The fight between sentiment and fundamentals

The fight between sentiment and fundamentals

5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  In today's equity update we focus on South Korea and the resurgence in new COVID-19 cases, the VIX dipping below 30 and term structure in contango suggesting that the bear market dynamics could soon end, Brazilian equity market trading a deep discount to global equities and finally that the market for fundamentals is still reluctant to jump on the bandwagon of optimism as seen in US technology stocks.


Equities are generally positive this morning as the market is still pricing in a V-shape recovery putting little weight on last week’s dire macro figures ending the week with the US unemployment rate hitting 14.7% in April. We are technically positive on the market as long as the NASDAQ 100 Index remains above its 15-day SMA but we still struggle to be positive on equities based on fundamentals. What are some of the key things to watch in equities today?

KOSPI 200 down 0.6% - number of COVID-19 cases have recently surged and today saw 34 new cases the highest since 9 April as new chains of the virus has started at nightclubs in Seoul. This comes after Germany just announced that its R0 (virus reproduction value) increased to 1.1 as it opened up society. These stories tell us that reopening the economies may not be that easy and LesEchos has in collaboration with Kayrros-EY Consulting made a new real-time economic activity index based on satellite images. This shows that Chinese activity despite reopening is still down 25% from levels before the COVID-19 outbreak.

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