Trade of the Day: Stocks buoyed by fiscal support hopes; gold, yen and US Treasuries sidelined.
Quote of the Day: “Central bank drugs are failing, driving global tail risks higher – With US equities declining following the Fed’s 50bp emergency cut last week and falling to new lows Monday, it’s clear that confidence in the central bank put is waning,” said BofA Securities in a note on Tuesday.
Stock of the day: SOHO China rose as much as 40% after Reuters News reported Blackstone Group Inc is in talks to take it private in a $4 billion deal.
Number of the Day:. 2.2%. Morningstar has lowered the 2020 China real GDP growth forecast by 250 basis points, to 2.2% from 4.7%. This would be China’s slowest growth since 1976.
Tip of the Day: “Beyond the near-term risks, we see strong catalysts for the tech theme. Strong e-commerce spending, 5G upgrades, data-center recovery, the ongoing strong transition to cloud and resilient fintech spending are some of the catalysts for the rest of the year,” said Sundeep Gantori, equity analyst, UBS Global Wealth Management CIO. “Hence, we recommend investors to take advantage of the recent correction and diversify their positions across both disruptors and enablers. In addition, “stay at home” stocks like video streaming and e-commerce companies should be more resilient amid the Covid-19 outbreak.”
Financial markets recouped some of the previous day’s losses on Tuesday on hopes of fiscal measures from governments around the world to combat the economic shock from the virus epidemic and the collapse in oil prices. Investors are tiptoeing back after US President Donald Trump’s pledge to introduce fiscal support steps.
These measures would be timely to rescue the global economy from collapsing demand even as prices tumble.
“While the drop in oil prices will push inflation down in the near term, the bigger disinflationary risk could stem from the effect of the coronavirus on economic activity,” said Capital Economics analysts in a note. “Indeed, we said after the global financial crisis that the world was now one recession from deflation. For now, the weakness of supply as well as demand should limit any disinflationary effects. But there is a risk that demand falls far further. And with interest rates already low, it might not even take an especially deep recession to get trapped in deflation.”
Stock markets advanced across Asia with the Nikkei 225 index adding 0.85% and Australia’s S&P ASX 200 benchmark surging 3.11%. The MSCI Asia-Pacific ex-Japan index added 1.39% while Hong Kong’s Hang Seng index rose 1.41 and China’s CSI300 climbed 2.14%.
Credit markets rebounded too with the Asia IG index narrowing 10 basis points to 98/101 and China’s credit default swaps moving in 5 basis points to 68/73 bps.
Wall Street is trading firm with the S&P 500 index up 0.86% after Stoxx Europe 600 rose 0.8%.