Stock markets: the Peak of the panic passed

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Develop Chinese stocks rebound on Friday: they were supported by hopes for progress in trade talks between China and the United States. Telephone conversation between leaders of the two largest economies in the world showed that the possibility remains for the settlement of disputes.
Asian indexes added more than 4% since the beginning of the week, what is the strongest rally in nearly two and a half years. At the same time, we can hardly hope for an easy progress, because earlier this year there were many negotiations at different levels, and the situation is only worsened. The growth of markets in this context clearly demonstrates the weakness of the Asian market, rather than any optimism. Despite the rebound, the blue-chip index of Shanghai stock exchange China A50 remains within the range of the last 4 months.
Futures on the S&P500 added 0.8% since the beginning of the day and more than 4% since the beginning of the week. The fourth day of growth index returned him to reach the 200-day mA, reflecting a restoration of confidence in the prospects of the American economy (and this is despite a number of weak statements of the IT companies!).
Thursday the focus on the foreign exchange market was the British pound. Its growth inside the day exceeded 1.7%, which is the sharp increase over the last year. As a result, the GBPUSD came back to the key level of 1.30. Support for the sterling has provided as news around Brexit and hints Bank of England that, if the withdrawal of Britain from the EU will run smoothly, it will accelerate the rate hike.
Today, the focus of markets will be Nonfarm Payrolls from the United States: it is expected a strong employment report. A month earlier, traders were surprised and discouraged by the increase in new jobs only 134 thousand, which was forced to question the sustainability of economic growth. Additionally the situation was aggravated by the hawkish tone of the fed. However, over the past month we’ve seen a lot of positive signals that fully dispelled the fears of the aggressive rate hike.
The strong data on employment growth is able to suppress the demand for the dollar as a protective asset, taking away part of the gains of October. In this case, the shares may receive an additional impetus to the development of rebound.
At the same time, signs of faster wage growth may support the U.S. currency on speculation. Another reason it remains the policy of the fed: it has become clear that aggressive tone will continue. In order to keep inflation under control. In such a scenario, the stock markets can return the caution, erasing the recent bounce.
Alexander Kuptsikevich,
Senior analyst,