Monday, June 22, 2020

Asia Times: Equities manage to hold onto weekly gains despite growing caution for a delay in a global economic recovery

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil

06222020a

Market Recap: Equities manage to hold onto weekly gains despite growing caution for a delay in a global economic recovery

Stocks on Wall Street mostly fell on Friday as investors likely continue to remain cautious on the potential economic impact of the growing count of Covid-19 cases. Apple's announcement of its decision on temporary shutdowns for its stores in Florida, Arizona, South Carolina and North Carolina likely impacted stock prices as well, since the move from Apple signals that other retailers are likely considering a similar strategy as numbers of Covid-19 infections spike in those states. S&P500 sector performance on Friday also signalled that financial markets continued to shift towards lower risk positions, as the utilities, energy and industrial sectors lagged the most while health care, materials and communication services were the top performers.

Indexes Daily Change (%) Net Change Closing Price
Dow -0.80% -208.64 25,871.46
S&P500 -0.56% -17.60 3,097.74
Nasdaq +0.03% +3.07 9,946.12
*Source: Bloomberg

Major indices in the US still managed to hold on to gains over the week, with the Nasdaq advancing the most among major indices across the world. While normalising of the sharp losses seen in stock markets in the week before likely contributed to last week's gains in major market, it also signals that investors are likely still holding on to optimism that the peak of the Covid-19 pandemic's economic impact was seen during March to April. The STI was the only index that fell over the week, possibly as fears for a delay of a global economic recovery put downward pressure on Singapore's outlook despite the country's first day of its second phase of easing lockdown restrictions.

Indexes Weekly Change (%) Net Change Closing Price
Dow +1.04% +265.92 25,871.46
S&P500 +1.86% +56.43 3,097.74
Nasdaq +3.73% +357.31 9,946.12
FTSE100 +3.07% +187.42 6,292.60
Dax +3.19% +381.48 12,330.76
Stoxx +3.66% +115.36 3,269.10
Nikkei +0.78% +173.31 22,478.79
CSI300 +2.39% +95.63 4,098.71
KOSPI +0.42% +9.02 2,141.32
ASX200 +1.62% +94.77 5,942.58
HSI +1.41% +342.51 24,643.89
STI -1.86% -49.80 2,634.83
*Source: Bloomberg

Risk aversion was seen in the foreign exchange market as well with the dollar and Japanese yen leading gains among major currencies. The uncertainty of lockdown restrictions fully being lifted in the US was the most likely driver in the foreign exchange market. Hopes for additional stimulus from either the Fed or the US government may also have been another factor that lifted demand for the greenback, after Fed officials again signalled the central bank's willingness to support the US economy. The dollar and kiwi will likely be the focus for the week ahead, as the Reserve Bank of New Zealand decides on monetary policy on Wednesday, while the US' durable goods orders and personal spending report for the US for May will be released on Thursday and Friday.

06222020b

Safe haven assets ended Friday as investors shifted to safe haven assets ahead of the weekend. Gold gained more than 1% and is now trading at the top end of its price range since early April. The Japanese yen gained against both the greenback and euro, highlighting the demand for safe haven assets extending past the dollar. US Treasuries rose across the board, pushing benchmark 10-year yields down 1.5bps to 0.69%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +1.22% +20.94 1,743.87
Silver +1.39% +0.24 17.62
USD/JPY -0.09% -0.10 106.87
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -0.8bps 0.19%
10-Year -1.5bps 0.69%
30-Year -2.3bps 1.46%
*Source: Bloomberg

Oil futures rose on Friday as traders remain optimistic on the recovery for oil demand despite growing numbers of Covid-19 infections across multiple countries across the world and states in the US. The narrowing of the premium in the Brent and WTI crude benchmark also signals that there may be a growing shift in demand for Asian crude oil buyers to US suppliers, possibly as a result of higher price setting by OPEC+ members and the reduction in oil supply. The narrowing premium may push demand for US oil supply down in the EU however, since the lower premium for Brent oil would make it less cost effective to import oil from the US to the EU. Oil exploration in the US also shrank for a 14th straight week, signalling producers' expectations for a recovery in energy demand may be less-than-optimistic as compared to financial markets. Data released by Baker Hughes Co. showed that the total number oil rigs in onshore US fields last week fell by 10 to 189. The outlook for oil as a result will likely remains only slightly positive in the short-term, with significant downside risks as fundamental issues such as low energy demand continues to put downward pressure on the recovering oil prices.

Oil Futures Daily Change (%) Net Change Closing Price
Brent +1.64% +0.68 42.19
WTI +2.34% +0.91 39.75
*Source: Bloomberg

In Asia, stocks look set to start the week with losses as investors sentiment shift towards risk aversion. The Nikkei lost the most in the first hour of trading on Monday among other Asian indices, possibly thanks to growing demand for the Japanese yen. Both the KOSPI and the ASX200 were also facing downward pressure in the first hour of Monday's trading session. Futures tracking major indices in the US were also trading lower, signalling that the caution seen in financial markets on Friday may extend to Monday's trading session as well.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei -0.61% -135.63 22,342.07 8:40:50 AM
KOSPI -0.35% -7.37 2,133.95 9:00:50 AM
ASX200 -0.49% -29.18 5,913.40 9:00:44 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.20% -51.00 25,478.00 8:50:48 AM
US Futures -0.12% -3.75 3,055.75 8:50:49 AM
Nasdaq Futures -0.07% -6.75 9,916.75 8:50:50 AM
*Source: Bloomberg

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

  • PBoC 1-Year/5-Year Loan Prime Rate Decision (9.30am)
  • US May National Activity Index (Chicago Fed) (8.30pm)
  • US May Existing Home Sales (10pm)
  • Eurozone June Consumer Confidence (P) (10pm)