Top 5 Things to Know in the Market on Wednesday, July 8th

By Geoffrey Smith

Investing.com -- Reports of fresh U.S. action against China over Hong Kong hits HSBC but not the Hang Seng or the HK dollar. U.S. coronavirus cases topped 60,000 for the first time on Tuesday as President Trump leaned on schools to reopen in the fall. Stocks are set to open mixed after Tuesday's losses on fears that a second wave could cap the economic rebound. Allstate (NYSE:ALL) is to buy National General insurance for $4 billion. Spot gold prices top $1,800 for the first time since 2011 and the U.K. announces another round of fiscal stimulus. Here's what you need to know in financial markets on Wednesday, July 8th.

1. Hong Kong reports hit HSBC but not the $HKD

The U.S. is looking at further ways to punish China for its perceived violation of Hong Kong’s autonomy with a new national security law that greatly expands the powers of mainland security organs in the former British colony.

Bloomberg reported that aides to Secretary of State Mike Pompeo are looking at ways to undermine the Hong Kong dollar’s peg to its U.S. counterpart, but the agency reported that concerns about the potential market instability it would trigger are a powerful disincentive.

HSBC Holdings (LON:HSBA) shares fell by the most in more than two months amid concerns that the U.S. could limit the access of Hong Kong banks to dollars. HSBC gets more than two-thirds of its profits from Hong Kong and the adjoining Pearl River Delta. The Hong Kong dollar was stable, however, and the Hang Seng stock index rose another 0.6%.

2. U.S. virus cases hit new record high

The U.S. posted over 60,000 new cases of Covid-19 for the first time, with the state of Texas accounting for over 10,000 of them.

The World Health Organization’s executive director Mike Ryan said that it wouldn’t be surprising if the global death count starts to rise again, given the virus’ spread not just in the U.S., but also in countries such as Latin America and India.

San Francisco delayed the restart of indoor dining on Tuesday, while Ohio introduced a mask requirement in the counties covering Cleveland and Cincinnati.

President Donald Trump said on Tuesday that he would pressure primary and secondary schools in the fall, which would have the consequence of allowing more parents to return to work. The federal government hasn’t issued any guidance on how to ensure schools can be reopened safely yet.

3. Stocks set to open mixed; Allstate to buy National General

U.S. stocks are set to open flat to lower after breaking a five-day winning streak on Tuesday over concerns that the spread of the coronavirus will crimp the economic rebound.

By 6:30 AM ET (1030 GMT), the Dow Futures contract was down 33 points or 0.1%, while S&P 500 Futures were down less than 0.1% and Nasdaq 100 futures were up 0.2%.

European stocks were also mostly lower but Chinese indices continued to rise.

Bed Bath&Beyond (NASDAQ:BBBY) will report fiscal first-quarter results after the closing bell. Also in the spotlight will be insurance giant Allstate (NYSE:ALL), which has agreed to buy rival National General (NASDAQ:NGHC) for $4 billion in cash.

4. Gold hits nine-year high

The spot price for gold bullion rose above $1,800 for the first time in nearly nine years as fears of a second wave of the pandemic and expectations of easy central bank policy continued to drive flows into perceived safe haven assets.

According to the World Gold Council, gold-backed ETFs had record net inflow of $40 billion in the firs half of 2020. In June alone, they added 104 tons of gold, taking global holdings to all-time highs of 3,621 tons.

Federal Reserve Richard Clarida and San Francisco Fed President Mary Daly stressed that the Fed still has options to increase monetary stimulus in appearances on Tuesday, lending credibility to expectations of what Citigroup (NYSE:C) analysts called “incessant” Fed support.

Elsewhere, European Central Bank President Christine Lagarde indicated in an interview that the ECB could be on hold for some time after nearly doubling the size of its pandemic-focused bond-buying program.

5. U.K. to announce more stimulus

The U.K. government is expected to announce further fiscal stimulus measures in a ‘mini-budget’ from Chancellor of the Exchequer Rishi Sunak.

The measures expected to be announce include 3 billion pounds for improving the energy efficiency of homes and commercial property, 1.5 billion for supporting the arts and entertainment industry, and 2 billion pounds in wage subsidies for the young. There have also been reports that transaction taxes levied on home purchases will be partially suspended in an effort to revive the U.K.’s housing market.

The announcement comes a day after Prime Minister Boris Johnson told German Chancellor Angela Merkel that the U.K. was prepared to accept a ‘no deal’ scenario on trade with the EU at the end of the current post-Brexit transition period at the end of the year. The pound was down 0.1% at $1.2525 and 1.1113 euros.

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