Markets watch: Hot reads – 8 April

Markets

Markets continue to cause uncertainty amid concerns around the long-term impact of the coronavirus, with some commentators even describing this as a trickier investment landscape compared to the Global Financial Crisis in 2008.

In this environment, many questions remain for investors around issues such as the lasting economic impact of the coronavirus and how to play the rebound when it arrives.

In response, ETF Stream provides a daily selection of the best news, analysis and opinion stories summarising the current state of play.

Here are our five hot reads you may have missed:

8 April

1. The Stock Market Has Become One Big Value Trap – Bloomberg

Watching equities rally strongly for a second consecutive day, pushing the S&P 500 Index at one point to its highest level since March 11, it was hard not to be reminded of one of the most famous lines in movie history, or at least among fans of the Star Wars franchise.

2. U.S. oil state senators to talk crude markets with Saudi officials Saturday: source – Reuters

Republican U.S. senators who have introduced a bill that would remove U.S. defence systems and troops in Saudi Arabia unless it cuts oil output will hold a call with the kingdom’s officials on Saturday, a source familiar with the planning said on Tuesday.

3. Markets still too sanguine about coronavirus threat – Financial Times

Markets have been buoyed by the extraordinary actions of central banks and the hope that although the Covid-19 pandemic has spread, the US has not reached crisis levels.

4. Is Optimism In Oil Markets Misplaced? – OilPrice.com

OPEC and its partners are about to orchestrate the largest oil production cut in history, and a small number of oil & gas companies stand to benefit from it more than any of the others.

5. Opinion: Markets are shrugging off Boris Johnson’s hospitalisation. Here’s why. – MarketWatch

Markets shrugged off on Tuesday the news that U.K. Prime Minister Boris Johnson, who had tested positive for COVID-19, had been taken into intensive care in a London hospital.

7 April

1. The World’s Biggest Oil Deal Can’t Save Crude Prices – OilPrice.com

G20 countries are set to send their oil minister for an emergency meeting on Friday, a sign that there is a chance that OPEC and Russia can pull in other oil-producing countries into a global production cut.

2. Credit Markets Show Signs of Stabilising After Historic Fed Intervention – Wall Street Journal

Key parts of the U.S. debt markets are functioning again, a sign the Federal Reserve’s extraordinary steps are easing a credit-market crunch.

3. These Charts Show the Extent of the Grim Credit Market Reversal

It took just two weeks for a decade of easy – sometimes anything-goes – credit markets to screech to a halt.

4. Recent rally could be a ‘bear market trap:’ Miller Tabak strategist – Yahoo Finance

The recent rallies on the Dow and S&P 500 have some investors wondering if the worst of the market declines amid the COVID-19 pandemic are over. The Dow, which rose more than 1100 points on Monday, is trading around 20% above its’ 52-week intraday low from March. The S&P 500 is up around 16% from its’ March 23rd low.

5. Yellen says the Fed doesn’t need to buy equities now, but Congress should reconsider allowing it – CNBC

Former Federal Reserve Chair Janet Yellen thinks the central bank is not in a position where it needs to buy equities but thinks lawmakers should give it more leeway for the future.

6 April

1. Virus Peril May Make April Cruelest Month for Emerging Markets – Bloomberg

Emerging markets are about to find out just how much rougher April will be for them than developed economies.

2. OPEC’s Plan To Take Over The Global Oil Industry – OilPrice.com

The first three months of 2020 have shocked the global energy market to its foundations.

3. How big could the Fed’s balance sheet get? – Financial Times

The Federal Reserve’s balance sheet is expected to balloon this year after its dramatic interventions to shield capital markets and the world’s biggest economy from the effects of the coronavirus outbreak.

4. It’s a Scary Time. But Market Timers Have Been More Scared Before. – Wall Street Journal

The Covid-19 pandemic certainly seems as scary as anything we have faced in decades. But at least one measure of market sentiment suggests some influential investors don’t really believe this to be true as far as the effect on stocks is concerned.

5. The liquidity ‘collapse’ is a modern-day cobra effect – Financial Times

Back in the days of British rule in India, Delhi was overrun with cobras. Frustrated colonial officials put a bounty on them, paying out for every snake head the locals could deliver. But the scheme quickly backfired.

3 April

1. The Fed Is Settling Into Its Role as the World’s Central Bank – Wall Street Journal

“They must lend to merchants, to minor bankers, to ‘this man and that man,’ whenever the security is good. In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them,” said British journalist Walter Bagehot in 1873, illustrating how central banks should behave during periods of financial panic.

2. Investors braced for credit crisis in emerging markets – Financial Times

Investors are bracing themselves for an emerging market credit crisis as the economic fallout from the coronavirus pandemic hits vulnerable countries and limits their ability to repay debts.

3. What Really Caused Oil To Rally By 25%? – OilPrice.com

Oil prices spiked 25 percent on Thursday after President Trump tweeted that Saudi Arabia and Russia would cut production by 10 to 15 million barrels per day (mb/d), but there are a variety of reasons why a cut of this size faces steep odds.

4. How the Muni Market Became the Epicenter of the Liquidity Crisis – Wall Street Journal

The coronavirus triggered a liquidity crisis in municipal bonds, but the volatility that resulted has been brewing for a decade.

5. Emerging markets need more than Fed repos to fix dollar malaise – Reuters

The U.S. Federal Reserve’s offer of overnight dollar loans is a welcome lifeline for dozens of central banks in developing countries, but without a tangible improvement in investment and trade flows, the outlook for their currencies will remain glum.

2 April

1. Markets Can’t Ignore These Four Crucial Uncertainties – Bloomberg

Falsely reassured by large end-of-quarter rebalancing inflows into stock markets, many analysts and market participants still seem to be resisting four significant uncertainties.

2. Trump says he expects Saudi-Russia oil production deal in coming days – Reuters

U.S. President Donald Trump said on Wednesday he expected Saudi Arabia and Russia to reach a deal in the next few days on oil production to end a price war that has “ravaged” the oil industry worldwide.

3. Coronavirus Heightens Risk of Emerging-Market Defaults – Wall Street Journal

An unprecedented withdrawal of capital from emerging markets is threatening to create a wave of debt defaults as governments struggle with the double whammy of falling oil prices and the rapidly spreading coronavirus outbreak.

4. Closing the book on a tumultuous quarter – Financial Times

Global equities ended the quarter mixed, with Wall Street unable to extend its recent string of advances, and another policy initiative from the world’s central bank, the US Federal Reserve.

5. The Great Markets Unwind Might Be Pausing, but Traders Aren’t Relaxed – Wall Street Journal

Beneath the surface of Wednesday’s tumultuous trading are signs that several influential types of investors have worked through a pile of money-losing bets, something that analysts say should eventually bring more stability back to markets.

1 April

1. The coronavirus is the biggest emerging markets crisis ever – Australian Financial Review

We used to think the 2007-08 financial crisis set the standard for a savage global shock. But that crisis took more than 12 months to spread from the overbuilt suburbs of California and southern Spain to the financial centres of the world.

2. Jim Rogers Expects ‘Worst Bear Market in My Lifetime’ in Coming Years – Bloomberg

As global stocks attempt to recover from their biggest quarterly loss since the global financial crisis, veteran investor Jim Rogers says there’s worse to come.

3. How central banks beat back the ‘bond vigilantes’ – Financial Times

Governments across the world are embarking on the biggest borrowing spree in history, as they look to tackle the coronavirus crisis. That should, in theory, be a happy hunting ground for “bond vigilantes” — hedge funds and other investors that punish free-spending states by betting against their debt, in the expectation that higher issuance will push bond prices down and yields up.

4. Could Oil Really Fall To $0? – OilPrice.com

The outlook for U.S. shale continues to darken with WTI testing sub-$20 territory. The supply glut could grow worse as the contraction in demand continues to deepen.

5. The Federal Reserve unshackled – Financial Times

Two long years ago, during the 10-year anniversary of America’s 2008 financial crisis, a trio of former policy luminaries — Ben Bernanke, Hank Paulson and Tim Geithner — fretted that the Federal Reserve would be ill-placed to maintain global financial stability if another disaster hit.

31 March

1. ‘Nothing is out of the question’: What it would take for the Fed to start buying stocks – CNBC

The Federal Reserve has unleashed what’s frequently been called a bazooka in its efforts to calm markets. Its next step could be to go nuclear.

2. Saudi-Russia oil war is a game theory masterstroke – Financial Times

On the face of it, the idea of Saudi Arabia and Russia starting an oil price war in the middle of a global pandemic is as dumb as it gets. From a game theory perspective, it is a masterstroke.

3. A cost-effective way to help emerging markets fight Covid-19 – Financial Times

“Simple. Shut it down and then reboot!” You’ve probably heard these dreaded words from your IT department more often than you can bear. But now the same recipe is being recommended on a global scale. Epidemiologists everywhere have convinced political leaders to hold and release the “on” button on their national economies.

4. Coronavirus should not have caught leaders and markets off-guard – The Guardian

Events like the Covid-19 pandemic, the US housing-market crash of 2007-09 and the terrorist attacks of 11 September 2001, are often called “black swans”. The term is meant to suggest that no one could have seen them coming. But, in fact, these episodes each involved known unknowns, rather than what the former US secretary of defence Donald Rumsfeld famously called “unknown unknowns”.

5. Crude rises after US, Russia agree to oil market talks – Reuters

Oil recovered some ground on Tuesday as US President Donald Trump and Russian President Vladimir Putin agreed to discuss stabilizing energy markets, but prices remain near 18-year lows as the coronavirus shutdown destroys demand.

30 March

1. Complacency to chaos: how Covid-19 sent the world’s markets into freefall – The Guardian

For the global financial system, it has been a month of unprecedented pandemonium as the coronavirus pandemic breaks all records, bringing western capitalism to its knees as the disease spreads.

2. Four ways that coronavirus has changed capital markets – Financial Times

Some day this crisis will end. When, and at what human and economic costs, remain big unknowns. But when markets return to something like normality, investors are likely to find a fundamentally altered political and economic landscape: one in which the role of monetary policy has shifted from primary to secondary importance.

3. Oil prices fall to 17-year low as Saudi Arabia-Russia standoff continues, coronavirus hits demand – CNBC

Oil prices fell to the lowest in more than 17 years as demand plunged as a result of the pandemic and an unrelenting price war between Saudi Arabia and Russia showed no signs of easing.

4. Markets no longer know how to define ‘safe’ – Bloomberg

If the recent selloff in markets proves anything, it’s that for too many years too many people were focused solely on returns with zero consideration for risk or safety.

5. Unknowns await emerging markets after biggest moves since 2008 – Bloomberg

As most nations brace themselves for a likely surge in coronavirus cases through April, the signals from the developing world could hardly be more worrying for investors.

27 March

1. Why the Fed should put the Treasuries market on a war footing – Financial Times

When cracks emerged in the $18tn US government bond market this month, the Federal Reserve sprang into action to ensure volatile trading conditions did not destabilise the world’s largest and most liquid financial benchmark.

2. Here’s why stocks are rising on terrible news – CNBC

It might be premature to declare the bear market dead, but Thursday’s action sure checked off some important boxes.

3. In oil markets, it’s back to 1998 crisis pricing – Reuters

Brent oil futures may be trading at $27 per barrel but oil producers are selling their crude in the physical market at lower prices not seen since the aftermath of the Asian financial crisis of the late 1990s.

4. How I Learned to Stop Worrying and Love the Bear Market – Wall Street Journal

Everyone thinks they’re a genius in a bull market, but it’s only when prices head south that some people really stand out from the crowd.

5. What makes this global dollar crunch different? – Financial Times

26 March

1. Coronavirus: Stock markets rally for second day as $2trn US stimulus revealed – Sky News

Coronavirus-hit stock market values have rallied for a second day as details of the hotly anticipated $2trn US stimulus package start to emerge.

2. Coronavirus chaos lures Japanese back to stock market – Financial Times

Market turbulence, an old investment proverb and orders to work from home due to coronavirus have lured record numbers of Japanese to open new online trading accounts and dive into the stock market — in many cases for the first time.

3. Draghi: we face a war against coronavirus and must mobilise accordingly – Financial Times

The coronavirus pandemic is a human tragedy of potentially biblical proportions. Many today are living in fear of their lives or mourning their loved ones. The actions being taken by governments to prevent our health systems from being overwhelmed are brave and necessary. They must be supported.

4. Not Even The $2 Trillion Stimulus Package Can Save Oil Markets – OilPrice.com

A stimulus agreement has finally been reached.

5. Bill Ackman makes $2.6bn in credit market rout – Financial Times

Billionaire investor Bill Ackman has cashed in $2.6bn from bets that companies would struggle to pay their debts, less than a week after warning the American people that “hell is coming” as a result of coronavirus.

25 March

1. ‘Nationalisation’ of bond markets helps calm nerves – Financial Times

A fragile sense of calm returned to financial markets on Tuesday following the Federal Reserve’s dramatic intervention a day earlier, with a flurry of big companies taking the opportunity to sell bonds. But investors said they had little confidence that the radical actions of central banks — which analysts said amounted to a “nationalisation” of bond markets — would help stocks find a lasting foothold after weeks of turmoil.

2. Does Tuesday’s huge rebound mark the bottom for markets? Investors says one key piece is missing – CNBC

In market terms, think of the coronavirus sell-off as a three-legged stool where if one of the legs isn’t firmly attached, the whole thing will tip over.

3. Treat with caution: rocketing stocks aren’t cause for comfort – Reuters

Those pining for a bottom to the gut-wrenching stock market selloff may be disappointed to learn that mega one-day rallies like the historic one witnessed on Tuesday are typically not the start of a durable recovery.

4. Banks enjoy trading bonanza as markets churn – Financial Times

Frenzied trading around the coronavirus crisis helped the world’s biggest investment banks boost markets revenues by as much as 30 per cent in the first quarter, insiders and analysts told the Financial Times.

5. Coronavirus: Trump seals emergency virus deal worth trillions – BBC

US President Donald Trump and the Senate have agreed a massive economic relief package worth more than $1.8 trillion (£1.5trn).

24 March

1. Whatever It Takes: How the Fed Aims to Rescue the Economy – The New York Times

The Federal Reserve on Monday pledged to do, in essence, whatever it takes to keep the economy from collapsing under the weight of the coronavirus pandemic.

2. ‘Great liquidity crisis’ grips system as banks step back – Financial Times

Two weeks ago, traders at TwentyFour Asset Management came into the office after a weekend in which a global oil price war had erupted. The ensuing crash in crude made investors who were in the early stages of fretting about the coronavirus outbreak even more alarmed.

3. There’s Still Plenty Of Downside In This Oil Market – Forbes

It’s hard to overstate the nature of what has happened in the oil markets since the beginning of the coronavirus (COVID-19) outbreak in early January. At that time, supply and demand looked reasonably balanced. OPEC and its partners (primarily Russia) were taking action to make sure that balance was maintained. I felt confident enough in the fundamentals to predict that oil prices wouldn’t fall below $50/bbl this year.

4. When Will Stock Markets Recover? – Morningstar

Typically, bear markets have four stages.

5. Banks pull back from frontier markets amid scandal and risk – Financial Times

When Barclays took a controlling stake in its African venture in 2005, the British lender saw a bright future for banking on the continent. Twelve years later, “Barclays Africa” was no more, as the bank slashed its holdings and wound down a near century-long presence in Africa.

23 March

1. China aims to be a stabilising force as global financial markets gyrate – CNBC

In face of the new coronavirus’ shock to global financial markets, China aims to be a stabilising force — beginning with its own markets.

2. Europe needs a new scale of stimulus — and cash not credit – Financial Times

For the eurozone, this is not the 2010-2012 crisis all over again. It is far worse. The coronavirus will prove to be an economic shock, a corporate solvency crisis and a political crisis all folded in to one.

3. Recession Guaranteed, Recovery a Maybe, Says Bloomberg Economics – Bloomberg

The world economy is guaranteed to enter its worst recession since the financial crisis in the first half of this year with a recovery subsequent months likely but not assured, according to Bloomberg Economics.

4. Why markets gave a big shrug to the Bank of Japan – Financial Times

Was that it? Markets’ reaction to the Bank of Japan’s unscheduled monetary policy moves last week in response to the coronavirus outbreak was a swift and highly negative dismissal of the actions taken as inadequate to the challenge posed.

5. Central banks deploy record sums to break financial logjam, but may need more – Reuters

Central banks have offered trillions of dollars of support to markets in recent days to keep them from freezing up, as investors worried about the economic damage from the coronavirus and made a chaotic dash for the exits.

20 March

1. Bank of England cuts rates again and ramps up bond buying to combat coronavirus impact – CNBC

The Bank of England (BOE) cut interest rates to 0.1% and ratcheted up its bond-buying program Thursday, in an effort to offset the economic impact of the coronavirus outbreak.

Central banks have offered trillions of dollars of support to markets in recent days to keep them from freezing up, as investors worried about the economic damage from the coronavirus and made a chaotic dash for the exits.

2. Toilet rolls and Treasury bonds tell the same panicked story – Financial Times

The phrases “toilet paper” and “Treasury bonds” are not often uttered in the same breath. Right now, however, they should be.

3. Why Fund Investors Shouldn’t Panic – But Rebalance Instead – Morningstar

VIDEO: Morningstar Investment Management’s Dan Kemp has some advice for investors caught up in the market panic

4. Seeing the Forest Through The Trees With Gold Miners ETFs – ETF Trends

The VanEck Vectors Gold Miners and other gold miners ETFs tumbled Wednesday, but some market observers see the potential for the group to stage a rebound.

5. Markets Enter New Phase—Where Cash Is All That Matters – Wall Street Journal

A rush for cash shook the financial system Wednesday, as companies and investors hunkered down for a prolonged economic stall, taking the recent market turmoil into a new, more troubling liquidation phase.

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