American stock markets fell today, as European stock indices witnessed a significant decline due to fears of a second wave of the Coronavirus pandemic. This potential return to crisis levels of infection could delay the global economic recovery that has been anticipated – or hoped for – in second half of the year.
After a week full of major events, this week comes with a lot of data and events. More than one central bank will be meeting this week to decide on interest rates, but most of the attention will be directed towards the FOMC with the possibility of a rate hike during this meeting. Next to these meetings will be some important economic data that will also play a role in market movements.
Unlike last week, the beginning of this week was full of important events that had an impact on market movements. It was the beginning in the Middle East when Saudi Arabia, Egypt, the UAE and Bahrain cut off diplomatic relations with Qatar accusing them of supporting terrorist organizations. 12 countries were with this decision. Sheikh Sabah al-Ahmad, the Emir of Kuwait tried to calm the situation, but his attempts failed, amid calls from the American side to end the siege on Qatar.
Today is filled with many important economic and political events that have attracted the attention of the markets over the past few days. As the markets have been keeping an eye on what will happen during this busy day with all these data since the beginning of this week.
The Australian dollar shrugged off data indicating that Australian economy slowed in the first quarter of this year, following strong growth in the last quarter of 2016, but reassured markets that the economy grew for the second straight quarter after contracting in the third quarter of 2016. The Australian dollar reached the highest level against the US dollar since April 24 at 0.7566 after breaching an important resistance at 0.7512.
The US dollar fell today to its lowest level in seven months, in addition to the decline of US stocks at the beginning of trading, in light of markets stay tuned of several important economic events this week.
The most prominent event today were the severing of diplomatic relations with the State of Qatar by Saudi Arabia, Egypt, the United Arab Emirates, Bahrain, Yemen and Libya accusing it of supporting terrorist organizations and opening the door to the worst years of dissension among some Arab countries. This decision has had a significant impact on the movements of the Gulf stocks, especially the Qatari bourse, which its main index lost more than 7% of its value, and had an impact on oil prices, which fell during trading today being traded near the lowest levels last Friday at 47$ per barrel.
US employment data dominated the events last week, but disappointed markets. This week, the markets are heading towards the UK, where the general elections will be held next Thursday and the results of those elections will play a role in the process of Brexit negotiations with the EU.
The beginning of the week was largely quiet, and there were no noticeable or strong moves in light of the official holidays of some markets. The highlight was the testimony of Mario Draghi, Governor of ECB before the European Parliament, who stressed the need for the stimulus program as inflation remained far from the desired levels and it is too early to talk about the beginning of tapering.
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