Federal Reserve Chair Jerome Powell stressed the importance of keeping the coronavirus contagion contained as the U.S. economy bounces back from its deepest contraction in decades. The S&P 500 erased its June decline after a report showed that based on contracts signed last month, home sales surged 44.3%, compared to economists’ forecast for a 18.9% rise. The tech-heavy Nasdaq extended gains as Facebook Inc. wiped out its losses. The Fed chair struck an optimistic note as economic activity resumes although the epidemic showed few signs of abating as Arizona ordered the closure of bars and gyms, joining other sun belt states like Florida and Texas in reversing reopenings. Hiring is picking up, Powell noted, and spending is increasing, though 20 million Americans have lost their jobs. EU governments are poised to extend a travel ban for U.S. residents for at least two weeks, according to a draft of a decision set to be adopted today. The ban disrupting business and leisure travel seems unlikely to be lifted until U.S. authorities control the spread of the virus.
China’s slowing economy, mounting offshore defaults and a liquidity scare in government debt is showing Beijing’s ability to suppress swings in stocks despite concerns of a second wave of Covid-19 infections. Chinese investors are betting the rebound will continue, driving margin debt past 1.1 trillion yuan, the highest since January 2016. China’s top legislative body approved a landmark national security law for Hong Kong, seen as an attempt to quell dissent that risks U.S. retaliation and the city’s appeal as a financial hub. The Chinese yuan gained slightly after a survey showed China’s factory activity expanded at a stronger pace in June, beating expectations of slowdown from last month.
UK Prime Minister Boris Johnson will commit to spending on infrastructure to rebuild the coronavirus-ravaged U.K. economy in a major policy speech today. Balancing the books will have to wait until a recovery is secure, the prime minister will say according to extracts released by his office, such rejecting the idea of an austerity budget, a move adopted by the governing Conservative party after the 2007 recession. Meanwhile, a stringent lockdown has been imposed on the English city of Leicester following a local flare-up of the coronavirus just as Johnson attempts to nudge the United Kingdom back to normality with pubs and more non-essential businesses allowed to open this weekend. Sterling traded at $1.2285, after sliding to a one-month low of $1.2252 on concerns about how Britain's government will pay for the new program while there are also doubts about whether Britain will seal a trade pact with the EU as little progress has been made in agreeing on Britain’s future relationship with the bloc.
Safe-haven currencies were on the backfoot today as hopes of an economic turnaround boosted riskier assets like the Aussie and yuan. The dollar has climbed 0.1% to 107.67 yen, having touched a three-week high of 107.885 in the previous session, capped by its 100-day moving average. The safe-haven Swiss franc eased to 0.9513 per dollar and 1.0679 per euro. The euro stood at $1.1225, having retracting from yesterday’s gains. The offshore yuan gained 0.15% against the dollar while gold was mostly flat, slightly backtracking from this week’s opening.