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US open: Positive start to trading following sharp sell-off in previous session

By Iain Gilbert

Date: Wednesday 08 Jul 2020

US open: Positive start to trading following sharp sell-off in previous session

(Sharecast News) - Wall Street trading got off to a positive start on Wednesday following the sharp sell-off seen during the prior session.
As of 1525 BST, the Dow Jones Industrial Average was 0.60% higher at 26,045.55, while the S&P 500 was 0.66% firmer at 3,166.04 and the Nasdaq Composite came out the gate 1.15% stronger at 10,462.64.

The Dow opened 155.37 points higher on Wednesday, clawing back some of the losses recorded in the previous sessions as concerns around the global economic outlook due to the Covid-19 pandemic weighed on sentiment.

While those same concerns also seemed to be in focus ahead of the bell on Wednesday, with investors struggling to shake off fears around the rising number of new Covid-19 cases across the US, companies set to benefit from the reopening of the US economy like Carnival, Norwegian Cruise Line and Royal Caribbean were all higher at the opening bell.

The positive moves came after White House economic advisor Larry Kudlow tried to calm fears around the coronavirus' impact on the US economy.

"No one's denied we've had a huge jump in cases in certain hot spots," Kudlow said on Wednesday.

However, Kudlow noted "One cannot rule out - there's a lot of scenarios here. We really don't have any real experience in econometrics modelling for this type of things. Because so much is generated by the virus."

Kudlow added that the US had created 8.0m new jobs over the last couple of months, highlighting that "virtually every piece of data" showed a "V-shaped recovery".

Discussing the economic impact of the recent spike in new cases across the US, Oanda's Craig Erlam said: "The use of targeted lockdowns will no doubt alleviate the pain but a number of states in the US, in particular, seem to be struggling with the spread.

"The Fed has repeatedly reiterated that it stands ready to act and Loretta Mester added her voice to those warning of a levelling off in the economic rebound as case numbers rise. This may prove to be supportive to these equity markets just as they're looking a little vulnerable and ensure the dips are still attracting buyers. I guess we'll soon see whether that's enough as the cracks are appearing at a time when there is a huge gap between stock markets and reality."

The total tally of confirmed cases of Covid-19 across the globe hit 11.8m on Wednesday, according to Johns Hopkins University, with the US easily leading the way with its 2.99m cases.

Also in focus, the White House was said to be looking at ways to undermine the Hong Kong dollar's peg to the US dollar as a potential way to hit China.

Markets.com analyst Neil Wilson said it was "probably not" a tactic that will be considered seriously or pursued by the administration, it was definitely one worth watching out for.

"If such a tactic were to be deployed, it could raise risks for Hong Kong banks to access dollars and we could feasibly see ripple effects across the FX space - albeit I don't see the US embarking on any kind of outright manipulation to weaken or strengthen the dollar," he said.

In macro news, following a brief pullback at the end of last month, US homebuyers returned to the mortgage market last week in order to take advantage of all-time-low mortgage rates. Mortgage applications to purchase a home increased 5% week-on-week and a much sharper 33% year-on-year, according to the Mortgage Bankers Association.

"Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment," said MBA economist Joel Kan.

"The average purchase loan size increased to $365,700 - also another high - as borrowers contend with limited supply and higher home prices."

Still to come, Fed head Raphael Bostic will deliver a speech at 1715 BST, while consumer credit change figures for May will be posted at 2000 BST.

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