- Stock markets fell again yesterday, with the Dow Jones & S&P 500 Indices beginning to form bearish “head and shoulders” patterns on their respective daily charts. The Dow Jones Index closed yesterday below its 50% retracement level within 2020’s peak to trough. However, U.S. indices have already regained almost 60% of their losses from the peak, which is technically significant as an inflection point. Many market analysts think the bottom of this bear market has already been reached, but other analysts see further strong falls likely in stocks over the coming weeks and months. There is a strong divergence of opinion.
- The price of crude oil continues its consolidation just above $25 per barrel.
- The price of gold continues its multi-week consolidation pattern at about $1,700 per ounce, pending a potential breakout.
- Forex markets are dominated by relative strength in firstly the Japanese Yen and secondly the U.S. Dollar, while the British Pound and other “risky” currencies are weak.
- Tuesday’s U.S. inflation data showed an unusual negative rate (deflation) of 0.8%. The Federal Reserve ruled out a negative interest rate policy, which boosted the USD. Deflation means USD cash is increasing in its purchasing power day by day. Many currencies are likely to see deflation in the coming months, with unpredictable consequences for the Forex market.
- Wednesday saw British Preliminary GDP data come in at a decline of 2%, which was better than the expectation of a decline of 2.6%.
- The RBNZ just left its interest rate unchanged in its monthly policy input.
- The rate of increase globally in new confirmed infections and deaths from the coronavirus pandemic seems to have peaked, at least for a first wave, although this may be at least partially due to the pandemic moving into South American countries which tend to have worse reporting systems. Total reported deaths globally peaked on April 18th and daily new confirmed cases on April 24th. However, it can be argued that the number of daily new cases globally is plateauing and not decreasing. Total confirmed new cases stand at more than 4.3 million with an average case fatality rate of 6.84%. The pandemic’s epicenter is still located in the U.S.A., increasingly more so outside than inside New York, but it seems as if the peak of this wave has already been reached there, while this looks more certain also for every European nation. Both the total number of new cases and deaths continues to slowly fall daily in the U.S.A. and in the U.K. A world recession or possibly even depression from the pandemic appears to be inevitable, with Goldman Sachs forecasting a 34% drop in U.S. Q2 annualized GDP and other analysts seeing a 30% unemployment rate in the near future. If correct, these will be the worst such numbers seen since the 1930s, but it should be noted many analysts continue to see a much better outlook for U.S. unemployment. The WTO has forecasted that global trade is set to fall by one third. The U.S. now sees an unemployment rate of 15% and a drop in 1st Q GDP of 4.8%.
- The rate of new coronavirus infections appears to be increasing most quickly in Russia, Brazil, and India. Russia now has the second highest number of confirmed cases globally. Russia and South America are likely to become new epicenters of the pandemic soon.
- While a strong majority of confirmed coronavirus cases are still in Europe and the U.S.A., with the U.S.A. accounting for approximately one third of all cases, infections are beginning to increase dramatically in South America, which is now accounting for almost one quarter of global deaths. The situation is especially bad in Brazil which is now confirming more than 10,000 new cases and 700 deaths daily. The President of Brazil Jair Bolsonaro, who compares coronavirus to the flu, has issued decrees trying to reopen the country which are being ignored by state governors.