Asia on track for gains, but what's next

Another mixed day in Asia, most of the region advancing following the recovery in risk after three consecutive days of gains sustained on Wall Street, whilst Aussie and Kiwi stocks follow US futures lower. ASX200 -4.70%, NZX50 -0.79%, KOSPI +0.47%, Hang Seng +1.21%, Shanghai +1.60%, Nikkei +2.01% at the time of writing. However, the bear market bounce puts the MSCI Asia Pacific index on track for its best week since 2011. The continued pullback in the USD as well as the unprecedented whatever it takes backstop from the Fed, anticipation of the $2trn US fiscal stimulus package and short covering all helping to lift equities off lows.

China today posted the biggest industrial profits fall on record, but the markets focus is elsewhere. The S&P 500 has now retraced 38.2% of its decline from mid-February, but with breadth and volume declining in the Thursday session relative to Wednesday. Whether quarter end rebalancing, stimulus optimism, or just the classic example of a vicious bear market rally following a violent sell-off, as we saw overnight with initial jobless claims all but cementing the path to recession posting in excess of 3mn, the market is in the mood to shrug off the data (for now!). Commodity markets however have not joined the party as copper trades lower along with crude oil. And as we said previously, there is a real disconnect between the real picture which is cascading unemployment, bankruptcy headlines and a true “bottom” in equities.

Meanwhile, the US has now surpassed China in confirmed COVID-19 cases and the immunologist, Dr Anthony Fauci, who serves as a voice of reason the White House Coronavirus task force states, “We are in the escalating phase of a very serious pandemic. That is a fact. We have got to realize that and to prepare and respond. It is not, as it were, under control. Because it's still going up.”