Unpleasant surprise from China, eighth peak, FOMC protocols

21 พ.ค. 2020

Last week, we already wrote about the fear of the “second wave” of the epidemic associated with the opening of economies. Then it led to local sales in the stock markets, as well as the strengthening of the dollar. But then the markets calmed down somewhat and decided to postpone worries about this until actual confirmation of the fears would be received. China, it seems, sends a warning about this to the whole world. The sharp increase in the number of cases in northeast China has already led to new quarantine measures in these regions of China. As a result, more than 100 million people are in the lockdown. According to medics, the virus thoroughly mutated. Now its incubation period is even longer, which means it is more difficult to catch the beginning of the outbreak. And the disease now lasts longer. In general, the news is extremely depressing, especially the surge of optimism associated with the successful passage of the first phase of the coronavirus vaccine test on Monday.

The situation in Brazil continues to deteriorate rapidly and the general situation in the world continues to look like a new (already eighth) peak. In Russia, situation continues to remain stably heavy. So the pandemic will be for a long time not only on the headlines, but also harm the global economy. Accordingly, we continue to consider what is happening in the stock markets is a bubble, which sooner or later should burst.

Another important event for the markets was the publication of the minutes of the last FOMC meeting. We did not expect anything new from them, because recently Powell had already provided comments on key issues and the picture with the Fed was more or less clear. The minutes confirmed that the Fed’s negative rates are not considered, but options for long-term assistance to the economy are considered, since the pandemic and the damage from it are for a long time.

According to official figures, oil inventories in the USA fell again, and very significantly: by -4.982 million barrels, with a forecast of +2.150 million barrels. In Cushing, the decrease was even more significant -5.587 million barrels. So the white stripe for oil continues.

Bloomberg announced its forecast for the GDP growth rate in Russia in the second quarter. By growth, of course, we mean a decline. Analysts are waiting for a record in history (even compared to the global financial crisis) drop of 16%. In this light, the current attempt of the ruble to strengthen is a great opportunity for its sales at a higher price.