Friday, 29 May 2020

Market rally stalls after China moves ahead on HK security law

Markets were mixed on Thursday.

The Nikkei 225 surged 2.3 percent and the STOXX Europe 600 jumped 1.6 percent. However, the rally lost steam by the end of the day and the S&P 500 fell 0.2 percent.

US-China tension kept equities in check after China’s parliament on Thursday approved a decision to go forward with national security legislation for Hong Kong.

“There’s going to be some push back. No one was anticipating that in the immediate future,” said Ed Moya, senior market analyst at OANDA. “It could derail some of the reopening momentum we’ve had.”

Thursday, 28 May 2020

Markets rise despite US-China tensions amid “huge amount of liquidity”

Markets were mostly higher on Wednesday. The S&P 500 jumped 1.5 percent and the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, though, markets were mixed. The Nikkei 225 rose 0.7 percent but the Shanghai Composite fell 0.3 percent.

“Mounting US-China tensions bodes ominous for the global economy amid pandemic fragilities,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note after the US said it was considering sanctions on Chinese firms and officials over China’s plans to impose new security legislation on Hong Kong.

Elsewhere, though, investors shrugged off the rising geopolitical tension.

In Europe, market sentiment was boosted by a stimulus plan from the European Commission while US stocks were buoyed by hopes for an economic recovery as restrictions are relaxed.

However, David Kelly, chief global strategist at JPMorgan Asset Management, said that the recovery will take some time and that the rally is being driven mainly by large flows of money.

“You got a huge amount of liquidity with nowhere to go,” said Kelly.

“We will see a start of a recovery, but it shouldn’t be misinterpreted,” Kelly said. “We’re not going to get back to full employment or even an unemployment rate below 10% any time this year, and maybe it will take most of next year.”

Wednesday, 27 May 2020

Markets rise, new market highs “a real possibility”

Markets rose on Tuesday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 surged 2.6 percent.

The S&P 500 briefly moved above its 200-day moving average on Tuesday but failed to hold that level.

“In the first attempt to get above the 200-day, the bears made a stand,” said Scott Redler, partner with

Still, some analysts see a good chance of a more sustained move over the 200-day moving average.

“Maybe you spend a couple months not making much progress, but as long as investors are as defensive as they are, I wouldn’t get too negative,” said Chris Verrone, Strategas head of technical strategy.

“Week by week, the active bulls are proving more powerful than the active bears,” suggested Redler.

“The underlying trend is still pretty healthy,” said Robert Sluymer, Fundstrat technical analyst.

Wharton School professor Jeremy Siegel told CNBC on Tuesday that new stock market highs this year is “a real possibility”.

Even Mohamed El-Erian, the chief economic advisor at Allianz who had warned of dire economic and market consequences from the coronavirus in early February, has become more optimistic.

“It’s not just stocks. It’s other risk assets. It’s fixed income. It’s currencies, and it’s commodities,” he said. “So it’s really good to see an across the board risk-on tone, which we haven’t had really for quite a while.”

Saturday, 23 May 2020

Markets mixed amid concerns over increased US-China tension

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 was flat while the Shanghai Composite fell 1.9 percent.

Markets were initially weighed down by China's announcement of a plan to impose a new security law in Hong Kong, raising concerns of fresh tension between China and the US.

“Justifiably, the Hong Kong Security bill on the agenda for the NPC in Beijing today evokes insecurity in the markets; as risks of US China conflict and renewed Hong Kong protests grow,” analysts at Mizuho Bank said in a note.

However, investors turned more optimistic over the course of the day.

Vasu Menon, executive director of investment strategy, wealth management at OCBC Bank, said that “we’ve seen this happen before and while it might impact the Hong Kong market, I’m not sure whether it will spillover into the rest of Asia, rest of the world unless it’s results in a significant economic impact as Covid-19 has”.

Meanwhile, on the COVID-19 front, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in the US, said on Friday that Moderna’s vaccine data looked “promising”.

Fauci also acknowledged that the US “can’t stay locked down for such a considerable period of time that you might do irreparable damage and have unintended consequences, including consequences for health”.

Tom Lee, founder and head of research at Fundstrat Global Advisors, claimed that “there has yet to be a second wave in re-opened economies” and thinks that “stocks offer pretty good risk/reward”.

Friday, 22 May 2020

Markets fall, economic recovery could be “slow and bumpy”

Markets fell on Thursday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.2 percent.

A report from IHS Markit on Thursday showed that its flash manufacturing PMI for the US rose to 39.8 in May from 36.1 in April while the flash services PMI rose to 36.9 from 26.7.

IHS Markit's flash composite PMI for the euro zone rose to 30.5 in May from 13.6 in April.

While the PMI data indicated some improvement in the economy, strategists at Cantor Fitzgerald wrote in a note that “markets are priced to perfection on the expectation that there is only smooth sailing” and warned that should COVID-19 cases re-emerge, “the path back to growth will be slow and bumpy”.

Still, Savita Subramanian, Bank of America's head of US equity and quantitative strategy, suggested that low equity allocation among investors and bond yields near zero “can be the catalyst for the rotation into stocks, driving the market higher”.

Thursday, 21 May 2020

Markets rise as COVID-19 cases hit record

Markets were mostly higher on Wednesday.

The S&P 500 jumped 1.7 percent, the STOXX Europe 600 rose 1.0 percent and the Nikkei 225 rose 0.8 percent.

The World Health Organization reported on Wednesday that the number of newly reported COVID-19 cases worldwide hit a daily record with more than 100,000 new cases over the last 24 hours.

Still, investors remain hopeful that economies will recover as movement restrictions imposed to curb the spread of the diseasex` are relaxed.

“With re-openings now the vogue,” said Jim Paulsen, chief investment strategist at the Leuthold Group, “it seems almost assured that fundamental economic and earnings reports are headed for a period of improvement.”

Other analysts are less optimistic.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said in a note that stocks have already “priced in some degree of reopening success” but “consumer spending may be slower to come back than the market appears to currently expect”.

Peter Toogood, CIO of financial services business The Embark Group, told CNBC on Wednesday that the US stock market “has been expensive and remains expensive”.

Wednesday, 20 May 2020

Markets mixed amid doubts about rally

Markets were mixed on Tuesday.

The S&P 500 fell 1.1 percent and the STOXX Europe 600 fell 0.6 percent but the Nikkei 225 rose 1.5 percent.

Stocks were weighed down late in the day by doubts over Moderna's COVID-19 vaccine candidate, hopes for which had driven Monday's gains.

But many fund managers have had doubts about the stock market rally anyway.

A global fund manager survey by Bank of America found that two-thirds called the rally from the March low a “bear-market rally” rather than a new bull market.

Tuesday, 19 May 2020

Markets rise as end of COVID 19 downturn seen

Markets rose on Monday.

The S&P 500 jumped 3.2 percent, the STOXX Europe 600 surged 4.1 percent and the Nikkei 225 rose 0.5 percent.

Kristina Hooper, Invesco’s chief global market strategist, wrote that “the stock market has largely shrugged off the damage created by the pandemic-related cessation of economic activity” while Joe Saluzzi, co-head of equity trading at Themis trading, said that “the bets are coming in that we seen an end coming in sooner rather than later”.

A report by Moderna that it is seeing “compelling” early data from a phase-one clinical trial for its experimental COVID-19 vaccine helped boost markets, with Oanda’s senior market analyst Edward Moya saying that a vaccine “is a gamechanger” for an economic recovery but also warning that it “is still months away from being finalized”.

In the meantime, though, Morgan Stanley’s European equity strategist Graham Secker said that “this economic upturn is already largely priced in” by investors.

“We think valuations look full as we see further earnings downgrades as necessary for 2H20 and into 2021,” he said.

In contrast, Morgan Stanley's head of US equity strategy, is bullish “based on the equity-risk premium reaching the same levels observed in March 2009” when the US stock market began its post-financial crisis bull run.

Monday, 18 May 2020

Japan, Germany in recession

The Japanese economy has fallen into recession.

A report on Monday showed that the Japanese economy contracted by 0.9 percent in the first quarter. This followed a 1.9 percent decline in the fourth quarter of 2019.

After two consecutive quarterly declines in GDP, the Japanese economy is now tehnically in recession.

"We expect the worst is yet to come, with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy," said Naoya Oshikubo, senior economist at SuMi TRUST.

Last week, Germany reported that its economy shrank 2.2 percent in the first quarter. This followed a 0.1 percent contraction in the fourth quarter of last year, which means that Germany is also in a technical recession.

Elsewhere in the euro area, France and Italy, which have suffered more from the COVID-19 pandemic, had reported economic contractions of 5.8 percent and 4.7 percent in the first quarter respectively.

Saturday, 16 May 2020

Markets rise amid grim economic data

Markets rose on Friday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 0.6 percent.

Economic data released on Friday were mostly grim.

In the US, retail sales fell 16.4 percent in April and industrial production fell 11.2 percent.

Eurozone GDP fell 3.8 percent in the first quarter.

However, China's industrial output rose 3.9 percent in April from the previous year. Retail sales, though, fell 7.5 percent.

Also encouraging was a rise in the University of Michigan's consumer sentiment index for the US to 73.7 in May based on a preliminary reading from 71.8 in April.

Jim Baird, chief investment officer at Plante Moran Financial Advisors, said that “the gradual lifting of restrictions across the country should signal a bottoming in the economy and the first steps toward recovery”.

Friday, 15 May 2020

Economy may have bottomed but COVID-19 virus “may never go away”

Markets were mixed on Thursday.

The S&P 500 rebounded from an early decline to finish 1.2 percent higher.

Earlier in the day, the STOXX Europe 600 plunged 2.2 percent and the Nikkei 225 tumbled 1.7 percent.

US stocks rose even as a report showed that weekly jobless claims rose by 2.98 million last week.

Diane Jaffee, senior portfolio manager at TCW, suggested that the economy has hit bottom but Minneapolis Federal Reserve President Neel Kashkari said that a “V-shaped recovery is off the table”.

“Stock pickers are just wildly guessing. At this point, I want to listen more to health experts than investors,” said Kashkari.

Unfortunately, some health experts are warning that the COVID-19 pandemic is not going away anytime soon.

“This virus just may become another endemic virus in our communities and this virus may never go away,” said Dr. Mike Ryan, executive director of the WHO's health emergencies program, at a media briefing in Geneva on Wednesday.

Thursday, 14 May 2020

Markets fall as Powell describes downturn as “without modern precedent”

Markets fell on Wednesday.

The S&P 500 fell 1.8 percent, the STOXX Europe 600 fell 1.9 percent and the Nikkei 225 fell 0.5 percent.

Federal Reserve Chairman Jerome Powell said on Wednesday that the “scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II”.

This leaves stocks vulnerable to another significant pullback, especially with the market, especially in the US, already seen as expensive.

“The market is pretty high and the Fed has put a lot of money in here,” David Tepper, founder of Appaloosa Management, told CNBC on Wednesday. Before Wednesday’s sell-off, it was “maybe the second-most overvalued stock market I’ve ever seen,” he said.

On Tuesday, hedge fund manager Stanley Druckenmiller told the Economic Club of New York: “The risk-reward for equity is maybe as bad as I’ve seen it in my career.”

Wednesday, 13 May 2020

S&P 500 tumbles as US at risk of more “suffering and death”

Markets were mixed on Tuesday.

The S&P 500 tumbled 2.1 percent and the Nikkei 225 fell 0.1 percent but the STOXX Europe 600 rose 0.3 percent.

“The economic worries are still front and center here. Even though there are reopenings, they’re going to go slowly,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Indeed, Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in the US, warned the Senate Health Committee that the US could face more “suffering and death” if states start to reopen too quickly.

“It’s hard to see equities powering further higher,” Rob Carnell, chief economist and head of research for Asia-Pacific at ING. “Any further dollops of stimulus are gonna be fairly marginal.”

Meanwhile, the US stock market's rebound from its March low has brought it back into expensive territory. According to Refinitiv, the S&P 500 now trades at 22.5 times projected earnings, the most expensive valuation since October 2000 during the bursting of the dotcom bubble.

Tuesday, 12 May 2020

Markets mixed amid renewed COVID-19 fears

Markets were mixed on Monday.

The S&P 500 was flat, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 rose 1.0 percent.

After a rally driven by hopes of economies reopening with the relaxation of restrictions imposed to curb the spread of COVID-19, investors turned cautious amid reports that some countries like Germany and South Korea are seeing an acceleration of new infections after easing restrictions.

Russ Mould, investment director at AJ Bell, said markets were realising that “the V-shaped recovery will not be as fast as expected”.

“I think it’s pretty clear that if you open too fast, it’s going to have significant consequences,” said Michael Yoshikami, founder and CEO of Destination Wealth Management.

While many are calling the resurgence in cases a second wave, Jung Eun-Kyeong, director-general of South Korea's Centers for Disease Control and Prevention, said that this is not correct as the “first wave has not ended”.

Jung said that the second wave will come in autumn or winter.

Monday, 11 May 2020

COVID-19 pandemic: “It’s not over until it’s over”

Stocks rose last week, with the S&P 500 rising 3.5 percent.

Stocks rose despite grim economic data released last week, including a report on Friday that showed that the US economy lost 20.5 million jobs in April.

Instead, investors appear to be focused on the expected economic recovery as countries begin or plan to remove restrictions on activities that had been put in place to contain the spread of COVID-19.

However, the experiences of some countries that have so far been among the more successful in containing the disease suggest caution is warranted.

South Korea reported 34 new COVID-19 cases on Sunday, the highest daily number in a month. 26 were domestically transmitted infections while eight were imported cases.

The resurgence came as South Korea eased some social distancing restrictions and is seeking to fully reopen schools and businesses after the daily tally of cases had hovered around 10 or less in recent weeks.

“It’s not over until it’s over,” said South Korean President Moon Jae-in. “While keeping enhanced alertness till the end, we must never lower our guard regarding epidemic prevention.”

New COVID-19 infections also appear to be rising in Germany just days after the country eased social restrictions.

Over the weekend, the Robert Koch Institute reported that its estimate of the reproduction number of the disease, that is, the number of people infected by each case, is 1.1. It had been below 1 for most of the last three weeks.

Saturday, 9 May 2020

US stocks jump as employment dives

Markets rose on Friday.

The S&P 500 jumped 1.7 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 surged 2.6 percent.

Investors shrugged off a report on Friday showing that the US economy lost 20.5 million jobs in April and the unemployment rate shot up to 14.7 percent.

“While this pandemic has the potential to create economic conditions that are as bad or worse than the Great Depression, the steps that the Federal Reserve Bank has already taken, coupled with the stimulus that Washington is also providing, are the main reasons why we are unlikely to re-experience that terrible time in world history”, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Indeed, the US economy may already be recovering some jobs. Data from scheduling software company Homebase showed that while employment on 5 May was down 51 percent from before the COVID-19 shutdown, this is actually better than the 74 percent decline registered on 12 April, the worst day.

However, Sat Duhra, portfolio manager of Asia dividend income strategy at Janus Henderson Investors, told CNBC not to expect a V-shaped recovery in the economy.

“We’ve seen a bit of a V-shaped recovery in markets but that’s not how the real economy will behave,” he said.

Friday, 8 May 2020

China exports rise, US unemployment surges, UK faces biggest slump in 300 years

Markets were mostly higher on Thursday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.3 percent.

However, the Shanghai Composite fell 0.2 percent despite a report on Thursday showing that Chinese exports rose 3.5 percent in April from a year ago.

“We think the pick-up in exports is temporary and export momentum will fall in the coming months,” wrote economists at Oxford Economics.

In the US, investors shrugged off a report showing that almost 3.2 million people applied for unemployment benefits last week, bringing the total job losses amid the COVID-19 pandemic to over 33 million.

In Europe, the Bank of England left interest rates at 0.1 percent after its monetary policy meeting on Thursday but said it stands ready to take further action if deemed necessary.

The BoE mentioned that the UK economy is at risk of seeing output shrink by 14 percent in 2020, its biggest slump in over 300 years.

Earlier in the week, data had shown that the UK's COVID-19 death toll has overtaken Italy to become the highest in Europe.

Thursday, 7 May 2020

Economic news at “bottom” but “market valuations no longer as attractive”

Markets fell on Wednesday.

The S&P 500 fell 0.7 percent and the STOXX Europe 600 fell 0.4 percent.

A report from ADP on Wednesday showed that US private-sector employers shed more than 20 million jobs in April.

However, market reaction was relatively muted as many appear to be looking beyond April data.

“As investors, we see this Friday’s employment report, which will show a job loss of 21 million people, as marking the bottom for terrible economic news,” wrote Bryce Doty, a senior portfolio manager at Sit Fixed Income Advisors. “So, ironically, we are becoming more optimistic about the future.”

“The stock market is certainly pricing in the beginning of a downtrend in new virus cases for the U.S. as a whole,” wrote Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Still, some analysts note that the US stock market has become expensive.

“While we are encouraged by the stabilization of new COVID-19 cases and the massive stimulus put in place, stock market valuations are no longer as attractive,” wrote Jeff Buchbinder, equity strategist at LPL Financial, in a Wednesday research note.

Also, an economic recovery may not allow corporate earnings to recover as much as some think.

“While it’s possible that 2020 forecasts have been cut enough, we are concerned that 2021 numbers now need to be cut more aggressively,” wrote Lori Calvanasi, head of US equity strategy at RBC Capital Markets, in a Wednesday note. “We have serious doubts about whether S&P 500 profitability will be able to surpass pre-coronavirus crisis levels in 2021.”

Wednesday, 6 May 2020

Markets rise, “demand bottom behind us”

Markets rose on Tuesday.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 jumped 2.2 percent.

Oil prices surged. West Texas Intermediate crude jumped 20.5 percent and Brent rose 13.9 percent.

“The market is still vulnerable but now one thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise,” wrote Magnus Nysveen, head of analysis at Rystad Energy.

Chicago Fed President Charles Evans said on Tuesday that the US economy may return to growth in the second half of the year as businesses open up again after the lockdowns to combat the COVID-19 pandemic.

Evans added that “I can’t imagine that anybody is expecting the Fed to raise the interest rates over any relevant time horizon”.

Indeed, St Louis Fed President James Bullard said that he thought the Fed’s benchmark interest rate would stay near zero for “years”, not “months”.

Bullard said that the US unemployment rate could exceed 20 percent in the second quarter, the third quarter will be a “transition” period and “by the time we get to the fourth quarter I would hope that you could have an end to the crisis and put this behind us”.

Tuesday, 5 May 2020

US stocks rebound amid easing of curbs

Markets were mixed on Monday.

The STOXX Europe 600 plunged 2.7 percent after the US criticised China on Sunday for allowing the coronavirus causing COVID-19 to emerge from a Chinese laboratory.

However, the S&P 500 rebounded from an early decline to close 0.4 percent higher.

“Some regional openings in California helped financial markets end the day on a positive note,” said Edward Moya, senior market analyst at OANDA.

Ohio and other states were also easing more curbs on businesses while outside the US, Italy, among the world’s hardest-hit countries, allowed about 4.5 million people to return to work.

Meanwhile, though, economic data remained grim, with IHS Markit reporting that its final manufacturing PMI for the euro zone sank to 33.4, its lowest since the survey began in mid-1997.

Monday, 4 May 2020

Peak in US COVID-19 cases also means “peak infectivity”

The S&P 500 fell 0.2 percent last week, its second consecutive weekly decline.

Stocks enjoyed gains early in the week on hopes of the relaxation of restrictions imposed on economies to curb the spread of COVID-19.

However, those gains were reversed in the latter part of the week, with the S&P 500 falling particularly hard on Friday by 2.8 percent.

Indeed, even as Americans began to take advantage of the relaxation of restrictions, some are worried that the pandemic could yet worsen.

“We expected that we would start seeing more significant declines in new cases and deaths around the nation at this point. And we’re just not seeing that,” said Scott Gottlieb, a former Food and Drug Administration commissioner. “If we don’t snuff this out more and you have this slow burn of infection, it can ignite at any time.”

Indeed, John Hussman, president of Hussman Invesment Trust, pointed out in his latest article that while the US rate of new infections of COVID-19 may have hit a peak, “relaxing containment at the point of ‘peak’ daily new cases also means relaxing containment at the point of peak infectivity”.

He added that while he had considered the possibility of fewer than 60,000 US fatalities a few weeks ago, “we’re now looking at the likelihood of about 90,000 by mid-year, with the potential for far greater numbers if containment is eased without offsetting practices”.

With regards to market conditions, Hussman views the recent advance as a “clearing rally” to relieve an oversold compression.

However, extreme valuations, divergent market internals and overextended conditions have created a “trap door” situation that, when seen over the past two decades, have had “unfortunate consequences”.

Saturday, 2 May 2020

Markets fall as US manufacturing shrinks further

Markets fell on Friday, with both the S&P 500 and Nikkei 225 tumbling 2.8 percent.

Most European markets were closed for a holiday.

“After one of the best months in history, it’s not overly surprising to see some profit taking here,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management.

News that the US government is considering proposals for punishing China for its handling of the COVID-19 pandemic added to downward pressure on stocks.

Miskin said that “even more strains to supply chains in the form of tariffs is rightfully being priced into the market negatively”.

Indeed, the strain on the US economy is already showing in the Institute for Supply Management's manufacturing index, which fell to 41.5 in April from 49.1 in March. The index for new orders dropped 15.1 to 27.1, the biggest monthly drop since 1951.

The IHS Markit US manufacturing PMI fell to 36.1 in April from 48.5 in March.

Friday, 1 May 2020

Markets lower, euro area faces “unprecedented” contraction

Markets were mostly lower on Thursday.

The S&P 500 fell 0.9 percent and the STOXX Europe 600 tumbled 2.0 percent.

Earlier in Asia, though, the Shanghai Composite rose 1.3 percent and the Nikkei 225 jumped 2.1 percent.

The European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday but said it would make long-term loans to banks even cheaper and would set up a new shorter-term liquidity operation.

Eurozone GDP fell 3.8 percent in the first quarter and ECB President Christine Lagarde said it could shrink by 5 to 12 percent this year.

“The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime,” said Lagarde.

Thursday, 30 April 2020

Stocks jump on hopes for COVID-19 treatment and Fed support

The S&P 500 jumped 2.7 percent on Wednesday on hopes for a treatment for COVID-19.

Market sentiment was buoyed by a report from Gilead Sciences on Wednesday that its drug, remdesivir, met the primary endpoint of a clinical trial evaluating the drug as a treatment for the disease.

Also on Wednesday, the Federal Reserve announced that it would maintain its current interest rate target between 0 and 0.25 percent.

“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Federal Open Market Committee said in a statement after its monetary policy meeting.

The report on remdesivir and the Fed's supportive stance helped the market shrug off news that US GDP shrank at a 4.8 percent annualised rate in the first quarter.

Wednesday, 29 April 2020

Markets mixed, economic downturn may be “very protracted”

Markets were mixed on Tuesday.

The S&P 500 fell 0.5 percent and the Shanghai Composite fell 0.2 percent but the STOXX Europe 600 jumped 1.7 percent.

While markets have been cheered by recent suggestions of economies reopening, some analysts are advising caution.

Chris Gaffney, president of world markets at TIAA Bank, said that there are “a lot of folks out there saying the downturn is going to be much deeper and probably last longer than many had originally predicted”.

“We’re not gonna see, suddenly, a sudden stop in the economy become a sudden start,” Kerry Craig, a global market strategist at JPMorgan Asset Management, told CNBC on Tuesday. “It’s gonna be very protracted, it’s gonna come through very slowly and I don’t think that’s very much appreciated by what we’re seeing in the markets.”

Meanwhile, the news on the COVID-19 pandemic remained grim, with the US death toll hitting 58,233 on Tuesday, more than the toll from the Vietnam War.

While the US has the highest death toll from the virus in the world, Italy has the second highest death toll, with another 382 deaths on Tuesday, the highest since Saturday, to bring the total to 27,359.

Tuesday, 28 April 2020

Stocks shrug off oil plunge, retest of low still plausible

Stocks rose on Monday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 rose 1.8 percent and the Nikkei 225 surged 2.7 percent.

However, oil prices plunged. West Texas Intermediate crude fell 24.6 percent and Brent fell 6.8 percent.

Stock markets were able to shrug off the oil price declines as investors focused on plans to reopen economies.

“Country reopenings could anchor short-term sentiment provided the COVID-19 curve remains on a flattening tangent,” said Stephen Innes Chief Global Markets Strategist at AxiCorp.

However, some analysts think the markets may be getting ahead of themselves.

“We've got this epic battle between monetary and fiscal policy on one side, and weak economic earnings, earnings data on the other,” Tony Dwyer, managing director and chief market strategist at Canaccord Genuity.

“Having a very, very flat yield curve is telling you that the economy is going to be very slow coming out of the recession and that you want to maybe just kind of wait for some of the overbought condition that was created on this relief rally to work itself out,” he said

Indeed, Jeffrey Gundlach, CEO of DoubleLine, told CNBC on Monday that a retest of the March low is “very plausible”.

“I think we’d take out the low,” he added.

Monday, 27 April 2020

Stocks fall as global economy faces steepest contraction on record

The S&P 500 fell 1.3 percent last week, ending a two-week winning streak.

Stocks saw big declines early last week amid plunging oil prices but recovered partially in the second half of the week on hopes that the US and other economies will be reopening in the near future as tests for COVID-19 become more widely available and drugs are developed to treat the disease.

“Any sentiment around a therapy is really moving markets because it shapes expectations for a return to normalcy which would be needed to get an economic recovery started,” said Shawn Cruz, manager of trader strategy at TD Ameritrade.

However, that sentiment suffered a setback on Thursday after Gilead Science’s remdesivir reportedly failed a trial.

Meanwhile, others are warning that a vaccine could take some time to become available.

“We haven’t got a hugely good track record with vaccines for this particular virus, coronavirus, the family of viruses,” said Professor Gina Radford, former deputy chief medical officer for England. “I think those who are very used to the process of developing vaccines are saying they are not anticipating it being available until well into next year.”

That would be problematic for a global economy that is widely expected to suffer its steepest contraction on record this year.

“We are likely to see a deeper contraction in 2020 than during the global financial crisis,” said Janet Henry, global chief economist at HSBC.

“The global economy is collapsing at a pace not seen since World War Two,” said Michael Hanson, senior global economist at JPMorgan. “Staggered re-openings of economies until a vaccine is widely available imply more of a U- rather than a V-shaped recovery for the global economy.”

Still, others think that the positive response of policy-makers to the COVID-19 pandemic may be enough to turn markets around.

“On March 23, we made a low exactly on the same day that the Federal Reserve introduced what I call ‘QE4ever.’ The Fed announced that they were going to purchase bonds for the foreseeable future,” Yardeni Research president Edward Yardeni told CNBC on Friday.

Having lowered his year-end target for the S&P 500 to 2,900 early last month, Yardeni is now looking forward to a rebound.

“Sometime next year, maybe by the end of next year, we’ll be moving toward 3,500,” he said.

Saturday, 25 April 2020

US stocks rise even as economy faces large pullback in capital spending

Markets were mixed on Friday.

The S&P 500 rose 1.4 percent but the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.9 percent.

US stocks rose despite a report on Friday showing that US orders for durable goods tumbled 14.4 percent in March.

Lydia Boussour, senior US economist at Oxford Economics, wrote that the impact of the COVID-19 pandemic “will translate into some of the largest pullbacks in capital spending of all time”.

In Europe, BofA said that it expected stocks to gain a further 20 percent as “the root cause of the economic slump - the spread of Covid-19 - is fading”.

However, Hannah Anderson, global market strategist at JPMorgan Asset Management, warned that progress in combating the virus is “not the same as returning the economy to the place it was last fall” and said “investors should expect more volatility across all asset classes”.

Similarly, Hugh Young, managing director for the Asia Pacific region at Aberdeen Standard Investments, warned that markets “have not accurately priced in the risks” and that “the economic consequences are actually huge of what’s going on”.

Friday, 24 April 2020

Markets rise, economies shrink

Markets were mostly higher on Thursday.

The S&P 500 rose less than 0.1 percent while the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 jumped 1.5 percent.

Oil prices surged. West Texas Intermediate crude rose 19.7 percent and Brent rose 4.7 percent.

However, economic data released on Thursday were gloomy.

IHS Markit’s flash US composite output index plunged to 27.4 in April, the lowest since the series began in late 2009, from 40.9 in March.

IHS Markit’s flash eurozone composite PMI sank to 13.5 in April, its lowest reading since the survey began in mid-1998, from 29.7 in March. IHS Markit said the PMI was consistent with the bloc’s economy contracting 7.5 percent this quarter.

“The rather muted reaction relative to the amplitude of the misses proves the lack of surprise for markets, which are almost immune to data at the moment,” said Olivier Konzeoue at Saxo Markets.

However, as economies contract, Andrea Cicione, head of strategy at TS Lombard, said that the level of bad loans at banks is “worrying”.

“What the market is failing to appreciate is the size of the macroeconomic shock,” said Cicione.

Thursday, 23 April 2020

Markets rise but negative forces “remain very much intact”

Markets mostly rose on Wednesday.

The S&P 500 jumped 2.3 percent, the STOXX Europe 600 rose 1.8 percent and the Shanghai Composite rose 0.6 percent.

Oil rebounded. Brent crude rose 5.4 percent and West Texas Intermediate surged 19.1 percent.

“By no means does this suggest that a price bottom has been placed since the supply/demand forces that drove negative crude pricing this week remain very much intact,” said Jim Ritterbusch, president of Ritterbusch and Associates.

That could mean further pressure on stocks as well.

“The oil reality check has triggered a reassessment across risk assets,” wrote Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, in a note.

Indeed, Citi’s global equity strategy team says the bear market in stocks is not done.

“All bear markets include false rallies, often associated with supportive monetary policy. But markets only find a sustainable base when there are signs that cheap money is feeding through into the real economy, rather than temporarily supporting asset prices,” said the team led by Robert Buckland.

Wednesday, 22 April 2020

Markets fall from impact of COVID-19, winter could prove “even more difficult”

Markets fell sharply on Tuesday.

The S&P 500 tumbled 3.1 percent, the STOXX Europe 600 plunged 3.4 percent and the Nikkei 225 fell 2.0 percent.

Oil prices plunged. West Texas Intermediate crude for June delivery fell 43.4 percent while Brent fell 24.4 percent.

Ben Powell, chief investment strategist for Asia Pacific at BlackRock Investment Institute, said that “oil will continue to be very challenged” because of “the simple inability for a global energy sector to respond in real time to such an unbelievable collapse in demand in such short order” resulting from economic shutdowns in response to the COVID-19 pandemic.

Meanwhile, deaths in the US from COVID-19 topped 45,000 on Tuesday but hopes for a slowdown in the spread has moved states like Georgia and South Carolina to ease restrictions.

Unfortunately, the slowdown may be temporary. “There’s a possibility that the assault of the virus on our nation next winter will actually be even more difficult than the one we just went through,” warned CDC Director Robert Redfield.

Tuesday, 21 April 2020

Oil plunges, stocks look like “incredible bargains”

Markets were mixed on Monday.

The S&P 500 fell 1.8 percent and the Nikkei 225 fell 1.2 percent but the STOXX Europe 600 rose 0.7 percent.

Oil prices plunged. West Texas Intermediate crude for May delivery fell to negative US$37.63 a barrel.

Louise Dickson, oil markets analyst at Rystad Energy, explained that “midstream players are now paying ‘buyers’ to take oil volumes away as the physical storage limit will be reached”.

Brent crude fell 8.9 percent.

Meanwhile, US stock market investors are bracing for the worst quarter for earnings since the 2008 financial crisis. Results for the first quarter are on track to decline 14.5 percent from a year ago, according to John Butters, senior earnings analyst at FactSet, and analysts expect a 28.7 percent decline in the second quarter.

Still, some analysts think stocks are becoming bargains.

John Cunnison, chief investment officer at Baker Boyer, said “if we look back at this moment in three years, it probably will look like a fairly attractive place to buy”.

Similarly, Mark Mobius, co-founder of Mobius Capital Partners, said that he is “very optimistic” markets will bounce back after creating “incredible bargains”, although he also warned that stocks could retest the March lows.

Howard Marks, co-founder of Oaktree Capital Management, also warned of further declines in the market. “We're only down 15% from the all-time high of Feb. 19,” he said Monday on CNBC. But “it seems to me the world is more than 15% screwed up”.

Monday, 20 April 2020

Stocks rally on hopes for economy to re-open

The S&P 500 rose 3 percent last week amid suggestions by US President Donald Trump and others that the country has “passed the peak” of the outbreak and the economy could start to re-open soon.

Still, the US COVID-19 death toll hit 40,461 on Sunday as confirmed cases reached 755,533.

Researchers at Harvard said that testing for COVID-19 in the US, currently at 150,00 per day, must go up to at least 500,000 people per day if the country wants the economy to open back up.

"If we can't be doing at least 500,000 tests a day by May 1, it is hard to see any way we can remain open," the researchers said.

Meanwhile, Italy, the country with the second highest death toll in the world after the US, reported another 433 deaths on Sunday, the lowest in a week, and the number of new cases slowed to 3,047 from a previous 3,491. The total death toll is now 23,660 while the total number of confirmed cases is 178,972.

Saturday, 18 April 2020

Markets rise on hope of COVID-19 treatment

Markets rose on Friday.

The S&P 500 jumped 2.7 percent, the STOXX Europe 600 rose 2.6 percent and the Nikkei 225 surged 3.1 percent.

Investors were cheered by promising results for the drug remdesivir in treating COVID-19.

Jasper Lawler, head of research at London Capital Group, said though that the trial on the drug was small and there was no control group “so there’s plenty of room for error”.

Investors shrugged off a report showing that China's GDP shrank 6.8 percent in the first quarter from a year ago.

“We expect a significant sequential recovery in Q2 as economic life returns to normal,” economists at Oxford Economics wrote.

Friday, 17 April 2020

Western governments were “staggeringly slow to act” on COVID-19

Markets mostly rose on Thursday, the S&P 500 rising 0.4 percent and the STOXX Europe 600 rising 0.6 percent.

While investors were encouraged by talks of reopening economies, Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC on Thursday that he is “still worried about greater risk to the downside”.

“It’s been such a dramatic experience that it’s going to alter household and business behavior,” he said. “The end result is going to be a much slower pace of growth which means lower earnings.”

James Griffiths at CNN said that Western governments have themselves to blame for failing to take the necessary actions to stem the COVID-19 outbreak.

For all the blame laid at China's door for its failure to act early in the pandemic, officials there did not know what they were dealing with.

By comparison, officials in Europe and the US knew exactly what they were facing once the outbreak reached their borders, but were often slow to react, wasting time as the virus spread through Asia and ignoring lessons learned by other countries.

Much of what we know about the coronavirus -- that it is highly contagious and spreads from person to person, that it has a relatively high mortality rate, particularly for certain populations, and that one of the best ways to contain it is via enforced social distancing -- was established by early February.

Despite this, Western governments, particularly the US and UK, were staggeringly slow to act.

In the US, nationwide social distancing guidelines were not put in place until March 16 -- the country's first case was recorded on January 15, and the first signs of "community spread" detected in late February. The UK too dragged its feet on taking concerted action, only instituting lockdowns and stay-at-home orders in late March, two months after its first case was recorded.

Thursday, 16 April 2020

Markets fall as global economy faces “worst recession since the Great Depression”

Markets fell on Wednesday. The S&P 500 fell 2.2 percent and the STOXX Europe 600 tumbled 3.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.5 percent and the Shanghai Composite fell 0.6 percent.

US economic data released on Wednesday indicated a sharp contraction in the economy. Retail sales fell 8.7 percent in March and industrial production fell 5.4 percent.

Lydia Boussour, senior US economist at Oxford Economics, said this is “just the beginning of the consumer pullback” while Jason Thomas, chief economist at AssetMark, said that “April is much worse”.

On Tuesday, the International Monetary Fund had said it is “very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago”.

The US COVID-19 death toll surpassed 30,000 on Wednesday but President Donald Trump said that the country has “passed the peak” of the outbreak.

“While we must remain vigilant, it is clear that our aggressive strategy is working,” Trump said at a White House news briefing on Wednesday.

Wednesday, 15 April 2020

Stocks jump but pandemic may depress GDP “for more than 3 years”

Markets rose on Tuesday.

The S&P 500 surged 3.1 percent, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 jumped 3.1 percent.

Investors were encouraged by signs that some countries were relaxing restrictions on activity. For example, Spain has allowed businesses like construction and manufacturing to resume while Austria is reopening small shops. In the US, ten states are coordinating plans to reopen businesses.

Oil prices fell though. West Texas Intermediate crude plunged 10.3 percent and Brent fell 6.7 percent.

Robbie Fraser, senior commodity analyst at Schneider Electric, said that “the math remains firmly in favor of the bears”, pointing out that “global demand is suffering 20-30% losses, virtually guaranteeing a flood of crude and products heading into storage in the short and medium-term”.

Indeed, some analysts are warning that the stock market rally is predicated on the wrong assumptions.

“Most of the analysts are asking — ‘When will the economies return back to work?’ — which we believe is the wrong question,” said Boris Schlossberg, managing director of BK Asset Management, in a Tuesday note. “The much more relevant question is — ‘When will aggregate demand recover to pre-virus levels?’ That is a much more difficult dilemma to assess given the massive damage done to consumer balance sheets.”

Carl Weinberg, chief economist at High Frequency Economics, suggested in a note on Monday that even after the economy starts to recover, “the level of GDP will still be lower than where it started for more than three years”.

Tuesday, 14 April 2020

Markets fall but downside risk reduced by “unprecedented policy support”

Markets fell on Monday.

The S&P 500 fell 1.0 percent, the Nikkei 225 plunged 2.3 percent and the Shanghai Composite fell 0.5 percent. European markets were closed for holidays.

Nigam Arora wrote on Monday that the recent stock market rally had been the result of a short-squeeze and is likely to end this week.

“There should be downward pressure on the stock market after the short-squeeze ends, unless there are new triggers to the upside such as medical developments against the coronavirus, pleasant surprises in what companies say about the future in their earnings reports and conference calls, more monetary stimulus from the Fed and more fiscal stimulus from the government,” he wrote.

Still, some analysts think the market has bottomed, a short-term pullback notwithstanding.

Morgan Stanley analysts led by chief US equity strategist Michael Wilson wrote on Monday that support by the Federal Reserve should help drive the stock market up, suggesting that “investors should have no doubt about the Fed’s resolve to do whatever it takes to make sure the recession does not turn into a depression”.

Similarly, Goldman Sachs strategists led by David Kostin wrote on Monday: “The combination of unprecedented policy support and a flattening viral curve have dramatically reduced downside risk for the U.S. economy and financial markets and lifted the S&P 500 out of bear market territory.”

And while Canaccord Genuity chief market strategist Tony Dwyer warned of an imminent pullback in stocks, he said: “Our plan is to go back on offense as the market pulls back toward the March 23 low.”

Monday, 13 April 2020

OPEC, Russia agree to cut oil output amid COVID-19 pandemic

OPEC and Russia agreed on Sunday to a cut in oil production.

The agreement was to reduce output by 9.7 million barrels per day for May and June following pressure from US President Donald Trump to arrest the oil price decline.

Global oil demand is estimated to have fallen by a third as measures to slow the spread of the COVID-19 pandemic drove down demand for fuel.

On the pandemic front, the number of COVID-19 cases in the US passed 554,000 on Sunday while the death toll hit 21,994, now the highest among all countries in the world after passing Italy's on Saturday.

As for Italy, the encouraging trend of recent days continued on Sunday. Deaths from COVID-19 rose by 431, down from 619 the day before and the lowest since 19 March. The number of new cases slowed to 4,092 from a previous 4,694.

Saturday, 11 April 2020

COVID-19 peak seen, global death toll hits 100,000

Markets in Asia were mixed on Friday, with the Shanghai Composite falling 1.0 percent but the Nikkei 225 rising 0.8 percent.

Most major markets in the rest of the world were closed for holidays.

The S&P 500 surged 12.1 percent earlier in the week, its biggest weekly gain since 1974.

The rally in stocks came amid signs that the COVID-19 outbreak in the US may be approaching a peak. From CNN:

The latest version of an influential model tracking the coronavirus pandemic estimates the US will see peak daily death numbers on Friday instead of Sunday.

The peak use of resources -- like hospital beds and ventilators -- will be on or around Saturday as suggested earlier this week, according to the Institute for Health Metrics and Evaluation at the University of Washington in Seattle.

Meanwhile, the number of deaths linked to COVID-19 reached 100,000 on Friday as the tally of cases passed 1.6 million, according to a Reuters tally.

Friday, 10 April 2020

Stocks rise on Fed move but March low could still be retested

Markets rose on Thursday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 jumped 1.6 percent and the Shanghai Composite rose 0.4 percent.

However, oil prices plunged. West Texas Intermediate crude tumbled 9.3 percent and Brent fell 4.1 percent.

Helping to prop up stocks prices on Thursday was an announcement by the Federal Reserve of its US$2.3 trillion programme to bolster local governments and businesses.

That comes as a report on Thursday showed that 6.6 million Americans filed for unemployment last week and another showed that the preliminary reading of the University of Michigan's consumer sentiment index fell to 71 in early April from 89.1 the previous month, the biggest ever one-month decline.

“The Fed will buy riskier debt and that should keep this V-shaped rebound going a little longer,” said Edward Moya, senior market analyst at OANDA New York.

However, others remain cautious.

“There has to be a capitulation where everyone throws their hands in the air and sells it all, gets rid of the hopes and dreams they had for the stocks in their portfolio,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Management.

Similarly, Mark Hulbert at MarketWatch noted that instead of the pessimism and despair usually seen at bear-market bottoms, the last couple of weeks have been marked by an “eagerness to declare that the worst is now behind us”.

“We should expect a retest of the market’s March low,” Hulbert concluded.

Thursday, 9 April 2020

Markets mixed as world economy faces “deepest recession of our lives”

Markets were mixed on Wednesday.

The S&P 500 surged 3.4 percent and the Nikkei 225 jumped 2.1 percent but the STOXX Europe 600 was flat and the Shanghai Composite fell 0.2 percent.

Oil prices surged, with West Texas Intermediate crude rising 6.2 percent.

“This week, we’re starting to see folks shift to being more hopeful that maybe the social distancing measures can be relieved sooner rather than later,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Still, the news on COVID-19 remain grim, with daily deaths in New York and New Jersey from the disease hitting records on Wednesday.

Meanwhile, measures imposed to slow the spread of the pandemic are pushing the world economy into a recession.

“During the first two quarters of the year, the economies of Western countries are collapsing,” said Philippe Waechter, economist at Ostrum Asset Management.

WTO chief Roberto Azevedo warned the world is facing the “deepest economic recession or downturn of our lives”.

Wednesday, 8 April 2020

Stocks reverse gains as “one more down leg” seen

Markets were mixed on Tuesday.

The Nikkei 225 surged 2.0 percent and the STOXX Europe 600 jumped 1.9 percent but the S&P 500 gave up early gains to close 0.2 percent lower.

Oil prices fell after the US Energy Information Administration lowered its US and global benchmark price forecasts. West Texas Intermediate crude plunged 9.4 percent and Brent fell 3.6 percent.

Investors continued to take some comfort from a slowing trend in the rise of COVID-19 infections. Italy reported the lowest number of new coronavirus infections in nearly three weeks and China reported no new deaths, though deaths in Spain rose after declining for four consecutive days and New York reported its highest daily death toll yet.

Adam Phillips, director of portfolio strategy at EP Wealth Advisors, warned that “the virus is not under control yet” while Mizuho’s US Chief Economist Steven Ricchiuto suggested that “the Street appears to be betting on at least one more down leg to this correction before a sustained bounce begins”.

Tuesday, 7 April 2020

Stocks surge as COVID-19 shows signs of peak but economy at risk of “vicious spiral”

Markets rose sharply on Monday.

The S&P 500 soared 7.0 percent, the STOXX Europe 600 jumped 3.7 percent and the Nikkei 225 surged 4.2 percent.

Markets rose amid signs that the spread of COVID-19 may be slowing.

“Signs that coronavirus may be peaking in parts of mainland Europe have given some hope that the economic hit will be short-lived,” said Russ Mould, investment director at AJ Bell.

US Vice President Mike Pence said “we’re starting to see glimmers of progress”.

However, oil prices plunged amid rising tensions between the world’s biggest oil producers over the weekend. West Texas Intermediate crude fell 8 percent and Brent fell 3.1 percent.

Some analysts see a bullish case for stocks. Bob Doll, chief equity strategist and senior portfolio manager at Nuveen, suggested that 2,192 was the bottom for the S&P 500, while Mike Wilson, Morgan Stanley’s chief equity strategist, said he does not expect a full retest of that low.

However, Peter Boockvar, chief investment officer at Bleakley Advisory Group, said that improvement in the rate of COVID-19 infections “does not signal the all clear” and is not confident that the botton has been hit.

Indeed, Scott Minerd, global chief investment officer at Guggenheim Partners, said that the S&P 500 could plunge to 1,500, while Mislav Matejka, head of global equity strategy at JP Morgan, warned of a possible “vicious spiral” in the economy that could result in a 10 percent decline in US real GDP.

Monday, 6 April 2020

COVID-19: Hopeful signs in West, renewed concerns in Asia

Markets fell last week, with the S&P 500 declining 2.1 percent.

While the falls were mainly driven by fears over the COVID-19 pandemic, latest reports on the disease provide some encouraging news.

Italy, which has suffered the highest death toll in the world from the disease, reported on Sunday another 525 deaths, the lowest since 19 March, to bring its total to 15,887.

Spain, which has the second highest death toll, reported 674 deaths, its third straight day of declining numbers.

In the US, the death toll hit 9,458 on Sunday, with New York state, the epicentre, seeing 594 deaths, slightly down from the previous day.

However, even as the West sees hopeful signs, fears of a second wave of the pandemic has hit Asia.

China reported 39 new coronavirus cases as of Sunday, up from 30 a day earlier. 78 new asymptomatic cases had been identified as of the end of Sunday, compared with 47 the day before.

In Japan, Prime Minister Shinzo Abe looks set to declare a state of emergency as early as Tuesday in a bid to stop the coronavirus spreading across the country as the cumulative number of infections topped 1,000 in Tokyo alone.

Saturday, 4 April 2020

Markets fall as US unemployment jumps

Markets were mostly lower on Friday.

The S&P 500 fell 1.5 percent, the STOXX Europe 600 fell 1.0 percent and the Shanghai Composite fell 0.6 percent.

A report on Friday showed that the US economy lost 701,000 jobs in March and the unemployment rate rose to 4.4 percent from 3.5 percent in February.

In the euro area, the IHS Markit composite PMI plunged to an all-time low of 29.7 in March from 51.6 in February.

A poll by Reuters shows that economists now think that the global economy will contract 1.2 percent this year compared to a 1.6 percent expansion predicted in a poll three weeks ago.

Friday, 3 April 2020

Markets rise even as economists fear severe economic contraction

Markets were mostly higher on Thursday.

The S&P 500 surged 2.3 percent, the STOXX Europe 600 rose 0.4 percent and the Shanghai Composite jumped 1.7 percent. However, the Nikkei 225 fell 1.4 percent.

Oil prices surged as US President Donald Trump tweeted that he expects Saudi Arabia and Russia to reach an agreement to significantly cut production. West Texas Intermediate crude rose 24.7 percent and Brent rose 21 percent.

However, Manish Raj, chief financial officer at Velandera Energy, noted that “skepticism remains in the market whether the said cuts would actually be made”.

“All the fine details seem to still be up in the air so President Trump’s tweet might have been premature,” said Edward Moya, senior market analyst at Oanda.

Meanwhile, the COVID-19 pandemic remains a threat to markets, with confirmed cases topping one million on Thursday.

Financial ratings agency Fitch on Thursday predicted that the US and eurozone economies would contract this quarter by up to 30 per cent on an annualised basis.

The US Labour Department reported that 6.65 million workers filed for unemployment benefits last week, the most ever recorded.

Thursday, 2 April 2020

Markets fall, March low “will get taken out”

Markets fell sharply on Wednesday.

The S&P 500 sank 4.4 percent, the STOXX Europe 600 tumbled 2.9 percent and the Nikkei 225 plunged 4.5 percent.

DoubleLine Capital CEO Jeffrey Gundlach said on Tuesday that the market was set to fall and that the March low “will get taken out”.

“Take out the low of March and then we’ll get a more enduring low,” he said.

US President Donald Trump warned late Tuesday that a “very, very painful” two weeks lies ahead for the country as the White House released new projections for 100,000 to 240,000 deaths in the US from the COVID-19 pandemic even if current social distancing guidelines are maintained.

Elsewhere, Italy reported another 727 deaths from COVID-19 on Wednesday, bringing its total death toll to 13,155, while Spain reported 864 deaths, bringing its total to 9,053.

France reported 509 new deaths on Wednesday to become the fourth country to pass the 4,000 coronavirus deaths threshold after Italy, Spain and the US.

Wednesday, 1 April 2020

Markets mixed as global COVID-19 deaths continue to rise

Markets were mixed on Tuesday.

The S&P 500 fell 1.6 percent but the STOXX Europe 600 rose 1.7 percent.

Earlier in Asia, the Nikkei 225 fell 0.9 percent but the Shanghai Composite rose 0.1 percent.

Some relief for investors came from data from China showing that its official manufacturing PMI rose to 52.0 in March from 35.7 in February and its services PMI rose to 52.3 from 29.6.

However, economists at ANZ said that the “outlook for Q2 continues to be concerning due to an acute drop in external demand and lacklustre domestic demand”.

Simona Gambarini, markets economist at Capital Economics, said that a sustained recovery in stock prices “probably won’t happen until there is evidence that the pandemic is being contained at a global level”.

That appears to be unlikely soon. The global COVID-19 pandemic has continued to exact a heavy toll around the world, with both Italy and Spain reporting more than 800 deaths from the disease on Tuesday and French and US death tolls surpassing China's death toll.

Tuesday, 31 March 2020

US stocks rise even as COVID-19 death toll surpasses 3,000

Markets were mixed on Monday, with stocks rising in the US and Europe but falling in Asia.

The S&P 500 surged 3.4 percent after President Donald Trump said on Sunday that he had extended social-distancing guidelines through 30 April and that the US would be “well on our way to recovery” by early June.

However, analysts at Goldman Sachs suggested that for the stock market to hit a bottom, among other things, the spread of COVID-19 must begin to slow.

Instead, the toll from COVID-19 in the US has continued to rise dramatically, hitting 3,008 deaths and more than 160,000 confirmed infections on Monday evening.

“Tactically, however, we believe it is likely that the market will turn lower in the coming weeks, and caution investors against chasing this rally,” the Goldman analysts said.

Meanwhile, in Italy, the COVID-19 death toll rose by 812 on Monday to 11,591, the most in the world, but the number of new cases rose by 4,050, the lowest since 17 March.

Monday, 30 March 2020

S&P 500 jumps with COVID-19 cases

Investors received some respite last week from the gloom that had pervaded markets recently.

The S&P 500 rose 10.3 percent last week even as the US became the country with the highest number of confirmed COVID-19 cases in the world.

As of Sunday evening, there were more than 137,000 cases and at least 2,400 deaths from the disease.

Dr Anthony Fauci of the National Institute of Allergy and Infectious Diseases said on CNN on Sunday that, based on modelling, 100,000 or more could die from the disease in the US.

Meanwhile, despite having a smaller population than the US, the number of cases in Italy hit 97,689 on Sunday. It also has 10,779 deaths from the disease, the highest in the world.

The good news, though, is that the daily rise in infections has slowed to 5.6 per cent, the lowest rate since Italian officials started tracking cases following the first death on 21 February.

There is no sense of complacency though in the Italian government. "The measures expiring on Apr 3 will inevitably be extended," said regional affairs minister Francesco Boccia, referring to the lockdown.

Saturday, 28 March 2020

Markets fall, US COVID-19 cases pass 100,000

Markets were mostly lower on Friday.

The S&P 500 tumbled 3.4 percent and the STOXX Europe 600 fell 3.3 percent. However, the Nikkei 225 jumped 3.9 percent.

“Economic data is deteriorating quickly, and we still have few signs on just how severe the economic impact will be,” said Lindsey Bell, chief investment strategist at Ally Invest.

“The bottom line is that the recovery from this crisis will be a lot slower than consensus expects,” said Andrea Cicione, head of strategy at TS Lombard.

Oil prices plunged. West Texas Intermediate crude fell 4.8 percent and Brent fell 5.4 percent.

“According to industry reports, oil storage levels globally have already reached 75% of capacity, and continued stockpiling under closed demand would crash the prices to $10 in the coming months unless industrial activity restarts,” said Mihir Kapadia, chief executive offer of Sun Global Investments.

Global economic activity could take some time to pick up again, though, with COVID-19 cases still rising in many countries. In the US, the number of confirmed cases passed 100,000 on Friday while Italy recorded 919 deaths from the virus, the highest daily toll in the world, as its total of confirmed cases rose by 5,959 to 86,498, surpassing China's.

Friday, 27 March 2020

Markets shrug off record jobless claims as US tops COVID-19 cases

Markets were mostly higher on Thursday.

The S&P 500 surged 6.2 percent and the STOXX Europe 600 jumped 2.6 percent. However, the Nikkei 225 tumbled 4.5 percent.

US stocks were boosted by the passage late Wednesday of an emergency relief package intended to help mitigate the impact of the COVID-19 pandemic. That helped investors shrug off a record 3.28 million in claims for unemployment benefits last week.

“Investors cheered the impressive global policy response, but today’s data have them knowing the battle is daunting,” said economist David Rosenberg in a note.

Indeed, latest data from Johns Hopkins University show that the US now has the highest number of confirmed COVID-19 cases in the world, surpassing Italy and China.

Still, Paul Tudor Jones, founder of Tudor Investment and Just Capital, told CNBC on Thursday that the market could be higher by June.

“My guess is one of the reasons the market’s up right now is because of all the month-end rebalancing,” said Jones. “That’s one reason my guess is we’ll stay firm into month-end and then we’ll be challenged in April.”

“My guess is we’ll be higher three or four months from now, five months from now, than lower than where we are right now,” he added.

Thursday, 26 March 2020

Markets rise on hopes for US fiscal package

Markets rose on Wednesday.

The S&P 500 rose 1.2 percent, the STOXX Europe 600 jumped 3.1 percent and the Nikkei 225 surged 8.0 percent.

Optimism over the passage of a fiscal package in the US provided a boost to markets.

“The coronavirus spread is intensifying in the US, but some optimism is growing that it could peak in a few weeks and right now traders are primarily focused on all this stimulus,” wrote Edward Moya, senior market analyst at Oanda.

James McCann, senior global economist at Aberdeen Standard Investments, called the fiscal package “huge” and said “it should hopefully act as a firewall to slow the spread of this crisis through the economy and prevent it from seizing up the financial system”.

Still, the COVID-19 pandemic remains a global threat, with Italy's death toll increasing by 683 on Wednesday and Spain's by 738. Italy and Spain now have the world's highest and second highest death tolls from the disease.

Wednesday, 25 March 2020

Markets surge, “getting dangerous to be negative on equities”

Markets soared on Tuesday.

The S&P 500 surged 9.4 percent, the STOXX Europe 600 jumped 8.4 percent and the Nikkei 225 rose 7.1 percent.

Sam Stovall, chief investment officer at CFRA Research, said that “this market was stretched like a rubber band that, at least in the near term, was ready to snap back”.

Investors appear hopeful that the US Congress will be able to agree on a fiscal package soon to mitigate the impact of the COVID-19 pandemic even as President Donald Trump raised the idea of restarting the economy soon.

Indeed, with all the monetary and fiscal stimulus initiated or planned, JonesTrading’s chief market strategist Michael O’Rourke warned that “it is getting dangerous to be negative on equities at these levels”.

“Nobody should be surprised if the next moment of panic leads to a special purpose vehicle to buy stocks and equity ETFs,” O’Rourke said. “While the long-term ramifications of these measures are dangerous, the short-term liquidity will be strong. If there was ever a time not to fight the Fed, this is it.”

Tuesday, 24 March 2020

Markets tumble despite “powerful” Fed action

Markets fell sharply on Monday.

The S&P 500 fell 2.9 percent and the STOXX Europe 600 sank 4.3 percent.

Earlier in Asia, the Shanghai Composite tumbled 3.1 percent and the BSE Sensex plunged 13.2 percent but the Nikkei 225 rose 2.0 percent.

Markets fell despite the Federal Reserve launching yet more measures to mitigate the impact of the COVID-19 pandemic. It announced on Monday that it would purchase an unlimited amount of Treasuries and mortgage-backed securities, as needed, to support smooth market functioning and effective transmission of monetary policy. It also launched and expanded several emergency lending facilities to prop up markets for corporate credit, municipal debt and asset-backed securities.

Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson, said that while the latest Fed action “sends a powerful signal to markets”, it also “felt like it could be the final policy move from a central bank that now has few cards left to play by itself”.

Still, James Sullivan, head of Asia ex-Japan equity research at JP Morgan, said that this could be “one of the sharpest, but also on our numbers at least, one of the shortest global downturns that we’ve seen in the history of markets”.

“We would be selectively adding to exposure here,” he said.

Similarly, hedge-fund manager David Tepper said that it might be “time to buy a little”. Although stocks could still fall by another 10 to 15 percent, they “look really interesting for the long term”.

In contrast, Scott Minerd, global chief investment officer at Guggenheim Partners, said that “‘buying the dip’ on the expectation that Congress is going to pass something soon is probably not a prudent investment strategy”.

Anthony Scaramucci, founder and managing partner at investing firm SkyBridge, told CNBC that while an economic stimulus package could provide a short term boost for markets, he is less optimistic for the long term.

“We’re in a protracted bear market,” Scaramucci said. “I’ve told people, this is so much worse than the global financial crisis. It’s literally 9/11 plus the global financial crisis.”

Monday, 23 March 2020

US stock futures fall as markets face “worst crisis since the Great Depression”

US stocks suffered their biggest one-week decline since the financial crisis in 2008, with the S&P 500 dropping more than 13 percent, and it looks like they will get off to a weak start this week.

US stock futures opened sharply lower on Sunday night, with the Dow Jones Industrial Average futures falling more than 900 points, or 5 percent, to hit their “limit down” level. S&P 500 and Nasdaq 100 futures were also down around 5 percent.

In the US, more than 30,000 cases have now been confirmed, with the number of cases in New York state having hit 15,168 over the weekend, more than in France or South Korea.

Indeed, Kelsey Piper and Christina Animashaun at Vox had suggested last week that the path of the COVID-19 outbreak in the US is following the same path as that in Italy, where the number of deaths from the virus has now hit 5,476, more than any other country in the world.

“[T]he US and most European countries are seeing early coronavirus growth numbers that look like the ones from Italy. Our confirmed cases are increasing at about the rate theirs did. That gives us every reason to think our health systems will eventually be overwhelmed like theirs were, unless we take strong measures sooner than they did,” they wrote.

A recession in the US is now widely expected, with Goldman Sachs in particular warning that the economy will decline at a 24 percent rate in the second quarter.

“Things will get worse before they get better and the markets will continue to reflect that reality,” said Marc Chaikin, CEO of Chaikin Analytics.

“This is an unprecedented situation, this is worse than 2008, this is worse than 1987, this is the worst crisis to hit financial markets since the Great Depression,” said Stephen Isaacs, chairman of Alvine Capital Management’s investment committee.