Only bull market is in intervention

Only bull market is in intervention

Equities

Summary:  Asia equities trade subdued into the weekend after a broadly flat lead from Wall Street and with US and European futures remaining under pressure and in the red most of the session. Nikkei -0.70%, KOSPI -0.89%, Hang Seng -0.60%, ASX200 +0.63% at the time of writing.


Risk looks set to continue to roll over in tandem with the real economy outlook, as collapsing economic data, failed drug trials and tech concerns fuel a more cautious mood. For the AUD that as a global risk proxy has bounced hard in recent weeks looking through the collapsing data towards the recovery, as risk rolls over the currency is primed for disappointment. Although FX moves in today’s Asia trading session are muted. 

Gilead’s coronavirus drug Remdesivir has failed its first trial in China according to the Financial Times, contrary to documents released last week that sent US stocks surging higher on Friday. Overnight US equities pushed higher, with little regard for the addition 4.4mn jobless claims, and cratering PMIs in the US, EZ, Germany, France and the UK, something we touched on yesterday. But when news hit that the previously heralded antiviral was less cure more failure, those gains promptly reversed. The S&P 500 staged another reversal on the 50-day moving average and failed to close above, playing into to the theory that recent moves remain a bear market bounce driven by technicals as opposed to anything more meaningful. Without a vaccine or viable antiviral treatment imminent, the optimistic hopes for a V shaped snapback in activity and profits is fading fast. The re-opening process therefore being a phased transition and bounce back in activity being a slow return to normal levels. With the scale of job losses globally mounting, second order implications take centre stage and alongside a longer lasting drag on activity, the V-shaped recovery in employment can be ruled out. Job insecurity, lost savings and personal safety concerns dampen consumption as consumers choose to save more and spend less, preventing a one-quarter and done impact. Alongside plunging economic indicators it is likely that the consensus for earnings and equity fundamentals remains too optimistic at these levels, despite “QE Infinity” and fed intervention. Longer-term mounting debt levels, de-globalisation and receding international cooperation dull potential growth further.

Google to Slash Marketing Budgets by Up to Half in a bid to reduce expenses, according to internal memos seen by CNBC. The stock is down in after hours, but the read through to other tech stocks is equally as important. As we have previously noted, for investors hiding in tech stocks, some revenues may be far more cyclical than consensus expects. Digital advertising budgets are being slashed across the board and Facebook, Alphabet, Twitter, Snapchat will not be immune. Decelerating advertising growth and digital ad spending is bad news given that Google and Facebook’s revenues are heavily tied to ad spending. Google in particular has more than a third of advertising revenues tied to sectors which have been hit hard by the impact of COVID-19 - Travel, Automotive and Financials. For an indicator of how much spending is actually being cut Barry Diller, chairman Expedia, speaking with CNBC earlier this month said that they typically spend $5bn on ads, but probably “won’t spend $1bn this year”.

Is the oil bailout pending? Treasury Secretary Steve Mnuchin said he’s considering creating a government lending program for U.S. oil companies. Sounds like it! The problem here, over supply has been a key component of the fallout in the oil market alongside demand destruction.If the market cannot be allowed to force production cuts due to bailout intervention then the problem of over supply remains, against a fundamental backdrop of demand that remains incredibly subdued. The only bull market is in intervention! 

EUCO meeting leaves many questioning what is Europe if not for solidarity in times of crisis like the present. The positive - the failure to reach a conclusion on the long-term stimulus plan, is favourable to a bad plan. All or nothing? For more, Christopher Dembik has the analysis.

Quarterly Outlook

01 /

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.