Morning Minutes 4/27/2020

Morning Minutes

Japan Stimulus and Reopening Plans Boost Stocks

April 27, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Stock markets around the world have been climbing to start the new trading week with investors responding favorably to reports of falling growth in new coronavirus cases and deaths suggesting that the current wave has passed its peak. Increasing numbers of national (including Italy) and regional (including New York) governments outlining phased reopening plans for May, adding to the ones which have already started, investors continue to look ahead to a reviving world economy although how strong a rebound could be and how long a recovery could take remain a mystery.

US index futures are up 1.0% to 1.25% this morning with Dow Futures up about 225 points as they look to add to Friday’s 260-point gain. Overseas markets have been even stronger with Germany, Japan and Italy all up about 2.6%, while Hong Kong, Australia, the UK, France and South Korea are up in the 1.50%-2.00% range. Defensive havens are on their heels this morning with Gold, the US Dollar and the Japanese Yen all in decline. Commodity markets remain mixed with WTI crude oil down 21.4% near $13.30/bbl, Brent Crude down 5.3% but holding $20.00/bbl, while copper is up 0.4% and platinum is up 0.6%.

It’s a big week for central bank meetings and the Bank of Japan has kicked things off with a bang, further ramping up monetary stimulus by announcing unlimited buying of government bonds and tripling its allocation to corporate bonds and commercial paper. The Fed meets on Wednesday while the ECB meets on Thursday with investors watching to see if they also decide to increase stimulus again or not, and if so, what could they do next.

General Motors suspended its dividend this morning reminding investors that there could still be a lot of land mines out there. Today is relatively quiet for earnings with Canadian National Railway reporting later in the day. It’s a big week for results across several sectors with headliners including: Caterpillar, Google, Ford and Starbucks Tuesday plus Boeing, GE, Mastercard, Facebook, Microsoft and Tesla Wednesday. Thursday brings reports from several Canadian gold producers including Agnico-Eagle, Eldorado and Yamana, plus Apple, Amazon, McDonalds, Visa, Twitter and others out of the US. Thursday and mainly Friday see Big Oil heavyweights ConocoPhillips, ExxonMobil, Chevron and Imperial Oil reporting, with investors looking for potential news about cuts or delays to exploration, capital spending or even actual production.

Economic reports are concentrated more in the back half if the week. Wednesday brings US Q1 GDP which could highlight some of the impact from COVID-19, although corporate reports have suggested that the bigger impacts of the pandemic on the economy hit more in April. Wednesday and Friday bring manufacturing PMI survey results for China, the US, Canada and the UK with US construction spending also coming on Friday, the start of the new month. Monthly employment reports for the US and Canada aren’t out until the 8th, keeping investors focused on Thursday’s weekly US unemployment claims.

 

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