The tone is one of caution in early Asia, which seems to be the case of late given that a plethora of ASEAN countries mired in lockdown scenarios, which continues to cloud the local GDP outlooks.

Still, the broader market’s attention is now turning away from the trajectory of epidemiological curves and towards exit strategies.

But the big issue here is given overwhelming public support for hard lockdowns, and relatively elevated risk perception levels of the danger of the virus, it will make it difficult for the government politically to exit the lockdown without reliable test and trace capability.

China Template

China is beginning to come to life with services, and small and medium businesses are lagging. This has implications for the global reopening and gives us a peek at the future of weekend shopping. The fog is lifting, and the data is becoming a more useful guide through it. With China beginning to release more post-COVID shutdown data, a few takeaways are poignant.

The differential between the sharp recovery in factory activity and retail sales is glaring. While the factories are coming back online, it does not force people to buy things.

So, with countries around the world starting to relax their stay at home orders – some more than others – but getting back to where we were before the virus shut everything down isn’t just a matter of telling everyone to go back to work.

It’s a matter of getting them to re-engage demand in the face of potential secondary spreaders. Without a cure or a reliable treatment, the road to recovery could be longer and more arduous than initially thought based on the China template.

The Bearish View

Going into month-end short covering may lose its impact, especially as we near 2800. The lack of stock dispersion and with a possible ETF month-end rebalancing looming ominously, it wouldn’t take much of a negative headline to see the SPX veer below 2700.

The Realist View

Far too many inputs to draw any sensible conclusions about stocks Some Wall Street banks are arguing for new, permanently-higher equity multiples given the volume of central bank asset purchases in the system. While some of Wall Street’s most exceptional fear there may be some negative backlash on stock prices, S&P earnings come in at $110 this year vs. a January estimate of $178. Ultimately there’s are going to be a collision between deflationary forces hitting head-on into whatever it takes reflation policy.


The Australian economic data release this morning painted a more sombre picture than expected Australia April manufacturing PMI, released earlier, 45.6 after 50.1 in March. April services PMI 19.6 after 39.8 in March. The Aussie dollar has temporarily been knocked off its G-10 high horse as the market digest this ” check the box” data, which could contain a high level of inaccuracy given the lack of available concrete metrics. But as a whole, the data is hardly a surprise given the weaker than expected retail recovery in China.

I expect the market to digest and come back bid on the A$ with excellent support. From 6295 through 6275, as more and more will come to recognize China normalizing trade on the first signs of improvement in China’s retail sector demand.


Korea Q1 GDP contracted 1.4% q/q vs -1.5% consensus, after +1.3% in Q4 2019 (Bloomberg). Wednesday’s price action in USDKRW was indicative of market indecision, with a trip higher and lower, but the pair ultimately closed near where it opened. The KRW market is caught between social/economic normalization efforts on the back of an improving coronavirus situation, and the drag from portfolio outflows and The Kim Jong Un dynamic is foggy.

US market overnight

A better tone on US equities overnight, S&P500 up 2.3%, smaller gains through Europe after a mixed session in Asia. US10Y Treasury yields up 5bps to 0.62%. A better session in oil markets helped that sentiment, with Brent prices rising 5.4% after the US President indicated he had ordered US warships to shoot and destroy any Iranian gunboats threatening US vessels. Separately, offshore US oil drillers in the Gulf of Mexico have responded to the recent collapse in prices by shutting down wells.

And putting to rest thoughts of ” Policy Maximus” US Treasury Secretary Mnuchin indicated the to Main street,” the US will need to “spend what it takes” to protect the economy. Those comments follow some hand-wringing about debt from Senate Majority leader Mitch McConnell, who suggested Congress should “push the pause button” on further stimulus.

Oil markets

The first contracts are dead in early Asia, echoing my morning thoughts on ” scraping the barrel.”

Gold Markets

Gold gains on investor COVID-19 economic concerns while getting a boost from yet another US stimulus package; uptrend intact, but the rally may slow as US bond yields tick higher.

In a nutshell, gold investors are more impressed with the bullish aspect of more fiscal spending than with the bearish impact of higher equities.

Currency markets: The Ringgit

The ringgit is advancing on a more friendly outlook for medium-term oil prices as the market seems to be sidestepping the dreary near-term outlook in favour of an anticipated robust oil price recovery in Q3.

This is getting reflected in global oil stocks, which outperformed yesterday as the sector decouples from the underlying front month as the oil stocks are supported by high dividends and expectations of a positive price correction in Q3.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp