Bloomberg: Five Reasons for Market Optimism
Risk assets are trading exceptionally well. There’s no visible speed bump to derail this trend until the U.S. day at least.
• Central banks have made very clear that they will do whatever it takes to prop up markets
• All the largest European economies have clear and relatively aggressive plans to reopen in the coming weeks
• The yuan has traded very strongly since Thursday morning, sending a reassuring signal for so many other markets ahead of U.S.-China trade talks next week
• In U.S. stocks, hedge fund shorts are being squeezed and that provides a knock-on positive impulse to other equity markets
• A collapse in U.S. yields is weakening the dollar and easing financial conditions globally
For U.S. jobs data later on Friday, there shouldn’t be any shock value as abysmal numbers are expected. Ironically, the risk to markets may come from a print that’s less bad than feared, as that would see U.S. yields bounce, the curve steepen and the dollar strengthen again, thereby tightening financial conditions.
Otherwise, only two other risks seem to be left and neither work on any schedule: a severe negative shift in virus sentiment or an escalation in tensions between the U.S. and China.
Risk assets are trading exceptionally well. There’s no visible speed bump to derail this trend until the U.S. day at least.
• Central banks have made very clear that they will do whatever it takes to prop up markets
• All the largest European economies have clear and relatively aggressive plans to reopen in the coming weeks
• The yuan has traded very strongly since Thursday morning, sending a reassuring signal for so many other markets ahead of U.S.-China trade talks next week
• In U.S. stocks, hedge fund shorts are being squeezed and that provides a knock-on positive impulse to other equity markets
• A collapse in U.S. yields is weakening the dollar and easing financial conditions globally
For U.S. jobs data later on Friday, there shouldn’t be any shock value as abysmal numbers are expected. Ironically, the risk to markets may come from a print that’s less bad than feared, as that would see U.S. yields bounce, the curve steepen and the dollar strengthen again, thereby tightening financial conditions.
Otherwise, only two other risks seem to be left and neither work on any schedule: a severe negative shift in virus sentiment or an escalation in tensions between the U.S. and China.