07 April 2020

US Virus Count Eases, But Too Early to Celebrate?

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What’s happening: US stocks closed sharply higher on Monday, with all three major indices surging more than 7%.

What happened: Investors rejoiced at the first positive sign of America’s ability to contain the coronavirus pandemic. A decline in the daily death numbers in the nation’s worst affected state, New York, reignited hopes of the outbreak not being as prolonged as feared. A slowdown in death tolls was also reported in some of the other major COVID-19 hotspots around the world.

However, US officials still cautioned against complacency and have warned the nation, with numbers of deceased exceeding 10,000. With a strong rise in the stocks yesterday, let’s see how the markets are expected to perform today.

Why it matters: Monday’s surge in indices marked their strongest single-day percentage rise since March 24. After finishing 1.7% lower on Friday, the Dow made a strong comeback yesterday. Positive investor sentiment, driven by news of coronavirus easing in New York, sent the Dow higher by 7.7%. New York, which reported the largest number of cases in the country, recorded its first drop in deaths.

New York Governor Andrew Cuomo expressed optimism around the cases nearing a peak level, with the daily death toll falling under 600 for two consecutive days, suggesting a “possible flattening of the curve."

Experts cautioned, however, that it is still unclear whether this trend will hold. The coronavirus pandemic has infected over 368,400 people in the US and claimed around 10,900 lives, half of which are in New York state alone. The total COVID-19 cases have exceeded 1,348,600 globally, with around 74,800 fatalities.

Meanwhile, Governor Cuomo increased the civil penalty twofold to $1,000 for not following the social-distancing guidelines and delayed the opening of all schools until April 29.

The Dow jumped 1,627 points to close at 22,679.99 on Monday, led by a surge of around 18% in Boeing’s stock. The S&P 500 climbed 7% to finish at 2,663.68, while the Nasdaq 100 gained 7.3% to end at 7,913.24.

Shares of Carnival spiked 20% after the Saudi Arabian fund, The Public Investment Fund, announced the acquisition of an 8.2% stake in the cruise company. Wayfair’s shares jumped over 40% after the retailer disclosed a surge in its business following the coronavirus outbreak.

In other news, yield on the 10-year US Treasury note rose 8.8 basis points to 0.675%, while WTI crude for May delivery fell 8% to settle at $26.08 per barrel.

What to watch: Investors are hoping for a marked downward trend in coronavirus cases and deaths. US stocks are expected to remain in positive territory today, with stock futures pointing towards a higher open. Investors also await a couple of economic reports from the country, including job openings and the IBD/TIPP Economic Optimism Index.

The Markets Today

     

The British pound will be the currency to watch today, with UK Prime Minister Boris Johnson in ICU (intensive care unit) after testing positive for coronavirus.

Context: The pound slipped versus the US dollar on Monday, after news of the country’s Prime Minister being shifted to the ICU grabbed the headlines.

Details: PM Johnson's coronavirus symptoms have worsened since he was admitted to the hospital, according to his Downing Street office. Johnson, who was admitted to hospital on Sunday night, had been undergoing several tests, after testing positive for coronavirus for more than 10 days.

The government had previously said that Johnson was still in charge. However, given the deterioration in his health conditions, the country’s Prime Minister has asked his Foreign Secretary Dominic Raab to deputise.

10 Downing Street said that the decision to shift Johnson to the ICU was made after the PM experienced breathing difficulties and there are concerns that a ventilator may be needed to support his struggle against COVID-19.

The British pound, which declined against the US dollar on Monday, recovered strongly today, gaining 0.9% to trade at $1.2341 due to an improvement in global sentiment. There has been a decline in the number of coronavirus cases and deaths around the world, raising hopes that the virus will peak sooner than expected

What to watch: Markets will be closely monitoring the health status of the UK Prime Minister. The pound may be sensitive to any news related to Johnson’s health this week. Any report of an improvement in Johnson's health could support the sterling.

Other Markets: European indices were trading higher as of 9:00am GMT, with the German 30, French 40 and Stoxx Europe 600 up 3.5%, 3.3% and 2.6%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
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What else to watch today

     

Mexico’s inflation rate, Russia’s total vehicle sales and foreign exchange reserves, Brazil’s retail sales, Canada’s business confidence and the US Redbook index.

 

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