Stock and forex markets show increased appetite to risk today despite accelerating pace of growth of the number of confirmed Covid-19 cases (+27256 or 12.43%, highest on record), stock markets including EM are recovering thanks to stabilization measures of the European and US Central Banks. Concerns about the global dollar liquidity shortage has subsided a little bit.
The global dollar dump today has led to a drop in the index from a three-year peak by 1.5% at the time of writing. The oil rebound is gaining momentum, futures for WTI and Brent rose 5% and 6%, respectively, after falling to the lowest level for 17 years. Bullish confidence in the oil market has been supported by the statement made by the Kremlin’s spokesman Peskov that Russia was ready “to contact over oil prices”. But the market, rising on conflicting rumors, is often known to be unstable and subsequently gives up growth, all the more so since it makes no sense to expect fundamental shifts in demand or supply in such a short time. However, given that it was Russia that displayed “aggression” against the US shale oil sector, declining to extend the OPEC + deal, it is its willingness to discuss prices is a key to stabilizing the market. Now it’s worth focusing on the pace of spread and countermeasures against coronavirus in Saudi Arabia and Russia to understand how fast the additional burden of the virus will deplete the economies of these countries. Below is a graph of confirmed cases for both countries:
It can be seen that the situation differs slightly between the two countries. Today it became known that Saudi Arabia suspended all domestic flights, public transport and banned taxis for 14 days.
In the world, the situation with coronavirus develops as follows:
The growth rate continues to increase and yesterday reached more than 12%. In other words, the spread of the virus is still at the acceleration stage. Governments have two choices: to tighten quarantine, trying to find a trade-off between overloading health services and economic damage, or to make a politically difficult decision to let the population get sick and develop natural immunity, while reducing economic damage and conserving more resources. In any case, market optimism should be taken with caution, as fundamentally the situation with the virus has not yet changed for the better.
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