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Chinese Shares Rip And Dollar Dips

Published 06/07/2020, 10:12
Updated 25/04/2018, 09:10

“The policy of being too cautious is the greatest risk of all.” – Jawaharlal Nehru

Shares

Chinese shares are shooting higher on optimism around the economic reopening and policy stimulus in China. The CSI 300 has added 5% on top of the 5-year high reached Friday. Shares in Hong Kong have reversed the entire March decline.

European markets have opened higher, bolstered by a return to growth in Germany factory orders, albeit at a slower pace than expected.

Cyclical shares are leading the rally on the FTSE 100 with homebuilders and banks leading the way. That includes Lloyds (LON:LLOY) where CEO Antonio Horta-Osario announced he will step down.

Forex

The Chinese yuan is getting a lift alongside Chinese equities. USD/CNH is trading on a 7.03 handle at its lowest level in 3 ½ months.

The US dollar is almost universally lower since the strong payrolls surprise on Thursday kept hopes for the global economic revival alive.

AUD/USD is again testing 0.70 – with investors brushing off the re-closed borders in the Australian state of Victoria.

Commodities

Gold is steady with the spot price near $1770 per oz and futures close to $1800. Precious metals are laying low amid the rally Chinese equities but the price is stable thanks to the weakness in the US dollar.

Oil prices are chasing equities higher on the same optimism that the economic recovery will expand demand for fuel. Both Brent and WTI futures have topped their June peaks to be at the highest levels since the Russia-Saudi price war in March.

Chart

Shanghai Composite Index Weekly Chart

The Shanghai Composite index is breaking out to the topside of a long term triangle pattern. It appears a long term bottom has been established at 2650 support.

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