Public Security chief launches digital vehicle plate wallet service    'Action is in our nature': 4th Saudi Green Initiative Forum to be held at COP16    Pop hit APT too distracting for South Korea's exam-stressed students    Saudi Arabia's inflation rate hits 1.9% in October, the highest in 14 months    Mohammed Al-Habib Real Estate Co. sets Guinness World Record with largest continuous concrete pour    PIF completes largest-ever accelerated bookbuild offering in MENA region    Saudi Arabia signs renewable energy program with Azerbaijan, Kazakhstan and Uzbekistan at COP29    Australia and Saudi Arabia settle for goalless draw in AFC Asian Qualifiers    Human Rights Watch accuses Israel of mass displacement in Gaza amounting to war crime    Thousands of protesters march in Paris ahead of tense football match between France and Israel    Republicans win 218 US House seats, giving Donald Trump control of government    UN sounds alarm at Israel's 'severe violations' at key buffer zone with Syria    Order vs. Morality: Lessons from New York's 1977 Blackout    Saudi, Indian foreign ministers co-chair Cooperation Committee meeting in New Delhi    South Korean actor Song Jae Lim found dead at 39    Don't sit on the toilet for more than 10 minutes, doctors warn    'Marvels of Saudi Orchestra' to dazzle audience in Tokyo on Nov. 22    Saudi Champion Saeed Al-Mouri scores notable feat in Radical World Championship in Abu Dhabi with support from Bin-Shihon Group    Rita Ora is tearful in tribute to Liam Payne at MTV Awards    France to deploy 4,000 police officers for UEFA Nations League match against Israel    Al Nassr edges past Al Riyadh with Mane's goal to move up to third    India puts blockbuster Pakistani film on hold    The Vikings and the Islamic world    Filipino pilgrim's incredible evolution from an enemy of Islam to its staunch advocate    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Time for correction?
Published in The Saudi Gazette on 09 - 06 - 2020

GENEVA — US equities extended rally Monday. The S&P500 (+1.20%) rose to a fifteen-week high, reversing most of post-COVID sell-off. Despite real damage to businesses and economy, the US stocks are set to continue their pre-COVID race to fresh historical highs.
The latter raises many eyebrows of course, regarding the divergence between asset prices and underlying economic dynamics. But that is the ultimate result of an unprecedented monetary and fiscal intervention, which create and maintain the illusion that all is fine.
Speaking of monetary policy, the Federal Reserve starts its two-day monetary policy meeting today and is expected to maintain its policy unchanged. The Fed already deploys all available tools to maximum capacity to help markets recovering. And it works.
However, the unusually high, or low economic figures and the impossibility of predicting those numbers in such a chaotic and unparalleled crisis environment clearly shows that the market doesn't have a clue about the real duration of the post-COVID recession and the strength of the recovery to come.
The latest economic figures suggest that the worldwide economic rebound would be faster-than-many-thought provided the speed of normalization and the steadily down trending cases across the world. This is, at least, the side of the story that the market wants to see among the chaotic and highly volatile economic data.
According to Goldman Sachs, what we see may be the deepest, but the shortest recession since World War II, as the economic data hints at a steep rebound. The risk of a second wave of contagion is gradually less, and the rising political, social unrest and street protests around the world seem to be dwarfed by the hope of a fast and steady economic recovery.
So far, left behind are those who kept a cautious approach to the market rebound. And, as long as the illusion lasts, the equity-bulls will have a stronger case for carrying the actual rally further, as the unprecedented fiscal and monetary support could only overheat the buy-side and boost asset prices into a renewed risk bubble; the risk, here, being an even more aggravated divergence between the stock prices and their real valuations compared with what we have seen before the Covid sell-off.
From a policy perspective, the Fed can sit back and enjoy the agreeable company of the bullish market run and doesn't need to intervene unless we see another global debasement.
Equities in Asia were mixed. The ASX 200 (+2.74%) recorded solid gains, Hang Seng advanced 1.31%, as the Nikkei slid 0.64% on the back of a sudden rise in the yen appetite. The USDJPY recorded sharp losses over the last two sessions, and the slightly better-than-expected economic figures in Japan may not be the only cause for increased inflows to the yen. The yen's strength could also be a sign of a return to safety.
Activity in European futures hint at a flat-to-positive start on Tuesday. The US dollar remains weak, but the capital outflows appear to be losing some pace as investors question whether it is time for a downside correction in equities. The US 10-year yield remain capped below 0.90%.
Gold remains offered above the $1,700 per oz, even though the rise in US yields increases the opportunity cost of holding gold, particularly at these high levels, where the upside potential is limited.
But, there is a clear restraint in selling the precious metal further below $1,670, as the levels in equity markets suggest that a downside correction would be healthy and no investor wants to get caught in a renewed risk sell-off having liquidated gold positions.
There is a toppish feeling in EURUSD as the sell-off in US dollar loses pace. Given that the soft USD has been a major catalyzer in the latest euro rebound, a broad-based recovery in the dollar should easily wipe a part of the recent euro strength.
But the hope of seeing a 750-billion-euro fiscal package materialize and the 600-billion-euro extension to the European Central Bank's (ECB) PEPP purchases should throw a floor under an eventual euro sell-off. The single currency should find a higher ground compared to the beginning of the April-June rebound.
Intermediate support is seen near 1.1230 (minor 23.6% Fibonacci retracement on April-June rebound) and solid buyers are waiting before 1.1135 (major 38.2% retrace).
Cable, on the other hand, runs into a solid resistance near its 200-day moving average on the back of a stronger US dollar and given the lack of a solid justification to carry its appreciation against the greenback further.
The UK and Japan start trade talks, as Brits seek new trade partners to temper the negative shock of a no-deal divorce from the EU. But the EU trade gap will be difficult to fill and a no-deal Brexit will certainly lead to a softer pound valuation in the medium run.
WTI crude steadies near $38 per barrel after decent profit taking capped the rally below the $40 mark following the OPEC+ decision to continue curbing supply. A possible deterioration in risk sentiment could encourage a deeper downside correction in equities and in oil, but price retreats in oil markets could be interesting dip-buying opportunities for investors betting on a gradually improved global demand as businesses and travels get back on track.
— The writer is senior analyst at Swissquote Bank


Clic here to read the story from its source.