WHO, China and the United States give causes for optimism

1 apr 2020

This week's news background is struggling to get the most out of the sad situation that the world has found itself in (over 850K cases worldwide and the picture is only getting worse). We are talking about the desire of the United States to increase the already unprecedented amount of assistance to the economy. The White House and the Democrats are preparing for a new package of measures if the peak of the epidemic does not pass in the coming weeks. And Trump, in turn, called for another $ 2 trillion for infrastructure projects to support the labor market.

The World Health Organization has done its part to increase optimism, saying the peak of the pandemic in Italy and Spain seems to have passed.
Another reason for moderate optimism gave China. The PMI index in March rose sharply from 29.6 to 52.3 (with a forecast of 37.8). What does this mean especially in light of the information that Wuhan will be unlocked next week? China gives a clear signal that tough measures against the epidemic can minimize the damage to the economy from a pandemic by limiting it to period of 1-2 months.

But the rest of the world is not China. This is evidenced even by the fact that China now occupies only 4th place in the pandemic race.

So it’s too early to relax. Analysts so far only worsen their own forecasts. A week ago, Goldman Sachs expected a decrease in US GDP in the second quarter by 24%, but yesterday the forecast was lowered to 34%. Plus unemployment is expected at around 15%.

So we are still considering the growth in the stock markets at the start of the week as a great opportunity for sales. The only thing to note is that we recommend to protect each sale with relatively small stops - it is better to take a stop, take a break and go again than go against the will of the market (an attack of optimism can be quite sharp).

Amid such news, gold suffered losses. But again, for now, this is just a reason for cheaper purchases — nothing more.

The oil market also experienced some relief. Trump’s call to Putin raised the hopes that the oil price war could end soon. Quotes slightly moved away from the lows. Actually, everything is going according to our medium-term plan, despite all the news that the price of Russian oil has reached its lowest level in the last 20-plus years, Goldman Sachs expects a decrease in global demand by 26 million barrels bpd, while IHS Markit believes that the price oil in April will collapse to $ 10 per barrel, which will provoke a reduction in world production by 10 million bpd.