Fear of Missing Out (FOMO) stock rally?

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Macroeconomic/ geopolitical developments

  • The COVID-19 virus continues to spread globally, with the epicentre now in the US, where the number of cases and deaths continues to increase.
  • However, there has been modestly encouraging data from Europe, with some nations such as Italy, Spain and Germany seeing a potential plateauing of the number of cases/ deaths from the coronavirus.
  • Furthermore, four European nations (the Czech Republic, Austria, Denmark and Norway) are looking to potentially relax lockdown rules that most European nations are still employing with restrictions on public movement and work from home rules.
  • The global economic slowdown was further highlighted in the data in the past week, with another VERY high Jobless Claims number in the US on Thursday.
  • Again, over six million Americans filed for unemployment, after record numbers the prior two weeks, with nearly 17 million registering as unemployed since the lockdown began in early March.
  • Some economists are predicting that this could put the unemployment rate in the US already at 14%, which is above the peak during the global financial crisis.
  • On the Central Bank front, the US Federal Reserve stepped in again last week with further support for both the US and global economy.
  • On Thursday the Federal Reserve announced new programs aimed at lending as much $2.3 trillion to businesses.
  • This includes a Main Street lending program for small and medium sized business, plus a commitment to buy corporate bonds (investment-grade as well as high-yield, junk, bonds).
  • These measures are on top of prior initiatives, including effectively 0% interest rates, open-ended asset purchases, overnight lending facilities to US banks and the supply of US Dollars to global Central Banks via swap lines
  • An emergency OPEC+ meeting on Thursday 10th April, saw a cautious deal to lower production by 10 million barrels per day in May and June, with a G20 agreement reinforcing these production cuts over the Easter weekend.

Global financial market developments

  • Global stock markets surged over the last week, with the S&P 500 positing its best one-week percentage return since 1974, up 12.1% (and it was only a four-day trading week, given the Good Friday holiday).
S&P 500 chart
  • These gains have reinforced bases that formed in the second half of March, driving a Fear of Missing Out (FOMO) rally.
  • In the Forex space, the US Dollar has wakened broadly, as stock averages have rallied, with the “risk currencies” the Australian and New Zealand Dollars particularly strong against the US currency.
  • The US Dollar setback has encouraged a surge in Gold, now at new multi-years highs.
  • The oil price dropped Thursday, with some disappointment at the OPEC+ production cuts, but there is potential for a rebound into the start of this week, given the aforementioned G20 developments over the Easter weekend.

Key This Week

  • Markets in Europe and the UK are closed Monday for the Easter holiday still, whist the US and Asia are open.
  • Watching for a further slowdown in Europe, of the number of cases/ deaths from the coronavirus.
  • Also, watching for the possible further easing of lockdowns in Europe (and elsewhere).
  • We get Chinese trade data for March on Tuesday, which is factored in to be very poor.
  • Wednesday brings US Retail Sales data for March and the Bank of Canada (BoC) interest rate meeting and decision.
  • On Thursday we get the Australian Employment report, and key US Jobless Claims.
  • The week ends Friday with Chinese Gross Domestic Product (GDP) and Retails Sales.
  • Earnings season starts in the US this coming week, kicking off as ever with banks and large industrials.
  • These will be watched with interest with the Q1 number anticipated to be extremely disappointing given global events in February and particularly March.
  • The future guidance for Q2 will be watched with interest, although details are understandably likely to be very vague.
DateKey Macroeconomic Events
13/04/20Markets in Europe/ UK closed for Easter; US and Asia are open
14/04/20Chinese trade data
15/04/20US Retail Sales; BoC interest rate meeting and decision
16/04/20Australian Employment report; US Jobless Claims
1/04/20Chinese GDP and Retails Sales.

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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