the Shanghai and Hong Kong stock markets. Bloomberg highlighted that according to the Baidu index, the number of mainland commentaries and retweets containing the term “bull market” over the weekend was more than 10 times the average that is seen over the past 90 days.

This added to the already positive sentiment in the US stock market and helped push the Nasdaq to yet another record high. The wall of worry continues to be climbed, and the relentless liquidity-driven rally continues.


Stock Indices



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store