A sharp rise in US equities reminds us that bear markets come in various shapes and sizes, while some of the more impressive rallies do come in short-covering fashion from grizzly bear conditions.
And while economic outlooks have deteriorated especially in the equity credit and energy complex in recent weeks, however, the reaction from the EUR and European stocks to horrible business confidence – the worst on record on a composite basis – suggests that on some level the market feels comfortable with its current level of risk and delighted the Fed has managed to fortify the economic cracks sufficiently.
This week's horrendous data might get viewed through a rose-colored Fed stimulus lens. Next week could be a different matter as the market moves on quickly, and traders will care less about the stimulus effort if the COVID-19 headcount graph goes vertical.
India: Lockdown Declared
India late last night declared a nationwide lockdown for 21 days, until Apr. 14. The lockdown came into effect within a few hours of the announcement. Essential services, including financial institutions, are the only sectors exempted from the lockdown. This is likely to have a brutally severe economic fallout on an already struggling economy. As such, we should expect India's stock markets and INR to underperform in the near term despite risk rally elsewhere.
Also note that today is a banking holiday in India today (unrelated to the outbreak), so currency and fixed income markets will be closed today. Stock markets are open, though.
At least for this week, we might avoid plunging into the void thanks to the Fed
The Yuan
USD/CNH went another leg lower at the open, indicating safe have flows entering China as they see the virus pass. As well other countries that followed the China example and took the 'economic pain' upfront, with stringent lockdown measures, are likely to be rewarded with more robust asset markets and currencies on a 6m view.
CME will start a new gold futures contract with flexible delivery.
Gold has regained its safe-haven status with a stunner of a move in spot, slicing through offers on a two-day $130 rally.
Of course, the knock-on effect of the liquidity drain due to soaring EFP has floated gold higher.
And to that effect, the CME will start a new gold futures contract with flexible delivery easing fixed date delivery burdens, and as such, gold has sold off as the EFP narrows, and more liquidity comes back to the markets.
But the EFP would have normalized in the coming days as the active futures contract will roll to June and money is being pumped into the system.
All this after the Interpolated gold EFP opened at $30, went up to $60, and is now at $50.
Also, the CME has announced the launch of a new gold futures contract with expanded delivery options that include 100-troy ounce, 400-troy ounce, and 1-kilo gold bars. The new contract is expected to launch with the first expiration of April 2020, pending regulatory approval. The contract will be available for trading on CME Globex and for submission for clearing via CME ClearPort and will be subject to the rules and regulations of COMEX. The approved brand list will have complete convergence with the approved brand list for CME Group's (NASDAQ:CME) existing gold futures and the LBMA gold good delivery list.