Welcome to the real world, Mr. Trump
We wrote yesterday that the optimism in the financial markets at the start of the week is very premature and this will end with another round of decline in the stock markets. Actually, this is what happened.
The reason for the decline was Trump's acceptance of reality, which he so stubbornly denies. In his last speech, the US President admitted that the main problems are yet to come, and against the backdrop of predictions that up to 240K Americans will not be able to survive the epidemic, this looks like an extremely depressing fact for financial markets. Moreover, the situation in the world continues to deteriorate. Judging by the current dynamics, tomorrow (if not today) the number of cases may well exceed the mark of 1 million, which in itself looks very frightening.
So we continue to sell everywhere in the stock markets, hide in safe haven assets (we buy gold and the Japanese yen) and prepare for the bad NFP data and the subsequent sale of the dollar.
It should be noted that the wave of economic negativity has not yet clearly covered the United States. In fact, everything in US began to reach more or less serious levels only two weeks ago. Yesterday's statistics on the labor market from ADP showed a decrease of only 27K, but this is definitely positive for the US and the dollar, in light of how much the indicator could sag (analysts, by the way, expected a decrease of 150K). The PMI and ISM indices went below 50, which is a statement of a decrease in economic activity, but again, this data is far from disastrous. So the dollar can be satisfied with the data. However, this is good for those who want to sell it on the eve of official statistics on US labor market.
And a few words about our medium-term position (buy oil). Yesterday was the day the OPEC + agreement expired. Typically, oil quotes did not fall to $15 and below, as many analysts predict now. Yes, the size of the drop in demand is scary, but do not forget that oil has already received its share of suffering in the form of a 60% drop in oil prices over the past few months. But the future sharp drop in oil production (according to various estimates, may exceed 5 million bpd) is still not taken into account in the price. Which in itself seems to be a local injustice to the asset. So we continue to believe in the prospective growth of oil, understanding, however, a general negative fundamental background nowadays.
The reason for the decline was Trump's acceptance of reality, which he so stubbornly denies. In his last speech, the US President admitted that the main problems are yet to come, and against the backdrop of predictions that up to 240K Americans will not be able to survive the epidemic, this looks like an extremely depressing fact for financial markets. Moreover, the situation in the world continues to deteriorate. Judging by the current dynamics, tomorrow (if not today) the number of cases may well exceed the mark of 1 million, which in itself looks very frightening.
So we continue to sell everywhere in the stock markets, hide in safe haven assets (we buy gold and the Japanese yen) and prepare for the bad NFP data and the subsequent sale of the dollar.
It should be noted that the wave of economic negativity has not yet clearly covered the United States. In fact, everything in US began to reach more or less serious levels only two weeks ago. Yesterday's statistics on the labor market from ADP showed a decrease of only 27K, but this is definitely positive for the US and the dollar, in light of how much the indicator could sag (analysts, by the way, expected a decrease of 150K). The PMI and ISM indices went below 50, which is a statement of a decrease in economic activity, but again, this data is far from disastrous. So the dollar can be satisfied with the data. However, this is good for those who want to sell it on the eve of official statistics on US labor market.
And a few words about our medium-term position (buy oil). Yesterday was the day the OPEC + agreement expired. Typically, oil quotes did not fall to $15 and below, as many analysts predict now. Yes, the size of the drop in demand is scary, but do not forget that oil has already received its share of suffering in the form of a 60% drop in oil prices over the past few months. But the future sharp drop in oil production (according to various estimates, may exceed 5 million bpd) is still not taken into account in the price. Which in itself seems to be a local injustice to the asset. So we continue to believe in the prospective growth of oil, understanding, however, a general negative fundamental background nowadays.
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