A higher or lower extent of the restrictive antiviral safety measures remain the main priority for government and country leaders. The "honey is sweet, but the bee stings" principle applied to the first slow steps in the direction of opening up economies is reflected in the duality of political decisions amid the quarantine so far and in the movements of the composite stock indexes both in Europe and in the United States. The American S&P500 and Nasdaq, the pan-European Stoxx 600, the French CAC 40, the German Xetra Dax and other indexes are struggling to hold on to achievements made during their rather humble April mini-rally, and yet, since the beginning of this week, they are gradually moving lower from their peaks. The market sentiment seems to be always somewhere on the border between light and shadow cast by the latest news reports from the quarantine fronts.
Infected cases in Europe are weakening, but Spain has extended strict quarantine measures until at least mid-May. Germany, which has started to open small stores and is planning to open schools in two weeks, runs into the demands of regional authorities to do everything much faster while Federal Chancellor Angela Merkel is putting down hotheads by saying that it is too early to rest on laurels and that the epidemic in the country is far from over. "We stand at the beginning of the pandemic and are still a long way from being out of the woods," Mekel told journalists in Berlin on Monday. Let's not forget about the plans of Brussels to keep the borders of Europe closed perhaps until September of 2020. It is clear that the actions of many European leaders so far resemble the well-known saying that all cats love fish but fear to wet their paws. It would be a "crying shame if we were to stumble into a relapse with our eyes wide open," Merkel warned yesterday.
The three-stage plan called Opening Up America Again officially presented by US President Donald Trump on Friday evening, looks almost revolutionary by now as it contains specific guidelines, launch criteria, and descriptions of actions in each particular phase. Texas and Vermont, with a sense of relief, allowed certain businesses to reopen on Monday, while still observing social distance precautions. The state of Montana will begin lifting restrictions on Friday, South Carolina Governor Henry McMaster signed an order allowing retail shops and department stores to resume business on Tuesday, with limits on how many customers are allowed in. Colorado Governor Jared Polis said he would permit reopening of hair salons, child care centres and real estate offices, also subject to social-distancing measures, starting next week. Georgia announced that gyms, hair salons, bowling alleys, tattoo parlours and massage parlours could reopen on Friday, followed on Monday by movie theatres and restaurants. The plan for re-opening the US economy "seems consistent with the advice and the feedback that we've heard from health experts," Minneapolis Federal Reserve Bank President Neel Kashkari said in an interview to Fox News Channel. "Obviously we want to try to avoid the virus flaring back up again and giving back the gains that we've had, and I think a staged approach, looking over the horizon, makes sense," he added.
However, another camp of health experts have warned even against this gradual transition from the severe quarantine measures to at least partial permission to work for non-essential businesses. The governors of a dozen other states, including New York and California, have developed an alternative "collusion" on a much more time-consuming plan, perhaps, until mid-summer or even beginning of autumn. They refer to the need to protect citizens against the second or third wave of the infection. The political standoff between the Democrats who represent the authorities of these "opposing" states and the Republicans from the more ready-to-open states and from the Federal government includes more and more factors of election battles, which are interspersed in disputes about the care of the health of the nation. Meanwhile, the citizens in many states are losing patience and participating in offline protest actions. The first in a row of such revolts was out blazed by Michigan and then followed by Ohio, Minnesota, Virginia, Wisconsin and others. The demonstrators demanded the opportunity to return to work and to ease restrictions on walking in cities.
Proponents of lifting restrictions rely on a nearly ten-day plateau in the number of newly infected people in a national scale that was near 27,000 per day last weekend, and a clear decline in the number of hospital admissions. However, researchers began an effort to test residents of an entire town near San Francisco for antibodies, a broader sampling in Los Angeles suggested 40 times as many people were infected than the number of cases previously documented. So, Trump's determination is a serious argument for economic optimists, and his adviser Larry Kudlow repeated yesterday that Trump's goal is to start the first stage of lifting restrictions in many states before May 1. It is far from clear who will take the advantage in this reopening battle. Especially considering that the US President himself is more careful in actions than in words. The US administration announced on Monday that the US, Mexico and Canada are extending all restrictions on communication between countries for another 30 days.
Mr Trump said that he will suspend all immigration into the United States temporarily through an executive order. But the adoption of a new rescue package known as Care Act is again in question. Moody's agency predicts that this new bailout assistance will only delay the inevitable collapse for many American retailers. Moody's has downgraded Mexico's rating to Baa1 with a negative Outlook, and Fitch rating agency kills Argentina's rating to C, which signals an almost inevitable default of the country. JP Morgan flagged negative by releasing a note that the buyback level of shares is significantly lower than the three-year average.
Conditionally positive or neutral effect could be made by the specifics of companies' reporting for Q1 2020, which will start to be published this week, and throughout the next week. IBM already published its report on Monday, also the "stay-at-home" stocks like Netflix, Snapchat and Amazon are due to release their reports in days to come, Procter and Gamble is expected to present inspiring results, as consumers were probably not saving on diapers and shampoos in March. Reports of other companies suffering from falling offline sales could disrupt the positive tune as expectations of major damages in Q2 is much more negative than in Q1.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2022 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.