(29 JUNE 2020)DAILY MARKET BRIEF 1: Risk-off traders in charge: stocks down, gold up.
Asian stock markets slipped at the weekly open, following a deeply red close in New York after the rising worries of a second wave contagion took a toll on investment sentiment.
This time Nasdaq suffered as much as its peers, as the Facebook shares dived 8.32% on news that an increasing number of companies will stop advertisement spending on the social media platform pointing at inappropriate content. These companies include giants such as Starbucks, PepsiCo, and Levi’s. Provided that Facebook earns a big part of its revenues from advertisement – up to $17 billion last quarter only, the latter decision will probably have a dramatic impact on Facebook’s future revenues, hence its stock valuation.
In other discouraging company news, Chesapeake Energy, one of America’s leading shale oil extractors, filed for bankruptcy. The coronavirus lockdown has been fatal for the company which has been already struggling with a huge debt burden since years. Chesapeake’s bankruptcy reminded oil stock investors that some of these companies are now living on the edge, as worries that a second wave contagion may lead to a slower recovery in global demand and a prolonged period of depressed market conditions.
On the other hand, the Chesapeake’s fall is positive news for a lower global glut, as the shale-oil giant has partly been responsible for the rapid buildup in global inventories for years and had a negative impact on oil prices. Therefore, we may see a limited retreat in WTI, though the risk-off sentiment across the market should encourage a renewed test of the $37 per barrel support and push for a deeper correction towards the $35 mark.
Nikkei lost more than 2% in Tokyo as retail sales fell 12.3% y-o-y in May, more than analyst estimates. The ASX (-1.94%), Hang Seng (-1.20%) and Shanghai’s Composite (-0.81%) edged lower.
Activity in European futures hint at a morose start to the week in the old continent, as well. The FTSE 100 could feel the pinch of a renewed sell-off in energy space, as rising fears of a renewed Covid sell-off mixed with the pessimism following Chesapeake’s bankruptcy will likely weigh on global energy stocks.
By Ipek Ozkardeskaya
