Stocks ignore economic calamity to push higher

Equities heartened by incoming support measures.
Rebound may turn out to be a false dawn.
Investors should remain vigilant.

Han Tan ForexTime (FXTM)

Asian stocks are set to enter the weekend on the back of four consecutive days of gains, after their US counterparts extended their advances overnight. It’s taken just two weeks for the Dow Jones index to go from a bear market to a bull market, at least technically, while the SP 500 recorded its steepest 3-day climb since 1933!

Stock markets appear content to dismiss signs of the economic carnage left in the coronavirus’ wake for now,even ignoring the record high US jobless claims data which rose by over three million during the span of a single week.This print is the highest on record by a factor of nearly five, and up over 1000% on the week before. The delivery of economic rescue packages and unlimited quantitative easing has apparentlybeen enough to send equities higher for the time being.

Gains in equities this week do not truly reflect market confidence that the coronavirus outbreak has peaked and that the economic turmoil is over. While the stimulus measures being rolled out around the world can mitigate the initial negative fallout from the coronavirus outbreak and help support the eventual recovery, Covid-19’s economic toll could be more severe. It is this that would then test policymakers’ ability to push against the virus’ drag on their respective economies.

It remains doubtful whether the recent surge in global equities can be sustained. The wild price swings put an artificial gloss over valuations, with prices disconnected from the economic realities of the coronavirus impact.This rebound in stock markets may eventually prove to be a false dawn, one fueled by volatility rather than fundamentals and we feel thiswarrants cautionand vigilance on the part of investors.

Author

Han Tan

ForexTime (FXTM)

Tan Chung Han (Han Tan) joined FXTM in January 2019 as a Market Analyst.

EUR/USD trims gains, hovers around 1.1900 post-US data

EUR/USD trades slightly on the back foot around the 1.1900 region in a context dominated by the resurgence of some buying interest around the US Dollar on turnaround Tuesday. Looking at the US docket, Retail Sales disappointed expectations in December, while the ADP 4-Week Average came in at 6.5K.

GBP/USD comes under pressure near 1.3680

The better tone in the Greenback hurts the risk-linked complex on Tuesday, prompting GBP/USD to set aside two consecutive days of gains and trade slightly on the defensive below the 1.3700 mark. Investors, in the meantime, keep their attention on key UK data due later in the week.

Gold loses some traction, still above $5,000

Gold faces some selling pressure on Tuesday, surrendering part of its recent two-day advance although managing to keep the trade above the $5,000 mark per troy ounce. The daily pullback in the precious metal comes in response to the modest rebound in the US Dollar, while declining US Treasury yields across the curve seem to limit the downside.

XRP holds $1.40 amid ETF inflows and stable derivatives market

Ripple trades under pressure, with immediate support at $1.40 holding at the time of writing on Tuesday. A recovery attempt from last week’s sell-off to $1.12 stalled at $1.54 on Friday, leading to limited price action between the current support and the resistance.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.