- Risk revives in Europe
- US housing data on tap
- Nikkei -0.18% Dax 0.44%
- UST 10-Year 0.70
- Oil $40/bbl
- Gold $1749/oz
- BTC/USD $9430
North America Open
- USD Existing Homes Sales 8:30
Any concerns about global growth revival were once against swept away in early European dealings, as all risk assets reversed their selloffs and rose strongly in morning trade.
US stock index futures, which opened as much as 70 basis points lower in Asia, flipped completely, rising by more than 1%, as once again buyers flooded the markets. In FX, the story was similar as the dollar weakened across the board and cable lifted from 3-week lows.
There was very little meaningful news over the weekend, as EU fiscal stimulus talks continued. Brexit negotiations were once again ramping up and traders kept an eye on coronavirus cases, which climbed to record highs globally.
The markets at this point remain utterly dismissive about the threat of COVID-19, even as the virus continues to spread, posting record-high numbers in series of Southern and Western US states, as well as ravage Latin America and part of Asia. The underlying assumption is that, despite the rise in infections, the death rates continue to remain subdued, as better treatment protocols, as well more fit cohorts, get the disease.
Such assumptions may be premature. While death rates have declined, the sheer increase in new cases almost assures that the numbers will inch back up, especially if the disease turns wildly exponential once again. With Florida, California, Texas all inching towards the 5,000-infections per day rate, such a scenario is entirely possible. One in five COVID cases requires serious medical care and the sheer number of infections could swamp facilities over the next 4 weeks, especially in those areas that have essentially abandoned all precautionary measures.
That’s why, despite markets’ nonchalant attitude, COVID data may be the most important economic statistic of the day, as it may force yet another wave of lockdowns or, at very least, a retreat of economic activity, as more and more infections as reported in the media.
For now, however, the risk-on flows remain in place, although as we noted last week, the 3,100-area in the S&P and the 10,000-area in the NASDAQ remain hard resistance points that bulls have not been able to batter through with any conviction so far.