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Market Commentary 20/04

Markets spiked overnight after great news about a therapy that has successfully defeated the coronavirus. Gilead has been trialling the drug, ‘remdesivir’, which has been successful in a small trial in Chicago. Equity markets spiked up on the news, which coincided with President Trump announcing plans to reopen the US economy, giving markets confidence. The trials have been successful and renewed confidence should inspire markets to the much promoted ‘V shaped’ recovery. Risk appetite improved and so did the trade exposed currencies, with the AUD rising to 0.6360, while the NZD regained 0.6030.

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Market Commentary 17/04

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US Weekly Jobless Claims came in at 5,245,000, bringing the total to 22,000,000 unemployed due to the coronavirus. The economic impact of the pandemic is now being fully reflected in the economic data and the stark reality is now forcing authorities to plan a return to work. The US Philly Fed Business Outlook collapsed to minus 56.6, while EU Industrial Production contracted by 1.9%, driving a return to work strategy.

The USD regained some momentum, as risk appetite declined with the dreadful economic data, forcing the EUR back to 1.0840. The GBP declined to 1.2450, as they approached the eye of the pandemic storm, extending the lock-down by another 3 weeks. The Australian Unemployment rate was better than expected, coming in at 5.2%, due to the success of the Government support programs and allowing businesses to trade through a partial lock-down. The AUD regained 0.6300, while the NZD fell back to 0.5950, as the full blown lock down/elimination strategy is being sorely tested.

The coronavirus spread looks to have been contained and the numbers are now measurable, giving markets some certainty. Exit strategies have become front and centre and Governments now realise economic activity must be resumed. Planning, timing and implementation are now key.

Weekly Market Calendar

13/4 Easter Monday, US Budget, German Wholesale Price Index

14/4 China trade Exports/Imports, NZ Credit Card Spending, Australia Consumer Confidence, NFIB Small Business Optimism

15/4 NZ Food Prices, Australia Consumer Confidence, US Weekly Mortgage Applications, US Retail Sales, Empire State Manufacturing, US Industrial/Manufacturing Production

16/4 Bank of Canada Rate Decision, NAHB House Market Index, Australia Employment, German CPI, EU Industrial Production, US Building Permits, US Housing Starts, Philly Fed Survey

17/4 China GDP, China Industrial Production, China Retail Sales, Japan Industrial Production, EU CPI

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FX Update

FX News

Day twenty of the official NZ lockdown.

The NZ Govt could increase the massive stimulus it is dishing out to limit the damage to the economy. Doubling the current spend to 40Billion would almost certainly have the effect of limiting the unemployment rate to ballooning past 10%. Not only that, increasing it to 60 Billion would assist in hastening the NZ economy back to normal times much quicker.

Traders around the globe will be paying attention to coronavirus numbers again this week, as we look for signs that numbers across the globe have peaked. US Dollar demand will come into play as it has over recent weeks with risk sentiment correlating closely to Covid-19 infection result publishing’s.
US Retail Sales and Aussie unemployment figures will be key this week along with Bank of Canada’s monetary policy announcement. 

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International Trade

Market Commentary 16/04

US economic data is now reflecting the economic shut-down, with Retail Sales contracting 8.7%, while Empire State Manufacturing collapsed by 78.20! These are record low numbers and reflect the economic shut down, while the Fed’s ‘Biege Book’ observed economic activity had ‘contracted sharply and abruptly across all the regions’. The Banks have had earnings hit hard, with provisions for bad debt skyrocketing, while client bankruptcy risk has ballooned. The IMF has warned of the ‘worst financial crises since the Great Depression’, which may be a bit dramatic, as economies pass the peak infection levels and begin the return to work.

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Market Commentary

The strong market rebound continued on equity markets overnight. The coronavirus appears to be under control and contained. Various treasuries and banking institutions are releasing reports measuring the impact of the virus on global economies. These reports are giving markets more certainty and allowing risk appetite to grow. The IMF have reported on global growth contractions of around 7%, while NZ Treasury estimated the impact of the virus will be greater, due to the highly trade exposed nature of the economy. Forecasts of Unemployment rising to above 10% should set off alarm bells, as this would represent a huge recession or perhaps even the dreaded ‘depression’ if this has legs. Equity markets are rebounding strongly and a restart of economies would avoid this dire scenario.

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Market Commentary 14/04

Markets reopened after the Easter break on a negative note, which may be more of a correction to the record gains from the previous week, rather than a resumption of the huge losses attributable to the coronavirus. The big news over the weekend was the agreement between OPEC and the PLUS members on oil supply cuts. The deal was to cut 10 million barrels per day, which is 10% of the worlds production and the biggest cut in history. President Trump had been working with the key factional fighters, Saudi Arabia and Russia, and apparently succeeded in a compromise deal in an effort to save the energy sector. Initially oil prices spiked but settled back to trade $22.50/barrel.

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Market Commentary 09/04

Markets continued to rise as certainty returns. The course of the coronavirus looks to be more predictable and all the models forecasting infection and death rates, have been overestimated. The increase in infection rates are falling in Europe and the US, suggesting that viral spread has peaked, giving markets some confidence. Control and containment seem to have been achieved and authorities are now working the return to work scenarios. There are many risks out there, but markets have an improving risk appetite, allowing the USD to settle. The Yen traded 108.85, while the GBP charged back above 1.2400, boosted by the improving medical situation of PM Johnson.

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Market Commentary 08/04

The Dow had opened the week full of confidence, surging more than 1600 points and followed this in early overnight trade with gains of a further 900 points. These gains have added nearly 25% to the Dow on coronavirus lows. Italy and Spain has seen falls in new cases and death rates have stabilised, while the New York hot spot appears to be cooling before any of the models predicted. This allowed a huge improvement in risk sentiment, forcing the Dollar lower and bond yields to rise. The mitigation taken to combat the coronavirus appears to be working and plans are now forming to return to work.

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Market Commentary

Global equity markets rebounded strongly overnight, as the number of deaths from the coronavirus slowed, allowing for some optimism. Italy and Spain have been overwhelmed with the infection, but the infection and death rates are slowing, allowing for speculation that they may have peaked. The US has also started to see a glimmer of hope, as the massive infection rates leasd by New York, may have peaked?

The good news was welcomed by markets and the commodity currencies were beneficiaries. The NZD pushed up to 0.5920, while the AUD approaches 0.6100, ahead of the RBA meeting held today. The Fed announced a new small business program, labelled the ‘Pay-check Protection Program’, while the RBNZ has an assistance program for the private sector called the (LGFA). Central Bank moves into private sector debt monetisation is a feature of these desperate days.

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