Yesterday’s rebound has proved to be short-lived, with global markets trading in the red today and futures contracts on the main American indices triggering a circuit breaker.
Governments around the globe have pushed toward fiscal stimulus. The Trump administration has assigned $1.2tn, the Spanish government pledged €200bn, and the French government promised €45bn and the prospect of nationalizing troubled companies if needed. However, US treasury secretary Steven Mnuchin said yesterday that the spread of COVID-19 could increase unemployment to 20%.
Oil tumbled to the lowest level in almost 17 years and still under massive selling pressure. At the time of writing, the WTI is at 25.50 during writing this article, with a short-term target at 22. Saudi Arabia is planning to increase its oil export to a record 10 mln/barrels a day, which increases the negative view for the oil in today session.
Gold – typically seen as a safe haven - has failed to stabilize above the major levels at 1,535 and it is dropping toward 1,480 and 1,460.
With the continued turmoil across most asset classes as funding is under strain and the demand for US dollar is increasing (as you can see from the cross-currency swap basis chart below), we believe the markets will continue to be under stress today. This is likely to continue until we see a diminishing rate of the spread of novel COVID-19.