US equities were stronger again on Tuesday, the S&P closing 0.4% higher after gains in Europe and Asia and oil down a bit after the API exacerbated intraday losses. The June preliminary PMIs helped, with greater increases in activity than May recorded globally, and much better print than expected in Europe.
But more troubling virus headlines contained the market enthusiasm as California recorded its most substantial daily increase on Tuesday, transmission rates in New Jersey are "creeping up", according to the state's governor, and Texas logged more than 5,000 cases in a single day for the first time.
Amid all that, White House infectious disease expert Anthony Fauci has noted that "the next couple weeks are going to be critical". But, on a brighter note, he stated that he’s cautiously optimistic a vaccine might be available by the end of the year.
Decent data overnight buoyed risk assets yet again, but the virus overhang continues to thwart bullish ambitions.
Gold hit fresh year-to-date highs on weaker USD and Covid-19 worries, despite a rise in 'risk-on' appetite, suggesting the rally can continue even with equities marching higher.
The USD is down and the gold market is higher, which is logical even though the USD and gold traded directionally together for much of this and last year. The same increase in risk appetite may be weakening the USD, which partly explains why gold is on the upswing.
Given the shift out of money markets funds as investors seek higher yields on the robust EFT flows, this money market outflow is undoubtedly finding its way into gold given that gold remains at the top of the must-have list for wealth managers around the world.
But its Covid-19, a weaker USD and geopolitical risks that continue stoking gold higher.
After a choppy 48 hours triggered a wave of USD weakness, the FX market seems very much inclined to echo the "risk-on risk-off" mood in equity markets this morning.
EUR-USD moved higher as French PMI readings pushed above 50 and EUR-USD moved higher. The GBPUSD is trading better on stable risk sentiment and nudge along as June's manufacturing PMI inches unexpectedly back above 50, and services beat consensus.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower