Asia Open – Virus unquantifiable impact and blocked stimulus bill sink risk appetite, Oil bears laugh at Texas-OPEC hopes, Gold resumes safe-haven role, Bitcoin’s problem

Wall Street closed out last week with some optimism, US stocks were showing signs of stabilizing, hopes were high that Congress learned lessons from the Global Financial Crisis that would suggest bipartisanship would deliver a swift response in getting a stimulus agreement done.  Global equities got off to another terrible start after Democrats blocked the Senate’s coronavirus economic response rescue package.  Risk aversion appears here to stay as investors become more fearful that this could be the worst global recession during peacetime.  Volatility was supposed to start to calm down as central banks unleash a wrath of liquidity programs and stimulus, but coronavirus updates in Europe and the US continue to suggest we are nowhere near being out of the woods or even close enough to guess on when that could potentially be. 

This week investors will start paying attention to economic data as we will see how bad it is getting for western economies.  The flash PMIs will be key for many economic models for trying to price in how bad the virus has brought business to a halt.  The pressure is on for US leaders to deliver stimulus for businesses and Americans as many hourly workers will be filing jobless claims.  Expectations are pretty high Congress will get something done this week, but US stocks will remain vulnerable on virus uncertainty.  Every passing day it seems lockdown efforts are intensified globally, thus it seems financial markets will remain nervous until we see the infection rate improve in both US and Europe.  Now that the US finally made some progress in delivering testing for the virus, markets could see in a few weeks if the lockdown efforts were successful enough in delaying the hitting of healthcare capacity.  Circuit breakers have become far to common over the past four volatile trading weeks and will probably be used again this week. 

Oil

Oil seems ready to crash again as energy traders doubt that President Trump can really sanction his way into getting the Russians to play nice with the Saudis.  The speculation that OPEC and Texas could reach a production cut agreement seems highly unrealistic, which means WTI crude break the $20 level this week. 

Oil prices are tentatively higher on the session, but that rebound is strictly matching the US equities move off the limit-down lows. 

Even if oil prices somehow manage to rebound a little more, oil is heading south as the demand destruction for crude will only get worst as more countries intensify their shutting down of non-essential business efforts and as storage space for crude runs out.  Oversupplied and crippled crude demand conditions appear to have no signs of changing in the short-term. 

Gold

Gold is trying to get back its safe-haven membership card back. With US stocks opening up limit-down, some metals traders were expecting the scramble for cash to drive gold prices lower.  The softer dollar along is probably more responsible for today’s rally in gold prices, but eventually bullion will benefit from all the fiscal and monetary stimulus that everyone seems to be pumping out.  Gold has held the $1,450 an ounce level and right now it seems that it could begin a steady climb back towards the $1,600 level as long as the dollar does not have a repeat of last week. 

Bitcoin

Bitcoin could be headed for a rough week as calls for short-ban selling in stocks grow, which means traders who want to short risky assets could just take it out on Bitcoin.  Bitcoin volatility will remain on ludicrous speed as it continues to trade off financial markets reaction to the coronavirus pandemic and not off any crypto-fundamentals.

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