Horrible PMIs No Biggie, it Seems
A mixed session so far in Europe, with Wall Street seeing minor losses on the open despite some horrific survey data this morning.
Once again it seems investors are willing to give the data a free pass and while I can see the argument for that, it does seem to gloss over the fact that these numbers are absolutely horrendous and there will be consequences, no matter how much stimulus we see and how many support schemes are put in place.
The difficulty of course is quantifying exactly what the damage will be. It’s difficult to compare these numbers to those that came before it as people aren’t not spending out of choice, the shops are closed and people aren’t allowed to leave their homes, but in many cases, they are still being paid.
Businesses are understandably pessimistic and these numbers are grim but once they’re allowed to open again, they will rapidly and dramatically change. People can’t wait to leave their homes again and plenty will have money to spend, which wouldn’t have been the case if they were unemployed. Not all businesses will bounce back quickly but the general outlook will be far better than it seems now. The uncertainty alone will be crushing these numbers.
So perhaps it's understandable that the data is getting something of a free pass at the moment. It may represent the current mood but arguably not so much the where business will be in six months, which is the point of the survey data. That, of course, will only last as long as unemployment doesn’t become more permanent and companies stay in business, if that changes, the data won’t get the free pass it currently is.
Panic abates in oil, for now
Oil prices are enjoying another little bounce on Thursday but don’t be fooled, at these levels, the percentage change can be very misleading. Don’t get me wrong, the price doesn’t start with a minus so things are looking up, but it’s not that far away and I wouldn’t bet against visiting those depths again. I didn’t think I’d be saying that even a month ago.
The fundamentals haven’t changed so I don’t expect to see too much upside – on an absolute basis – unless something happens. Donald Trump will continue to face opposition as he seeks to protect the oil industry and those employed within it and we saw earlier this week the lack of urgency from OPEC, which doesn’t suggest they’re yet willing to do much more. US output has fallen again but not that much so these levels will likely persist.
Gold bursts higher towards April peak
Equities and the dollar are pretty stable and yet, gold seems to have found some pent up energy, jumping around 1% on the day to come within a whisker of the peak earlier this month. If it falls short, it could signal further weakness to come for the yellow metal, with focus then shifting back to Tuesday’s lows.
A break above $1,750 could propel it higher though. The evolution of gold’s relationship with risk will be one to watch, given its apparent vulnerability to sudden shock losses across other markets. Then again, the unprecedented global stimulus provides the constant bull case that can’t be ignored.
Bitcoin continues to consolidate
What more is there to say about bitcoin? It’s been rangebound now for almost the entirety of April, with $6,500 and $7,500 providing strong support and resistance, respectively, despite multiple tests of both. I’m not sure who has the upper hand at the minute, with price appearing to consolidate further of late. Perhaps we’ll see a burst soon but for now, there really isn’t much to say.
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