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Top 5 Things to Know in the Market on Friday, July 3rd

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imageEconomy7 hours ago (Jul 03, 2020 06:55AM ET)

(C) Reuters.

By Geoffrey Smith

Investing.com — Emmanuel Macron reshuffles his government after painful losses in regional elections at the weekend. The U.K. prepares to reopen its pubs, hotels and restaurants, but European markets can’t shake concerns about the coronavirus across the Atlantic, where the U.S. continues to post over 50,000 new cases a day. India steps up its retaliation against China in the wake of last month’s border dispute and oil weakens amid bickering over compliance with the OPEC+ deal on output cuts. With U.S. markets closed for the Independence Day holiday, here’s what you need to know in financial markets on Friday, July 3rd.

1. Macron ditches government after regional poll loss

France’s Prime Minister Edouard Philippe resigned along with all his government, paving the way for President Emmanuel Macron to set a new policy course with two years of his term remaining.

A government reshuffle had been expected in the wake of heavy defeats across France for Macron’s La Republique en Marche movement in local elections at the weekend. Philippe had put himself in the departure lounge by running for and winning the position of mayor of Le Havre.

All the same, the resignation of the entire government is a surprise. Having gained the presidency by cannibalizing France’s political center, it seems likely that with his new government, he will try to drain support away from the country’s Green party, which was the main winner of Sunday’s elections.

2. Lockdown is over – let’s go down the pub

The U.K. will reopen its pubs, restaurants and hotels at the weekend, in a major test of its ability to keep the coronavirus pandemic under control.

New infections are running at one-tenth of the level they were at in early May, but fears of a second wave have increased this week as the government was forced to put the city of Leicester back in lockdown, while a cluster of infections at a meat-packing factory in Merthyr Tidfil in Wales has also been observed.

The pound was broadly stable at $1.2450 and at 1.1088 euros.

3. Stocks turn lower despite strong PMIs

European stocks turned lower after a positive start, as better-than-expected surveys of the service sector failed to sustain the optimism generated by the U.S.’s strong close on Thursday.

By 6:30 AM ET (1030 GMT), the Stoxx 600 benchmark index was down 0.6%, but was still on course for a gain of over 2.1% for the week. The German DAX was down 0.6% while the U.K. FTSE 100 was down 1.0% and the French CAC 40 down 0.9%.

Concerns about the spread of the coronavirus in the U.S., which posted a second straight day of over 50,000 new infections on Thursday, continue to weigh on the market, fed by suspicions that Thursday’s employment report may have flattered the ongoing labor market reality.

Earlier, consultancy IHS Markit had said its composite purchasing managers index for the euro zone rose to 48.5 in June, above expectations but still below the 50 level that signals growth.

4. India steps up retaliation against China

India stepped up its response to China in the wake of a lethal clash between the two country’s troops in a disputed border region last month.

The government is planning to impose high tariffs on imports of power equipment, minister Raj Kumar Singh was reported by Bloomberg as saying. That’s a sector where Chinese goods, such as solar modules, are currently dominant.

India last week banned a slew of Chinese-developed apps, including short-form video service TikTok and messaging service WeChat. Prime Minister Narendra Modi has also called for the country to step up substitution of Chinese imports. China was India’s biggest source of imports last year, and also the source of $164 billion in foreign direct investment.

5. Oil weakens on OPEC+ bickering

Oil prices weakened but remained above $40 a barrel after Angola warned that it wasn’t ready to bring its output into line with quotas agreed under the OPEC+ pact on output restraint, at least until the fourth quarter.

The phased restoration of crude supply to the global market, as foreseen under the pact, is dependent on countries that have over-produced compensating for that in the next few months. Saudi Arabia reportedly threatened last month to renew this year’s price war by undercutting sales to Angola’s clients if it didn’t comply.

By 6:45 AM ET (1045 GMT), U.S. crude futures were down 1.2% at $40.15 a barrel, while the international benchmark Brent was down 1.3% at $42.59.

Top 5 Things to Know in the Market on Friday, July 3rd