Markets
There's probably so much more pain to come as when the notional growth devastation number totals are projected, they still may fall well short of the actual sum of all the losses to Global, European, and US GDP. So, stock market bulls and those who are typically the perma bids like pension funds are nervous about stepping back in too early.
Given the economic impacts are yet to define an upper bound in Europe or the US, and with no vaccine in sight, it suggests, any positive bounce in any risk asset should be treated with caution.
Is cash, King?? Yes !!!! except for gold as it's starting to light up again (see below)
The US Aid delay
While other governments around the world pour money into fiscal spending, the US can't get over its political squabbling. Democrats claim the money will just go to corporates, and hence they can't support it. I think there's a significant number waiting to happen anyway, and it's not the only reason the market is down. But as far as today's markets are concerned, with the S&P futures shedding almost 5% and the 10Y UST yield falling 14bp to 0.79%, its another brick in the wall of worry.
As for the Congress dilly-dallying on the new Covid-19 bill, Majority Leader McConnell says Senate will re-vote on GOP bill unless a deal is made, at 9:45 am before US markets open, Bloomberg reports.
Currency markets
A weaker USD is part of the solution. Still, a stronger USD is unavoidable if investors fret about the liquidity (short-term rollover risk) and solvency (protracted revenue shortfalls) of dollar borrowers round the globe.
Spot CNH continued to outperform the basket and most regional currencies. We saw long unwinding in CNH crosses in London last week and may see that again today. The euro has been a slight beneficiary of short EURUSD position squaring in Asia today, in almost a repeat of Friday's Asia session.
USDJPY finally started to catch down with lower US yields, and the yen's appeal as a haven currency with the cross-currency basis swaps starting to ease a touch.
USDJPY vols are more or less unchanged on the day with spot well contained compared with the lower equity futures. USDJPY
NZD continues to stretch lower. It has proved capable of remaining oversold as valuation keeps getting hit by fresh news. On top of nationwide self-isolation announced on Monday, the Reserve Bank of New Zealand embarked on a massive QE program of NZD30 bn vs. just NZD70 bn New Zealand government bonds outstanding.
USD intervention?
Still lots of chatter on the street about possible USD intervention, but unless its the Fed NY doing the heavy lifting, it will likely offer traders better levels to buy dollar rather than anything else.
The Fed announced the establishment of USD liquidity swaps with nine other central banks, including the BoK and MAS. But it hardly helped the Korean won this morning. USDKRW opened at 1265, up 1% from the previous close in New York. The KOSPI is down 6%.
Oil markets
Oil markets collapsed out of the gate this morning as prices react in tangent to stringent containment lockdown measure that has seen life come to a standstill around the world. People are working/staying at home and only using their cars for the essential matters, as total demand devastation sets. But losses were tempered as Oil sellers have been less indiscriminate this morning; given market, chatter is building about the "TEXOPEC " meeting. Where there is smoke, there's fire. But its a wild cat bet at best at this juncture.
But with the prospect of storage facilities filling quickly and the potential endpoint of "worthless crude oil" is increasingly discussed. If an agreement isn't forthcoming, these talks never happen, or they end in a contentious break-up, oil prices will most certainly head for the bottom at a ferocious velocity.
Gold markets
Gold continued to react to financial market sell-offs and, at times, supported as government and monetary authorities' attempts to manage the economic and financial ramifications of COVID-19.
Despite the massive sell-off in US equities last week and the extension in the Asia markets today, gold is starting to hold up on relative terms suggesting that much of the margin call-related selling needs are fading to the background. As whoever needed to sell gold to cover margins might be cleared out already as the new waves of stock selling intensifies from equity markets bears and less so out of necessity from the volatility-controlled crowd.