April 17, 2020
Futures soar on return to normal hopes
Oil skids to $18/bbl
Nikkei 3.15% Dax 2.96%
UST 10Y 0.63%
Asia and the EU
EZ CPI 1.0% vs 1.0%
North America Open
A very strong risk-on mood dominated trade in Asian and early European dealing with stock index futures higher by 2% or more as investors were boosted by talk of relaxation of lockdown restrictions by US and Germany.
Stocks were also boosted by reports that Gilead’s drug Remdesivir could be effective in treating coronavirus cases. The company was careful to state that the data was anecdotal, but markets hungry for any bit of positive news when it comes to the virus were quick to respond fueling a furious rally in early Asia trade.
Currencies, on the other hand, were much more muted with most majors trading in a very narrow 25bp band during the night as volatility remained muted. There was little economic news to drive trade with only the EZ CPI data coming in at 1.0% as expected. FX remains ina wait and see mode, with traders there taking a much skeptical posture towards any prospect of a quick restart.
Comdollar currencies were also hurt somewhat by the continued weakness in commodities. Oil slid to $18/bbl in overnight trade pushing USDCAD back above 1.4100 while gold broke below $1700/oz pressing on Aussie a bit.
With no major news flow scheduled for North American trade, the open question is whether the rally in equities can hold its gains going into the weekend. Equity investors are clearly eager to “get back to work” and appear to be tired of the endless drumbeat of dour news on the coronavirus front. The US curve – which is now the by the far the biggest infection point in the world – has clearly flattened over the past week albeit at very high levels. Still, if the relative numbers continue to improve and mid-April does confirm the peak of the infection cycle the risk-on mood is likely to continue for a bit longer.