Market Overview

24 April 2020

Markets Put Ear to the Ground

In the absence of truly vital financial news, the market media discusses all sorts of leaks or topics that did not seem to be directly related to market sentiment across the spectrum of major instruments.

Stock indexes of both the US and Europe continued to climb yesterday evening on a moderately calm background reaching a certain technically accidental invisible "ceiling" that turned in the American trading session in the downward direction. The public excuse for this sale on Thursday was perfectly described in the publication by the Financial Times on the failure of limited clinical trials for remdesivir, which was considered a possible medicine for the treatment of a disease caused by COVID-19. The British edition of the newspaper referred to a draft report on the study, which briefly appeared on the World Health Organisation's (WHO) website, but was then quickly deleted. The American biopharmaceutical company Gilead Sciences said it is premature to assess the results as they showed "inconclusive" results.

Remdesivir is an antiviral medication developed by Gilead Sciences. According to the deleted article on WHO's website, its clinical trials conducted in China showed that it does not improve the condition of the patient and does not reduce the content of pathogens in the patient's blood. The Financial Times publication claims that only 237 people took part in the research, of which 158 volunteers received remdesivir, and also it had a strong side effect, so 18 patients were forced to stop taking the medication. The newspaper quotes a statement from the WHO, which reported that the draft of the report was at the stage of expert assessment and was published in error. Gilead Sciences drew attention to incorrect conditions for conducting clinical trials and the company referred to the early termination of the study due to the low number of volunteers, so that it could not be enough to make statistically correct conclusions. "We believe the post included inappropriate characterizations of the study," said Dr. Merdad Parsey, chief medical officer of Gilead Sciences in a statement on Twitter. "The study was terminated early due to low enrollment and, as a result, it was underpowered to enable statistically meaningful conclusions," the tweet said.

Generally speaking, it's not very fair when the topic on incomplete trials of only one of the medications as long as various others are running trials too. But remdesivir has become almost iconic in terms of the treatment for COVID-19 and was declared as a kind of "official" reason for yesterday's pullback of share's quotes. But it's worth remembering that just a couple of days ago Reuters quoted UK scientists as they are already manufacturing a million doses of a potential vaccine even before all proper trials are completed and the effectiveness of the vaccine has been proven. The shots will be produced in large numbers at risk of being useless if trials may show they do not work, and the Oxford University team's experimental product is one of at least 70 potential candidate shots under development around the world, and at least five of those are in the preliminary testing stage in people.

All this shows what kind of "proven" news the markets are currently feeding on, and yet today this is the actual reality. The American S&P500 index futures rose again from 2765 to the 2800 mark on this European morning, but it is impossible to completely exclude even a rather strange scenario that suggests that yesterday's decline in stock indexes may be able to launch a larger sell-off at the close of the week as markets put their ears to the ground. Meanwhile, such kind of information surprisingly came on Thursday from US President Donald Trump who touted a federal study that indicates... sunlight can weaken the coronavirus significantly - a finding that prompted the president to float the idea of treating patients with a lot of "light inside the body", which he asserted might be done "either through the skin or in some other way".

"Our most striking observation to date is the powerful effect that solar light appears to have on killing the virus, both on surfaces and in the air," commented Bill Bryan, an undersecretary of science and technology at the Department of Homeland Security, but he warned against Americans changing their behaviour based on the preliminary findings.

Mr Trump even said that he "might spend more time outdoors" such as in the White House Rose Garden to receive additional exposure to ultraviolet as the pandemic continues. "I hope people enjoy the sun," Trump said. "And if it has an impact, that's great." It was unclear whether he was joking or giving additional arguments for the American people to pressure on the opposition governors to quickly allow everybody to go into the light from self-isolation. On the contrary Trump mentioned that a number of restrictions in certain hot spots could be extended until the summer time. He also discussed using disinfectants to treat the patients: "Is there a way we can do something like that, by injection inside or almost a cleaning," Trump said, and that was a very strange suggestion.

Meanwhile, in Russia Alexander Chuchalin, Director of the research Institute of pulmonology at the Sklifosovsky Institute, reported to President Vladimir Putin on the feasibility of treating COVID-19 with gas mixtures consisting of helium and nitrogen oxide. He insisted that timely breathing with helium has shown effectiveness in most cases and can prevent a more severe stage of the decease when the ventilators for blood are needed. Increasing blood flow in the lungs according to the authors of the technique should reduce the resistance of the respiratory tract, relax smooth muscles and reduce the activity of the virus. At the same time the patient will not experience discomfort from high temperatures: "The procedure can be compared to visiting a sauna," describes the Moscow Department of health.

All this news may deliver a feeling that for the next few days at least in the absence of other fundamental reasons, that the markets may be mainly be driven by hopes and concerns about treatment methods and gossip. In the meantime, the process of opening up some US states or countries after the shutdown will be controversial, and it's not easy to track its immediate results.

Against this background is the reaction of the markets to the more familiar and so-called serious financial news, to which they seem to be somewhat deaf. Perhaps this is because this kind of news was expected for too long and it was fully anticipated in the prices. In particular, the European Union has only now agreed on an aid package of 540 billion Euros to provide support for member states with "safety nets for workers, businesses and sovereigns". The President of the European Council Charles Michel said the packages should be "operational" by June 1, which is more than the whole month of waiting. "We also agreed to work toward a recovery fund which is needed and urgent", he added. This could mean that nothing has been resolved with the recovering funding again.

The US House of Representatives approved a $484 billion "coronavirus relief bill" on Thursday that will release funding of small businesses and hospitals, pushing the total American spending response to the crisis to an unprecedented near $3 trillion. House members were meeting physically for the first time in weeks because of the coronavirus pandemic, many of them were wearing masks, but the market reacted philosophically to this action with no particular optimism.

Some media chewed on the fact that at least 30 Amazon workers had tested positive on COVID-19 at a warehouse outside New York City. The news cites an anonymous "sources at the facility". The company didn't provide any details, it just said that it is "supporting the individuals" as usual. Facebook bets on India with a $5.7 billion Reliance deal that helped the company's shares rise from $171 at Tuesday's close to $185 by the end of yesterday's trading. Facebook is to buy a 9.99% stake in Reliance Industries' digital arm as it looks to roll out services for India's grocers and small businesses by capitalising on WhatsApp's extensive reach in the country. The deal was announced on Wednesday and is Facebook's biggest since its $22 billion buyout of WhatsApp in 2014.

Apple Inc (AAPL) said on Thursday that it has found "no evidence" of a flaw in its email app for iPhones and iPads, and that it believes that such a flaw does "not pose an immediate risk to our users". Apple shares were trading mixed, rising first to $281.7 and then falling to $275 along with most other stock instruments.

Nestle posts better than expected Q1 2020 sales while customers stockpiled food claimed as a reason for this. The organic sales growth was 4.3%, Nestle reported on Friday, as consumers filled cupboards with Purina pet food and Poland Spring water to prepare for sitting home for a long time. The company also said it is launching a 500 million Swiss franc program to help its food service suppliers by extending payment terms and suspending rental fees for coffee machines.

Swatch Group's sales in China are up by almost a quarter during April, the watchmaker's Chief Executive Nick Hayek said in an interview with Blick newspaper. But the global situation following the coronavirus outbreak remains tough, as he remarked, because "elsewhere nearly all the company's stores are closed". And "instead of the normal 60 or 70 emails, there are only three or four," he added, referring to the daily sales data he gets from the company's shops around the world. This situation can be typical for sellers of luxury brands or products that are not perceived by consumers as essential goods.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Lysakov Sergey
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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