Top 5 Things to Know in the Market on Friday, July 10th

By Geoffrey Smith

Investing.com -- China’s markets pause for breath as the U.S. steps up sanctions against its officials, but new economic data point to an ongoing recovery. The U.S. registers another record high for new cases of Covid-19 and the IEA warns that the situation could hit oil demand for the rest of the year. Industry rebounded sharply in France and Italy as lockdowns lifted. Here’s what you need to know in financial markets on Friday, July 10th.

1. Chinese markets ease off

China’s stock frenzy eased off as state banks reportedly cut their purchases, sending a signal that was dutifully followed by the army of retail traders that has piled in to the market in recent days.

The Shanghai Shenzhen CSI 300 stock index fell 1.8% but has still gained more than 14% in the first 10 days of this month. That’s come against the background of an economic recovery that is building momentum (new loans rose to their highest in three months in June), but also in the context of increasingly clear antagonism between China and the West.

The U.S. sanctioned the top regional official in the western province of Xinjiang on Thursday, and also approved an expensive upgrade to Taiwan’s air defenses.

The yuan edged back to 7.01 to the dollar.

2. U.S. virus cases hit another new record; deaths rise

The U.S. posted a record 63,000 new cases of Covid-19 on Thursday according to Johns Hopkins data.

Texas, California and Florida all recorded new record highs for deaths, while Arizona posted its highest number of new infections in six days. Harris County, which includes Houston, and Miami-Dade both reported increasing use of intensive care facilities.

The state of Nevada reimposed restrictions on indoor dining and bars, while Kentucky joined the list of states requiring masks to be worn in public spaces.

Further afield, Hong Kong closed its schools in response to a cluster of new cases discovered in recent days, while Australia’s second city Melbourne remains under quarantine.

3 Stocks set to open lower

U.S. stock markets are set to open lower again as the spread of the coronavirus across much of the south and west casts further doubt on the economy’s ability to sustain its rebound.

By 6:30 AM ET (1030 GMT), the Dow 30 futures contract was down 114 points, or 0.5%, while the S&P 500 futures contract was down 0.4% and the Nasdaq 100 futures contract was down 0.2%.

Stocks in focus later may include HP (NYSE:HPQ), the world’s biggest maker of PCs, after data showing a surge in PC sales in the second quarter as people geared up for more working from home. BioNtech (NASDAQ:BNTX) and Pfizer (NYSE:PFE) may also see some interest after the former’s CEO told The Wall Street Journal that their experimental drug for treating Covid-19 may be available by December.

In Europe, stocks were on course to end the week lower as updates from brewer Carlsberg (OTC:CABGY) and duty-free shop operator Dufry (OTC:DUFRY) signalled a hard slog ahead.

4. France, Italy factory output rebounds sharply

The economic rebound in Europe looked a little more secure after both France and Italy posted big rebounds in industrial production in May.

French output rose 19.6% in the month, while Italy – which had experienced a sharper drop because of the intensity of the epidemic in its most industrialized provinces – registered a 42.1% rebound.

The numbers were both well ahead of expectations and compensate somewhat for surprisingly weak data out of Germany earlier this week.

Elsewhere, the EU’s Council President Charles Michel proposed a compromise to break the deadlock in negotiations on the proposed 750 billion-euro recovery fund, which will increase the amount of transfers between states to unprecedented levels.

The euro rose 0.1% to $1.1297.

5. IEA warns on oil demand

Crude oil prices fell to their lowest in nearly two weeks after the International Energy Agency warned of risks to its demand forecasts from the spread of the coronavirus in its latest monthly report.

“The large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside,” the IEA said.

The Paris-based agency nonetheless revised its forecast for average oil demand upward by 400,000 barrels a day to 92.1 million b/d, to reflect the fact that consumption had fallen by less than it previously estimated in the second quarter.

By 6:40, U.S. crude futures were down 2.0% at $38.81 a barrel, while the international benchmark Brent was down 1.8% at $41.59 a barrel.

Related Articles

Cash flows into China funds fuel fears of 2015 boom-bust repeat

Spain's Calvino says one country broke pledge in Eurogroup vote

Britain committed to agree principles on Brexit deal in July talks