With the phrase "bear market rally " permanently ingrained in everyone one psyche, it's getting more challenging by the hour to keep the glass half full, and the rose-tinted glasses-wearing scenario's in play as two of the markets major pressure points are starting to surface.
The fear of a super spreader in India suggests Asia's worst nightmare may become a reality. The COVID-19 infection curve is steepening in Asia's second-most populous country where containment efforts might have been affected to late to save the day.
And then the global financial sector was dealt a nasty wallop after shares in HSBC, and Stan Chart plummeted when both banks announced the cancellation of dividends.
All the while stock markets are reacting negatively to what now seems to be a likely increase in the duration and breadth of coronavirus lockdowns in the US and elsewhere, which is pointing to a potentially deeper and longer-term hit to economic activity than was anticipated even a week ago.
European equities are set to open 4% lower. The sell-off looks broad-based with banks in the lead after confirmation that UK banks will stop dividends and buybacks for 2019 and 2020. The focus will now shift to other sectors where shareholder returns look questionable. The rally into month-end is under perusal with pension-fund rebalancing finished and after having played there role.
Currency Markets
On the back of the weak Korean data at the open, USD/KRW has gapped higher, as equities falter (both in Asia and US futures). And foreign investor stock sales has accelerated once again this despite a USD liquidity recovery.
The Fed's temporary repo facility with foreign central banks will start on April 6 and last for six months, which will benefit both Malaysia and Indonesia, especially in the region. But with the bulk of dollar selling action triggered at extreme levels posts 4 PM London fixed yesterday, today its been an uphill struggle for risk-sensitive currencies given risk aversion that that threating markets stability.
Oil Markets
US President Trump signaled social distancing in the US would remain in place until April 30. The demand shock for oil and for the global economy more broadly will be more significant if mobility and social interaction restrictions stay in place beyond April.
As such, it's equally challenging to overlook the oil markets this morning as Saudi Arabia is making good on their oil war threats and have already started flooding the market awash with oil as tankers filled to the brim set out from King Abdul Aziz port this morning.
This shock is hugely detrimental for oil prices and perhaps a tipping point for the industry as a whole. The incredible deterioration in oil demand is swamping storage infrastructures to the point that now traders are even questioning whether policy coordination by OPEC+ and also with the US +Canadian oil producers in the mix, can save the day as now anything short of a 20-25 million barrel per day cut my only provide transitory relief as world economies come to a sudden stop.
Not surprising London oil traders are selling out of the gates this morning. But let's see how the Trump factor plays out as it's bound to be a bit bumpy ride the further we fall below WTI $20
Gold markets
Gold is bouncing back but unprecedented peacetime fiscal and monetary stimulus with the possibility of another US fiscal package are attracting buyers today especially as financial market concerns come to the fore with both HSBC and StanChart not paying dividends.