• Stock Markets: Markets are revelling in President Trump’s reopening plans and kicking into a higher gear as Boeing is said to resume commercial aircraft production at Puget Sound
• Oil Markets, more rapid recovery of global demand via re-opening, could mean upside surprise to the current forecast
• Gold Markets: Investors continue taking refuge from the storm under golds umbrella, but demand was getting crowded out a bit by a firmer US dollar, and demand for US treasuries
• G-10 FX: With oil prices finding some comfort on the US economy re-opening narrative, the commodity bloc of currencies has been off the races this morning
• Asia FX: The Ringgit should trade on much firmer footing today as prices stabilize and as global risk sentiment bubbles
Markets are revelling in President Trump’s re-opening plans and kicking into a higher gear as Boeing is said to resume commercial aircraft production at Puget Sound in a phased approach beginning next week after suspending operations last month in response to the COVID-19 pandemic.
Providing the roadmap to a plethora of companies likely to follow suit, the company has taken extra precautions and instituted comprehensive procedures to keep people safe and fight the spread of COVID-19.
Precisely what the doctor ordered while on both accounts simultaneously arresting the market healthcare and economic concerns. And as Gilead surged into the bell on a report that their Covid19 vaccine is showing promise.
In his daily update, President Trump said:
“The Administration expects fewer deaths than the most optimistic projections; the economy to boom once country reopens.”
Critical in his daily brief is that 1/3rd of the country has no new cases reported in the last seven days and that the US has passed peak virus and that’s healthy.
American will return to work as soon as conditions allow, with re-opening corporate borrowing a page for Boeing opening playbook.
For the Asia markets, this provides a more than suitable lead-in for what could be sobering assessment when China GDP gets delivered later this morning. Still, the steps taken by the PBoC and mainland regulators as domestic markets re-emerge from lock-down should help paper over the negative data fissures. But as things start to return to routine, the post-panic phase economic reality checks could increasingly drive the moves in asset prices going forward.
If we are looking for a simple quantifiable re-opening plan using international data benchmarks, New York Governor Andrew Cuomo said New York’s pause had been extended, in coordination with other states, according to early news reports.
What does that mean? In recent days, the daily increase in new cases in New York state has come steadily lower, taking it to around 5%, data from Johns Hopkins shows. The regular case increase fell to 3.5% on April 13, only to rise to 5.6% on Wednesday.
How does that compare internationally? Well, in Austria and Spain, which have taken tentative steps to reopen, Johns Hopkins data showed the daily growth rate at in and around 2% for a sustained period before reopening.
The market sentiment will continue to reboot and probably swivel as often a barstool at happy hour once the focus shift to the real economy immediately upon reopening.
Still, I can’t grasp the constant references to previous bear markets and the ” experts” why buying stocks is a bad idea. This slowdown is unlike anything before and is irrefutably and structurally different than any bear market on record.
Imbalances in the world economy did not cause this mess. This meltdown was a deliberate policy-induced slowdown, so the pattern of recovery will be nothing like before and probably a lot more explosive at times.
However, there will be numerous air-pockets to navigate.
More rapid recovery of global demand via reopening could mean upside surprise to the current forecast. So, the market has been gingerly covering shorts as the NYMEX evening (EST) session reopened. But price recovery could still be limited as the consistent view that the markets will likely rebalance slowly since the OPEC+ deal in its current format won’t offset 2Q demand, continues to resonate over the near term.
Still, visibility on the duration is positive as this provides more wiggle room for shut-ins or even additional storage to more effectively bringing the supply and demand equation to more manageable reading.
Institutional Gold bids are pulling back to the $1650-75 oz levels this morning as a more optimistic near-term economic outlook takes hold after President Trump has introduced a workable roadmap to recovery while Boeing has provided the exacting blueprint how America returns to work.
In early Asia, gold prices are finding some support above the critical pivot $1690-1700 oz level as the USD weakens and ahead of the vital China GDP reading. But if the S&P500 continues to rocket higher and 2900 level long gold positions could prove to be a weak hand heading into the weekend, and we could see some stop-loss action trigger on a break of $1700 oz.
With oil prices finding some comfort on the US economy reopening narrative, the commodity bloc, particularly the AUD and CAD, has been off the races out of the gates this morning. A potentially faster pace of recovery in China is providing the fuel to push commodity prices higher today.
Also, the rise in US equities is suppressing cross-asset volatility and providing a positive backdrop for the currency market. However, the Euro has been a bit slow uptake as re-emerging fears about relationships within the European Union could lead to a widening in Bund/periphery spreads, especially vs. Italy. They could continue to weigh on the single currency.
The Ringgit should trade on much firmer footing today as prices stabilise and as global risk sentiment bubbles on the favourable prospects as the US economy set to reboot post Covid19. The US equity market rise provides a good template of how the KLCI could move once the MCO is removed.
The KLCI was already beating the odds yesterday on growing expectations. Japan’s Prime Minister Abe has proposed building an economy less dependent on China. So there is some serious thought that Japanese companies will relocate to other ASEAN centres.
Malaysia is a prime destination given the tax-friendly environment, excellent standard of living, ready set manufacturing facilities, and the profusion of English as a second language.
International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp