US stocks have miraculously rebounded after possibly one of the bleakest weeks since the rally began. It was dotted with recovery potholes due to a resurgence of Covid-19, grim warnings from the Fed chief and a revival of the US-China feud – and along with that come lingering memories of all the worst-case scenarios associated with the protracted trade spat. It’s a terrible trifecta.
Even the most ardent bears on the desk are now conceding that maybe after this option expiry period is behind us, the S&P 500 could be on its way to 3000. I don't know about that, but it sure feels like the markets are not going much lower anytime soon after weathering this week's terrible trifecta.
US equities closed higher in a choppy session, the S&P500 closing 1.2% higher after opening in the red. The volatile session came as initial jobless claims rose another 3mn last week, but there were some signs of hope in the detail that the peak was near.
Oil surged 9.0% after the IEA indicated the drop in demand might not be as severe as earlier thought.
But US-China tensions continue to suppurate, with President Trump suggesting he could cut off the whole relationship with China amid criticism of its handling of the outbreak. Yet it feels like the market is becoming desensitized while waiting to see if this spat morphs into something more sinister than a pillow fight.
Good news for the market and the economy as a whole is that businesses worldwide are reopening, albeit in fits and starts. While restaurants are opening at minimal capacity and mall traffic remains depressed, traffic congestion is beginning to tick significantly higher, suggesting that people feel confident about leaving their homes. Indeed, this is huge as the global recovery will fall 100% on the back of consumer confidence.
Bangkok's large shopping mall complexes are preparing to reopen, signaling the next phase of the economic restart is near after coronavirus cases dwindled. I will have a direct glimpse into the future as I’ll be lined up at Central World first thing Saturday morning.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support