Global equities are bouncing back following Thursday’s rout as investors still believe the worst of the virus is behind us for the advanced world and as the focus shifts to the week ahead, which includes a wrath of central bank decisions that are expected to provide further stimulus to the punchbowl. A lot of money is still on the sidelines, but the conviction behind this dip buying seems limited and the bounce might not last.


The BOJ should expand their lending program, which will support corporate financing.  The BOE will throw more stimulus to their domestic economy with a 100-billion-pound increase to their asset-purchase target.  The Bank of Russia is also widely expected to ease next Friday, possibly becoming more aggressive with their rate cuts.  Brazil central’s bank will likely deliver its eight straight rate cut, while the SNB and Norges keep rates steady but reiterate the tool box is not totally empty.


The stock market selloff will unlikely be a one-and-done event as COVID-19 continues to intensify in the US and will likely disrupt many states’ reopening plans.  Nashville reported consecutive increases with new cases above the 14-day trend and will delay their Phase-3 reopening. Oregon saw a record high in cases and Governor Brown is pausing their Phase-1 reopening for a week.  The coronavirus is now spreading across America and many states that were not hard hit are seeing outbreaks. The risks of a second wave are still mainly expected to happen in the fall but could happen earlier when most New Yorkers that escaped the city eventually return.


The national trend of coronavirus is still flat, but concerns are growing that Governors will need to keep on pushing back reopening plans a couple weeks here and there.  The pickup and economic activity will remain staggered and you could very well see some investors sell now and comeback closer towards the end of summer when the Phase-3 US vaccine trial results start to come in.


Virus uncertainty could support another 5-10% over the coming weeks, but all the stimulus efforts from policymakers globally will prevent a complete collapse back to the March lows.




Oil prices are rebounding despite concerns that yesterday’s collapse could be the beginning of a new downtrend.  Oil is poised to have its first weekly decline since April as virus angst raises doubt that crude demand will see a swift pickup in the coming months.  New outbreaks in the US are ringing the alarm for many traders, but expectations are still low we will see an extended shutdown and perhaps just rolling delays as states continue their reopening plans.


The market turmoil is not going away anytime soon, and this should keep oil prices heavy.  Oil’s supply side and demand fundamentals will likely take a back seat over the next several trading sessions.  Energy traders may see crude prices mirror the broader risky asset trade.



Market turmoil has gold traders salivating at another chance at breaking above the $1750 level.  Yesterday’s slide seems to have been mostly retail traders, as bullion holdings in ETFs posted their biggest decline in over three years, while SPDR Gold Shares, institutional investors preferred ETF showed a daily increase.


The scramble for cash seems to have been more retail than institutional and that should support bullish calls for gold to finally break above the $1750 level.  Gold will see both steady safe-haven demand as many investors take heed to Fed Chair Powell’s cautious outlook and as a wrath of central banks will deliver more stimulus next week.  Over the next week, gold will have its eyes on $1800 as it will remain powered by the stimulus trade, virus angst, and US-China tensions.


By Ed Moya