Markets Flat and Wary as Week Begins

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Choppy trade in Asia and Europe
EU Sentiment Rebounds
Nikkei -2.30% Dax 0.55%
UST 10Y 0.65
Oil $38/bbl
Gold $1768/oz
BTCUSD $9097

Asia and the EU
EU Sentiment 75.7 vs 80

North America Open
USD Pending Home Sales

It’s been a quiet night of trade in the markets with Asia opening lower to start the week, but early Europe rebounding leaving markets essentially flat.

There was little market news to drive flow but the lingering concerns over coronavirus have cast a pall on the markets as total infections reached 10 million and total death toll crossed the 500,000 mark. However, the pandemic fears are having less and less impact on capital markets as investors accept the fact that the battle against the virus is likely to be an ongoing battle for at least a year. Meanwhile with mortality rates declining and new protocols having success the markets have decided that the existential risks from COVID 19 have disappeared.

That may be a premature sentiment at this point especially if death rates begin to climb at an alarming rate forcing governments to institute draconian lockdowns once again, but it’s clear that the market wants to move on and focus on economic matters.

To that end, investors may be far too optimistic than the current facts merit. The V shaped recovery in stocks has been driven by the assumption that the consumer, especially the US consumer will come back with a vergence, but the persistent spread of COVID will not only limit mobility and transactions but could trigger massive permanent shutdowns in retail as demand never comes back. That is turn is likely to have ripple effects on income and with the current US Congress hesitant to spend more on direct payments the rebound in economic activity may fizzle taking stocks down with it.

For now the markets remain wary as they watch both daily COVID figures and the political jockeying by fiscal authorities as investors set up for the next move in the market.

Boris Schlossberg
Managing Director

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