Stocks Lower Ahead of Chancellor's Summer Statement

The mood in the market remains depressed on Wednesday as coronavirus concerns coupled with geopolitical tensions drag on risk sentiment. Will Rishi Sunak be able to turn risk sentiment around?

Charts (5)

The mood in the market remains depressed on Wednesday as coronavirus concerns coupled with geopolitical tensions drag on risk sentiment. Equities across the board are out of favour whilst safe haven gold is consolidating just shy of $1800 after jumping 1% so far this week and hitting $1797, its highest level since 2012.

New daily US coronavirus cases dipped slightly at the start of the week. However, Tuesday’s figures have shown its premature to say that numbers are falling. COVID-19 concerns were further fueled by warnings from several Federal Reserve officials that rising coronavirus numbers in the US could jeopardize the economic recovery. The timing here of the rising numbers in the sunbelt is extremely important given that some stimulus programmes are due to expire soon.

US considers sanctions on Hong Kong & HSBC
Geopolitical tensions are also back in focus amid reports that the White House is toying with the idea of striking against the Hong Kong Dollar peg in retaliation for China’s national security law. Whilst the Hong Kong Dollar has shrugged off the reports, HSBC is under pressure as the Trump administration also considers sanctions against banks in the city.

HSBC is caught in a political tug of war between the US and China. Asia is the biggest regional contributor to HSBC income highlighting the importance of the region to the business. However, sanctions from the US would be extremely damaging. The share price in London is still down 40% year to date, reflecting the troubles at the bank, compared to Barclays, for example which trades -26% lower year to date.

Rishi Sunak’s Summer Statement in focus
The Chancellor Rishi Sunak is set to take centre stage as he delivers his Summer statement, outlining the economic stimulus package which he will implement to steer the UK economy through the coronavirus crisis. The focus is set to be on jobs, both the protection and creation of jobs as he attempts to pull the UK economy out of the deepest economic downturn in 300 years. 

In addition to jobs focus on business costs would be beneficial with immediate effect. More business rate relief, the pre-announced stamp duty holiday and targeted VAT cuts, particularly for the leisure and hospitality sectors would be well received. These measures could see house builders and leisure and hospitality stocks rally, whilst business rate cuts could see battered retail sector rise.

Should Rishi Sunak underwhelm, stocks, particularly on the FTSE250 could come under pressure among with the Pound. 

FTSE 100 Chart


More from FTSE 100

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.