(13 MAY 2020)DAILY MARKET BRIEF 1:Panic spreads on warnings that Covid could hit economies twice
The world, and the financial markets, are not out of the woods just yet.
US equities slumped as panic regarding a second wave of coronavirus infection following the business reopening dashed the investor sentiment amid the US’ top infectious disease expert Anthony Fauci warned that reopening the economy too early could have serious consequences.
Over the past 48 hours, the investor sentiment made a sharp U-turn from excitement of business reopening to the anxiety that the things could go terribly wrong. And this time, governments and central banks are left with limited ammunition to fight back an aggravated global health and economic crisis.
The S&P500 and Nasdaq closed 2% lower on Tuesday, equities were mixed in Asia. Indian Nifty gained 2%, Hang Seng was flat, while Nikkei (-0.41%), ASX 200 (-0.21%) and Shanghai’s Composite (-0.18%) recorded losses.
Activity on FTSE (-0.95%) and DAX (-1.44%) futures hint at another day of sell-off across the European equities.
On the data deck, the Japanese current account surplus narrowed to 1.917 trillion yen in March from 2.787 trillion yen printed a month earlier. The goods surplus fell rom 0.70 to 0.10 trillion yen, while the services deficit turned positive. Still, the Japanese yen remained strong on the back of an increased safe haven demand. The USDJPY traded below the 107.30 mark and is set to make a renewed attempt below the 107 mark.
Australian consumer sentiment, on the other hand, improved significantly in May on prospects of the economy getting back on track, however, the market gave little reaction to the data which remained somewhat behind the curve, as live news suggested that this optimism could remain fragile. The AUDUSD slipped and consolidated below the 65 cents mark, and the mounting risk-off sentiment could pave the way for a decline toward the 0.64/0.6380 area.
In New Zealand, the interest rates were kept unchanged at the historical low of 0.25% as expected, but the upper limit of the Large Scale Asset Purchase program (LSAP) was almost doubled from $33 billion to $60 billion. The Kiwi tanked to 0.60 against the greenback, on the back of a dovish monetary policy announcement and risk-off outflows.
The antipodeans will certainly fall from grace with the mounting anxiety that the post-coronavirus normalization may not be as smooth as the market has priced in.
