The euro finally found its footing this week, bolstered by a Franco-German plan for a European recovery fund worth half a trillion euros to assist the economies most devastated by the crisis. Although the proposal is a step in the right direction for establishing some debt-sharing mechanism that ultimately sets the stage for Eurobonds, its size is quite small and it will face fierce opposition from Northern European countries. Hence, while it diminishes some risks and could keep the euro [..]
Sino-Australian relations sank to a new low this week after China unexpectedly slapped 80.5% tariffs on Australian barley imports, possibly signalling a new front in the global trade war. China buys about 30% of Australia’s exports and its decision comes days after blacklisting four Australian abattoirs that export beef. But while China’s actions must be ringing alarm bells in Canberra, the Australian government is not planning retaliatory tariffs, adding weight to speculation that there’s more than meets the eye in [..]
Interest rate differentials have traditionally driven the FX market, but now that every major central bank has slashed rates to zero, what will guide currencies? In a nutshell, it might be a blend of how high the risk of future shutdowns is, relative growth performance coming out of the crisis, global risk sentiment, and politics. The defensive yen seems attractive in this brave new world as it no longer suffers from a severe yield disadvantage, while the dollar’s role as [..]
Oil prices traded negative for the first time ever this week, as physical space to store the liquid has almost run out amidst an oversupply of epic proportions. In the near term, there’s little that can save oil prices, and we might even see a repeat of the oil-crash movie in mid-May as storage space runs out entirely. That said, if and when storage room runs out, that could also be the point of ‘peak oversupply’ and perhaps the bottom [..]
This earnings season will be pivotal. With so little post-virus economic data so far, the real-time guidance by corporate executives could be invaluable. In a nutshell, while earnings and guidance will probably be gloomy overall, there might be huge contrasts between sectors. Industries like travel and energy will likely be decimated, whereas online retailers and home entertainment companies might have made a killing. All told, while significant downside risks remain for the market overall, some ‘value plays’ are also arising. [..]
This will be a pivotal week for energy markets. The world’s largest oil producers will meet to discuss cutting their production in an attempt to stabilize a market that has been devastated by collapsing demand. OPEC and Russia will sit down for talks on Thursday, before the G20 energy ministers convene on Friday. The immediate reaction in oil prices will depend on whether a deal is struck at all, and if so, by how much they will cut. In the [..]
It didn’t take long for the US dollar to reclaim its crown as king of currencies after a brief but sharp sell-off in late February. An acute shortage of dollars across global markets, driven by a panic rush for cash as the virus turmoil deepened, has bolstered the US currency’s safe haven status. But amid some tentative signs of a possible levelling-off in the rise of new infected cases, is there a risk of the dollar falling off a cliff? [..]
Stock prices are making a V turn after experiencing the sharpest downfall since financial crisis and bargain hunters are looking for the right time to buy. Hopefully, there are reasons to believe that the positive trend could continue, though on the other hand it is too early to rule out a dead cat bounce, and it is even challenging to predict a full recovery after the virus drama ends. Hence, while it looks like a good opportunity to get exposure to the market, a portfolio overloaded [..]
The outbreak of COVID-19 is the biggest crisis Europe has had to face since the second world war as the human and economic tolls reach levels that were inconceivable just a few weeks ago. Yet, while the euro hasn’t done particularly well during these dark times, it is far from being at the bottom of the performers league. But does the current exchange rate reflect investor confidence in the European Union’s handling of the outbreak or that it was undervalued [..]
Gold’s reputation as the ultimate safe haven asset took a real beating lately, as the collapse in stock markets forced investors to ‘sell everything’ in order to meet margin calls. Yet, that might be about to change. With central banks unleashing a tsunami of quantitative easing (QE) at a time when fear is running rampant in the markets and government debts are about to explode, this seems like the perfect cocktail that could push gold back to record highs. That [..]
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