Wednesday, May 6, 2020

Asia Times: Stocks across the globe rally as more countries start to ease lockdown restrictions

  • China
  • Dollar
  • Gold
  • Yen
  • Euro
  • Oil
  • RBA


Market Recap: Stocks across the globe rally as more countries start to ease lockdown restrictions

Lockdowns easing across the world helped rally stocks in the US for the second day in a row. Pfizer Inc's announcement that the company had started its first round of human testing for its experimental Covid-19 vaccine with partner BioNTech likely also helped fuel investor optimism.

The healthcare sector led gains among S&P500 sectors, rising 2.15% while the technology sector was close behind, advancing 1.42%. But equities reversed some of its gains late into the trading session after Fed Vice Chairman Richard Clarida dampened optimism in the financial markets during an interview with CNBC in which he said that the US economy will probably contract sharply during the Q2 as a result of the lockdowns.

Disney became the latest company to suffer a hard blow to its quarterly earnings. The entertainment giant suffered a dent to its profit for the quarter, with its earnings per share cut more than half to US$0.60 per share. While revenue rose 21% YoY in the latest quarter, it was mostly due to the acquisition of 21st Century Fox, instead of an increase in demand. The closure of its Disney theme parks cost the company close to US$1bn in income during the quarter. Its movie business also suffered an 8% loss to its bottom line, as costs start to add up with movie theatres closed across the world, and filming unable to continue. As expected, its Disney+ service experienced a surge in its subscriber count, rising to 33.5 million users in the quarter and spiking roughly another 20 million subscribers to 54.5 million as of May 4th. The decision for the company to shift some of its theatrical releases such as "Onward" will likely help boost its subscriber count and compete with Netflix for market share as a result of the lockdown across the world. But it remains to be seen if the subscriber count can be sustained post-lockdown. It's shares fell 2.08% in after-hours trading as of 8am (GMT +8).

In contrast, Beyond Meat posted quarterly sales that beat analyst estimates, signalling that demand for its product remains steady despite closures in the food industry. The lockdown did impact its top line however, dampening demand enough to pressure revenue growth to its slowest pace in two years. Its food service sales fell 23% while retail sales rose 12%, implying that while consumer demand for restaurants and food services has dropped, its product remains in demand in supermarkets. The disruption in the meat production supply chain is likely to help lift demand for its product as well, since it can be considered a substitute for meat. The company's stock surged 4.80% in after-hours trading as of 8am (GMT +8).

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +0.56% +133.33 23,883.09
S&P500 +0.90% +25.70 2,868.44
Nasdaq +1.13% +98.41 8,809.12
*Source: Bloomberg

In the forex market, oil-related currencies led gains among major currencies as oil prices continue its recovery. The dollar advanced as well, likely due to both increasing oil prices and as investors continue to hedge against some of the risk of escalating tension between the US and China. The euro on the other hand was one of the worse performing against the dollar, after Germany's top court ruled that the European Central Bank must justify its policies within three months. The court ruling was aimed at the central bank’s asset purchases program, although the new Pandemic Emergency Purchase Program (PEPP) isn't covered by the ruling. The ECB can continue its bond purchases during the three-month period. While the ruling should have little effect on the financial market, it may signal some downside for bond prices and possibly future legal implications on future programs.

The Australian dollar ended Tuesday relatively muted against the dollar, after the Reserve Bank of Australia (RBA) kept its monetary policy on hold as most economists expected. But the RBA expanded the scope of accepted collateral on its repurchase program to include investment grade bonds that were not issued by banks. The Aussie initially plunged 0.24% to as low as 0.6436 against the dollar at 12.30pm (GMT +8), but recovered within an hour to 0.6452 by 1.30pm (GMT +8) on Tuesday.


Safe haven assets closed Tuesday higher, tracking gains in the equities market. The detachment from the traditional inverse correlation to stocks is likely due to both the easing of lockdowns, which implies a possible economic recovery, in which both safe havens and equities should climb in tandem initially, as well as a form of hedge against the risk of financial markets revisiting bottoms as a result of the large expected negative impact to the global economy. Gold and yen both climbed for the third trading session in a row. US Treasuries on the other hand fell across the board, pushing benchmark 10-year yields 2.8bps higher to 0.66%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.23% +3.85 1,705.92
Silver +1.26% +0.19 14.69
JPY +0.16% +0.17 106.57
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +0.6 0.19%
10-Year +2.8 0.66%
30-Year +5.6 1.33%
*Source: Bloomberg

Oil futures surged double digits on Tuesday, rising back to levels not seen for the past two weeks. The spike in oil prices is likely due to speculation for oil prices to start to return back to normal as a result production limits from both OPEC+ and non-OPEC+ members. Shale oil producers starting to limit output also helped ease traders’ concern for the current oversupply. In addition, easing of lockdowns across multiply countries also imply that demand should start to return, which should most likely help the fundamentals for physical oil prices. The outlook for oil should remain mostly tilted to the upside, as downside risks may currently be quite limited for oil prices. Volatility in the futures market should be taken in consideration however, as the detachment from the fundamentals driving physical oil prices may continue to cause fluctuations in the oil futures market.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +13.86% +3.77 30.97
WTI Crude +20.45% +4.17 24.56
*Source: Bloomberg

In Asia, stocks looks likely to be mixed on Wednesday. The KOSPI should see some upside after the South Korean Stock Exchange closed for a bank holiday yesterday. There may be some reversals in gains for stocks in other Asian markets as investors in Asia weigh in on the surge in optimism across the world for the reopening of economies. Stocks in Hong Kong should continue to have some upside potential after it eased restrictions in the country while Singaporean shares may be dampened by local major bank UOB's first quarterly profit drop since 2016 due to a spike in its provisions for bad debt. Futures tracking US major indices were down but close to flat on Wednesday morning as of 8.46am (GMT +8).

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
KOSPI Index +0.60% +11.29 1,906.66 9:03:20 AM
ASX200 Index -0.79% -42.77 5,364.30 9:03:14 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.04% -10.00 23,751.00 8:46:27 AM
S&P500 Futures -0.06% -1.75 2,856.50 8:46:28 AM
Nasdaq Futures -0.06% -5.50 8,918.75 8:46:27 AM
*Source: Bloomberg

Companies reporting earnings for the day ahead include (all timings in GMT +8 where available):

  • Wendy's (10.30pm)
  • Hyatt Hotels (11.30pm)
  • Lyft (4.30am +1)
  • Etsy (5am +1)
  • Paypal Holdings (5am +1)
  • Peloton Interactive (5am +1)

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany Mar Factory Orders (2pm)
  • Germany Apr Services/Composite PMI (Markit) (F) (3.55pm)
  • Eurozone Apr Services/Composite PMI (Markit) (F) (4pm)
  • US Apr Employment Change (ADP) (8.15pm)