Trump’s market boost fizzles out

Asian stocks are mixed, unable to capitalise on Wall Street’s lead after all three major US stock indices posted gains yesterday. Although US equities were buoyed on Tuesday by the prospects of President Trump’s US$1.2 trillion stimulus package for the world’s largest economy, investors are not getting giddy with hope that a global recession can be averted. US stock futures currently point to losses, while Gold and the Japanese Yen are seeing slight advances.

The short-lived gains in global equities show that investors remain skeptical of the huge swathes of support measures being rolled out around the world. Global economic activity has already taken a hit, judging by the hard data out of major Asian economies, with the heightened travel limitations and quarantine measures across continents adding to the dismal outlook. Unless the coronavirus outbreak can defy expectations and show it will stabilise in the immediate term, investors fear that the current economic trajectory will only point to a dreaded global recession.

Dollar eases after recent surge

The Dollar index has made a V-shaped recovery, gaining over four percent since breaking below the 95 psychological level on March 9. Despite the Fed already using up most of its conventional tool box to try and mitigate Covid-19’s impact on the US economy, with Dollar weakness typically accompanying monetary policy easing, the Greenback has instead benefited from a surge in demand for the shelter it provides amid tumultuous market and economic conditions.

Although US$ 1.2 trillion in fiscal stimulus could stem the risk of a US recession while offering some measure of calm for investors, the economic outlook remains highly uncertain at this point in time and does not yet warrant venturing out significantly into risk-on waters. Such broad caution should ensure a supportive environment for the Greenback until the coronavirus-inspired fears start to fade away.

Gold prices to find floor once market panic subsides

Gold’s safe haven status has been challenged of late, with risk-averse investors displaying a marked preference for King Dollar at the expense of Bullion. Once the liquidity squeeze eases and Gold prices find a more stable footing, investors concerned about the global economic outlook should eventually come flocking back to the precious metal and send prices back above $1600.

Supply and demand disruptions set to drag Oil lower

Brent futures are now languishing below $30/bbl, trading at levels not seen since 2016. Barring active steps by OPEC+ to intervene and rebalance the markets, the supply-demand shocks may eventually drag Brent along the $20/bbl floor. The heightened risk of a global recession, coupled with the threat of cheap supplies flooding the markets, ensures that Oil’s weakening bias remains intact for the time being.