(08 April 2020)DAILY MARKET BRIEF 1:Equities mixed as number of cases plateau.
The US indices rallied past 3% before reversing gains on Tuesday, and closed the session a touch below zero. The US treasury yields were
offered, the US 10-year yield rebounded to 0.73% and the dollar softened.
US House Speaker Nancy Pelosi said that the US may add another $1
trillion stimulus in the mix to fight a coronavirus-induced economic slowdown.
Speaking of the virus, though the UK and New York announced their
deadliest days yesterday, the number of cases slowed in these locations and elsewhere in the world. The fact that we may see a peak and a
reversed trend in number of cases and deaths in most parts of the world indicates that the worst is probably behind, but it does not
necessarily mean that the containment measures should be lifted too quick and too soon. As the risks prevail, the world could stay confined
for couple of more months. In this respect, we could see energy and transport shares underperforming the rest for an extended period of time.
Equities
in Asia traded mixed. The Nikkei (+1.21%), Kospi (+0.69%) and ASX 200 (+1.23%) advanced, as Hang Seng (-0.75%) and Shanghai’s Composite
(-0.26%) traded in the red.
But one encouraging common denominator is the decline in amplitude of daily fluctuations. We start seeing
signs of falling anxiety fueled by a series of recent economic data around the globe that is not as bad as analysts expected.
In Germany, the
factory orders and industrial production remained resilient to the coronavirus outbreak in February. In Japan, the core machinery orders
unexpectedly increased 2.3% on month to February versus a 2.7% decline expected. And in the US, the Jolts job openings fell from 7 million to
6.8 million in February, better than the 6.6 million penciled in by analysts.
But that could be misleading.
Most economies, except
from China, were on the path of economic improvement at the start of this year. Hence, the February data reflects a former trend which should
abruptly come to an end in March and deeper negative numbers should creep in starting from April.
Still, consolidation will likely be the major
market theme in the coming months, as the expectations of cataclysmic economic figures have already been broadly priced in the asset prices
worldwide and better-than-expected data is the only thing investors need to stay tuned for recovery right now. Massive fiscal and monetary
stimulus packages should take effect slowly.
By Ipek Ozkardeskaya
