Market Participants Bet On Money From Central Banks And Governments
The U.S. stock market shows enthusiasm ahead of today’s open as central banks and governments around the world promise massive support to coronavirus-stricken economies. There’s hope that this financial support will lead to higher securities’ prices and change the current downside trend.
Currently, S&P 500 futures are up more than 1%, but they they have been trending down in recent hours.
The world is still waiting for the details of the coronavirus aid package from the U.S. In a divided political situation, Republicans and Democrats will have to find a consensus but there is no doubt that any coronavirus aid package that ultimately comes out of the intense talks will be massive.
Coronavirus Cases Increase
Meanwhile, the situation keeps getting worse in the real world. California has issued a ‘stay at home’ order as the state fears that the virus spread will become uncontrollable. Italy has recorded a record number of daily new cases – 5,322.
The length of the crisis remains the key unknown data point for the market. The world countries have not yet completed mass testing of their citizens and can only guess the real number of coronavirus cases.
In addition, there’s not enough data about the impact of various virus containment methods so that the governments can make their decisions based on bulletproof facts rather than estimates. In the longer-term, this uncertainty is the key worry for the market.
Oil Rallied, But Will It Sustain Gains?
In recent days, WTI oil rallied from $20 to $28.50 as bargain hunters stepped in to buy oil and also because of the rumor that the U.S. may intervene in the current battle for market share between Russia and Saudi Arabia. For Russia, this may mean new sanctions.
Interestingly, gains in oil majors like Exxon Mobil or Chevron have been limited compared to the size of oil’s rebound move. Perhaps, this means that market participants do not expect that oil’s move is sustainable. That’s certainly a story to watch for today.
Yesterday, I wrote that the U.S. dollar was the primary beneficiary of the crisis. Today, the U.S. dollar is in a pullback mode against a broad basket of currencies, but it remains to be seen whether this pullback will have any material length if the number of coronavirus cases keeps increasing at current pace.