Pandemic market shock: global fightback starts to take shape

The global markets today are trading in the red with major futures on US indices down roughly 1%. After two days of gains, markets failed to preserve their advance. Oil (WTI) is also down 2% today and is $24.5/barrel with a short-term target of 22/21. Gold is lingering around $1,600 per ounce, with expectations that it could rise to $,1635.

pite a successful two days of gains in global stocks due to exceptional stimulus measures from central banks around the world, we do not believe the bear trend will change course,  some stability may return to the markets as credit spreads tighten and volatility is decreases. The pandemic remains the markets’ focus, with the situation improving in Italy but deteriorating in Spain, and this is unlikely to change any time soon. Investors will need to see a significant slowdown in the virus’s spread to quantify losses and act accordingly in their valuations.

Situation in Spain is getting worse:

Source: Bloomberg

Yesterday, Senates approved a mammoth economic stimulus package of about $2 trn to minimize the economic fallout in the US. This move has successfully helped the markets to get their first back-to-back gains, and investors are monitoring other governments’ actions. Today, we are waiting for the unemployment claims in U.S., which are certain to grab the attention of street, with the of a surge to above 1 million compared to 281K in the past week.

Layoff will cascade to unemployment claims today:

Today we do not expect any change in the Bank of England’s approach, as they recently cut their interest rates to 0.1% and introduced a £200 bn QE package. Moreover, following the Fed, the BoE also announced a Contingent Term Repo facility to combat stress in the money markets. It is highly possible that the Bank of England may increase their QE program further.

British business activities in a free fall

Source: Bloomberg