April 15, 2020
Germany likey tp extend lockdown deadline
Dollar finds bid in risk-off mood
Nikkei -0.45% Dax -1.96%
UST 10Y 0.69%
Asia and the EU
North America Open
USD 8:30 Retail Sales
CAD 10:00 BOC Statement
The market mood turned decidedly sour in Asian and early European dealing today with stock futures off nearly -2% while the buck was bid on fears that the current global lockdowns may extend longer than thought.
Germany, which has been one of the most effective actors in the battle against the coronavirus nevertheless stated that the current lockdown may extend to May 3rd in order to ensure public safety. More troubling still was the release of a Harvard University study that suggested life would be very different in OECD economies even once the lockdowns would be lifted as many of the social distancing measures would need to stay in place in order to ensure that re-infection rates do not rise.
Social distancing measures, of course, create massive transactional frictions in everyday life and are both expensive and highly inefficient from an economic point of view. Therefore there will have to be a period of adjustment across all OECD societies that is sure to take a further toll on economic growth.
For now, the markets have enjoyed the bounce fueled only by monetary stimulus, but eventually, investors will have to assess the value of assets on fundamentals and give the current struggles with containing the virus, the prospect of a V-shaped recovery seems unlikely.
Meanwhile, the calendar is much more active today with US Retail Sales and BOC rate decision on tap. Retail Sales are expected to collapse by nearly -5.0% from the month prior but if the number is bigger than that and perhaps even approaching double digits the impact on the market is likely to be very negative as the long term consequences of such demand destruction are likely to be severe.