Lockdown Easing + Monetary Easing = Rally in Risk

Posted on

April 27
Risk revives on hopes of lockdown lift
Dollar weaker across the board
Nikkei 2.71% Dax 2.38%
UST 10Y 0.61%
Oil $14/bbl
Gold $1715/oz
BTCUSD $7689

Asia and the EU
No Data

North America Open
No Data

A strong risk-on rally in stocks and in both Asia and Europe started off the weak on a positive note and send the dollar lower as well on hopes that some of the more draconian lockdown measures in Western economies will be eased soon.

The weekend brought a round of good news regarding COVID-19 infections as all the major hotspots from Italy to Spain to France and even New York city reported declining rates suggesting that virus attack may have peaked.

Governments across the world made tentative announcements that some shelter in place restrictions could end as soon as the beginning of May although any return to full normal economic activity was likely to be months away.

In the US one critical barrier to resumption of economic activity is the lack of any national policy or guidance. The US has no universal access to testing, PPE, or even basic rules for retail transactions. The policy guidelines in the US are being driven by individual states with wildly different goals, as Georgia, for example, has lifted almost all lockdown restrictions on activity while Northeast and West Coast remain highly sealed. With a hodge-podge of conflicting policy signals and free borders between states, the US may be setting itself up for the second wave of re-infections even as its health infrastructure remains utterly unprepared to deal with them.

For investors, however, such concerns are of no concern at the moment as the prospect of any easing of lockdown in a combination of easing from central banks has created a perfect recipe for a rally in equities that looks ready to extend into the North American trade with no economic data on the docket today to dampen the mood.

Boris Schlossberg
Managing Director

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