US stocks have decided to move beyond the Fed’s commitment to the further loosening of policy and focus on the immediate weakness in the economy and the uncertain path forward.  Typically, after a FOMC meeting that has the Fed chief strongly signal rates are not going higher anytime soon, risk appetite would have some follow through momentum the next day.  Uncertainty about the path of the virus, lawmaker’s inability to show progress on the virus relief bill, and mega-tech cap earnings.  

The US economic recovery continues to show signs of weakness.  Labor market pressures should force lawmakers to get their act together and break the impasse over the fiscal virus relief bill.  The record fall with second quarter GDP puts an exclamation mark with the coronavirus recession. 


German employment and second quarter GDP data did not do any favors for the euro’s rally.  Germany’s record drop in GDP fuels extra concern that the rest of Europe might have a deeper slump. 

The July employment report in Germany was a small dose of good news. German unemployment fell by 18,000, the first decline in four months and much better than the expected 41,000 increase. 

Unemployment concerns are growing for Europe, but expectations are still high that rebound will be strong and outperform the US. The euro rally is taking a break but should still have its eyes set on the 1.2000 level. 


Oil prices are falling as doubts about the strength of the global economic recovery this quarter grow and as oversupply concerns return.  OPEC+ is growing concern that the crude demand pickup is slowing as large parts of the world continue to grapple with the coronavirus.  OPEC and allies will start to increase production in August and that should keep crude prices towards the lower boundaries of its recent range. 

Vopak, the world’s largest independent oil storage company also added to oversupply concerns yesterday after noting their tanks are still getting filled. If crude demand continues to show further signs of weakness, producers will have to look elsewhere for storage as Vopak’s capacity is fully rented out. Another historic oil price collapse is unlikely but oversupply risks will definitely keep crude heavy.

In the US, new cases are declining slowly, while hospitalizations have stabilized.  The death toll is rising and that is expected to continue for the next couple of weeks.  The virus is widely expected to make its return again in the fall and that will continue to put a cloud of uncertainty with the outlook for crude demand. 


After a 10% rally since the middle of the month, gold prices seem ripe for a pullback but safe-haven demand remains steady after a disastrous Q2 GDP reading, consistently high weekly jobless claims figures, partisan politics preventing progress toward virus relief bill on Capitol Hill, and nervousness about four giant tech earnings after the close. Gold is sinking alongside all risky assets but that should be short-lived. If a couple of the tech giants deliver downbeat earnings and comments on the outlook, a stock market selloff could drag gold even lower.

Gold’s bullish trend is intact but a healthy pullback just ahead of the $1900 level might be needed before breaking past the $2000 level. Virus uncertainty, election risks, a stalling recovery and no signs of the a slowing stimulus trade will have investors buy any dip in gold prices for the rest of the year.

By Ed Moya