Collinsonfx Daily Market Commentary

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Daily Market Commentary

The strong market rebound continued on equity markets overnight. The coronavirus appears to be under control and contained. Various treasuries and banking institutions are releasing reports measuring the impact of the virus on global economies. These reports are giving markets more certainty and allowing risk appetite to grow. The IMF have reported on global growth contractions of around 7%, while NZ Treasury estimated the impact of the virus will be greater, due to the highly trade exposed nature of the economy. Forecasts of Unemployment rising to above 10% should set off alarm bells, as this would represent a huge recession or perhaps even the dreaded 'depression' if this has legs. Equity markets are rebounding strongly and a restart of economies would avoid this dire scenario.

Governments are announcing huge stimulus packages and planning lock-down exit strategies. A return to work sooner rather than later, could signal a sharp 'U-shaped' economic recovery, rather than the continued lockdown driving economies into the ditch. Austria is leading European nations, returning to work, while US Governors are falling over themselves to announce their 'unlocking' strategies. Australia did not go into full lock-down, allowing essential industries to continue to trade, which included many operations.

China trade data showed that imports continued to climb and trade was being restored, giving markets confidence. The AUD continued to benefit the restored supply chain, moving up to 0.6425, while the NZD did not receive the same boost. The NZD lock-down is far more severe and no planned date for an exit strategy, has disappointed markets, pushing the NZD back to 0.6080, despite the weaker reserve.

Global markets are recovering confidence, as the focus shifts to lock-down exit strategies and the seeming containment of the virus. We are not out of the woods yet, but signs are positive and markets are reacting accordingly.