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Global stocks are edging lower and oil prices have plunged to 17-year lows at the start of another week set to be dominated by the coronavirus pandemic. But U.S. stocks look set to open cautiously higher as futures recovered from earlier losses. The hint of investor optimism came despite President Trump extending the U.S. lockdown to Apr. 30 and public health officials warning that the American death toll could be between 100,000 and 200,000, with cases in the millions.
In our call of the day, UBS strategists said “selling fatigue” may have kicked in as investors were no longer reacting as wildly to incremental bad news as they have been in recent weeks. The elasticity of the bank’s virus market risk measure to new coronavirus cases and other bad news was falling, it said.
“However, both because infection rates are likely to keep rising for some time, and also because in cash equity markets we have not yet seen a capitulation in the core positions in growth style stocks, it may be early to say a firm bottom has already been made,” strategists, led by Bhanu Baweja, said in a note.
In contrast, volatility in equities, rates and foreign exchange has likely hit the peak and was now “slowly coming off extreme levels,” they said. The strategists added it was time to consider getting long risk in the options space.
“Equities remain the most ‘pessimistic’ across asset classes (pricing global growth at 0.3%), followed by commodities (0.7%), rates and credit markets (both 0.9%). At 3% implied growth, cyclical currencies send the most optimistic signal,” they said.
The tweet
The market
After the Dow Jones Industrial Average DJIA, -4.06% closed 915 points lower on Friday — at the end of a good week for stocks — the index was set to open lower on Monday as investors remained preoccupied with the coronavirus spread. Dow futures YM00, +0.25% were 0.1% down, S&P 500 futures ES00, +0.51% climbed 0.3% and Nasdaq futures NQ00, +0.59% rose 0.5%. Asian stocks fell overnight and European equities declined in early trading. Oil prices plummeted to 17-year lows as virus-related demand issues persisted. Brent crude BRN.1, -8.10% fell 7.6% to $23.04 per barrel, while WTI crude CL00, -5.21% dropped 4.6% to $20.52.
The buzz
President Trump has extended the voluntary national lockdown and social distancing measures to Apr. 30. The government’s top infectious disease expert Dr. Anthony Fauci said the U.S. death toll could exceed 100,000 and move much higher without significant measures. Trump had initially hoped to lift the guidelines by Easter (Apr. 12).
The number of coronavirus cases in the U.S. has now risen above 142,000, with close to 2,500 deaths. Globally, 735,000 have been infected and 34,800 have died after testing positive for the virus.
Peg Broadbent, chief financial officer at Jefferies Group, has died after being diagnosed with coronavirus, at the age of 56.
European bank stocks fell on Monday after the European Central Bank asked lenders to suspend dividends and buybacks until October.
The White House vowed on Sunday to launch a massive new loan program for small businesses by Friday in a bid to protect jobs and companies from the coronavirus pandemic. The $350 billion relief package for small companies is part of the $2 trillion rescue package.
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