GENEVA — The US indices extended their advance, as investors chose to concentrate on improving and mostly better than expected economic data rather than the alarming rise in COVID-19 cases in the US and warnings that the situation may be getting out of control. The US house price index rose more than expected in May and the consumer confidence printed a significantly better number in June. But the rising uncertainties regarding the pace of business reopening are coupled with an unhealthy rising pattern in new COVID-19 cases in many US states. Therefore, we may see the optimism in recent data hitting back investors in the coming months as the public health recovery doesn't seem to be on the right path just yet. Elsewhere, the Australian manufacturing PMI hinted that the economy stepped in the expansion zone with a reading above the 50 mark in June. In Japan, the Tankan manufacturing index came short of expectations, but the manufacturing PMI beat the forecasts, though remaining near a relatively low 40 mark, suggesting that the activity in Japan continued contracting in June. The Korean imports and exports both slumped more than 10% in June, but the trade surplus finally came close to a pre-crisis level of 3.67 billion won. Sentiment in Asian equities was mixed. The Nikkei eased 0.20%, as the ASX (+0.59%), Hang Seng (+0.52%) and Shanghai's Composite (+0.91%) recorded gains. Activity in European futures hint at a flat open on Wednesday, as investors look for strong PMI prints, ideally above the 50-expansion mark for June. Solid PMI data should reinforce the European recovery story and give a positive spin to the euro that has been losing momentum against the US dollar on the recent inability to carry the bullish trend above the 1.13 mark. The short-term outlook in euro remains tilted to the upside and price retreats below 1.12 should continue attracting dip-buyers on the bet that the approval of a 750-billion-euro fiscal rescue package in the coming days could give the euro the most needed boost to clear the 1.13 resistance. Sterling continues flirting with its 100-day moving average (1.2390) as investors expect a manufacturing PMI print above the 50 mark as well. But the services make up to 80% of the British economy, therefore the Friday's figure will likely set the tone for the investor sentiment in Britain. In the US, the ADP employment report is due today. The US economy may have added 3 million private jobs in June. Given the extraordinary times, the consensus figures could significantly diverge from the real numbers. Though we may see a divergence by couple of thousands, or even millions, a positive jobs figure should keep investors on track for further risk taking, while a negative surprise would hit the sentiment as these numbers will likely get worse in the coming month due to a halted or slower reopening in businesses to contain the virus contamination. Anyway, the FOMC minutes due later today will certainly reveal a cautious economic outlook for the US and the global economy in the foreseeable future after the Summary of Economic Projections revealed the expectation of a high unemployment, low inflation and flat rate environment through 2022. The market will be watching any hint regarding the extension of the Fed toolkit, especially any discussion on the yield curve control would be of interest for investors hoping for more monetary support from the Fed. More support means cheap liquidity and a further rally in risk assets regardless of the underlying data and news. Gold extends its strength to $1,685 per oz on the back of what looks like an unfunded optimism in risk assets. WTI crude remains bid a touch below the $40 mark after the API data showed an unexpected 8-million-barrel slump in US oil inventories last week. The more official EIA data is due today and could confirm a fall in US inventories. On the demand side, the expectations are clouded by mixed news regarding the COVID progress. Slower gains are expected above the $40 mark. — The writer is senior analyst at Swissquote Bank
