David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Europe's Stimulus Package Sparks "Mother of All" Market Dreams

    This article by Cecile Gutscher and Ksenia Galouchko for Bloomberg may be of interest to subscribers. Here is a section:

    There’s no sign yet that the stimulus package is anything more than a one-off response to an unprecedented crisis. Even so, investors are viewing it with a bullish lens. “It’s completely new territory for the European Union,” Michael Strobaek, global chief investment officer at Credit Suisse Group AG, said in a Bloomberg TV interview. “And that would make the European Union as an investment much more attractive for global investors.”

    That would represent a shift for European markets, which have been unpopular compared with the U.S. For example, European equity funds suffered from outflows more than any other major region this year, losing about $31 billion, according to data from EPFR Global and Bank of America Corp.

    Bond Buyers Toast EU Ambition in Moment They Were Waiting for Gary Kirk, a money manager at TwentyFour Asset Management in London, which oversees 17.8 billion pounds ($22 billion), is sticking with his U.S. bias. “It’s a bit early to get overly excited,” said Kirk, who’s waiting to see how the details are hammered out and whether it will pass muster with more austere governments in north Europe.

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    New York Gold Traders Are Drowning in a Glut They Helped Create

    This article by Justina Vasquez for Bloomberg may be of interest to subscribers. Here is a section:

    The seeds of the current glut were sown when the coronavirus shut down commercial flights earlier this year and forced some gold refineries to close. The shutdowns strangled the supply routes that allow physical bullion to move around the globe, and prompted banks to step back from arbitraging between the London and New York markets. At the same time, demand for gold as a haven grew amid fears of the pandemic’s economic toll.

    The premium for New York futures over London surged as traders rushed to avoid delivering in April, instead buying back contracts they had sold short.

    Traders trying to capture that premium were able to arrange physical delivery, swelling inventories. Key refining hub Switzerland shipped a record amount of gold to the U.S. in April, according to figures dating back to 2012. Australia’s Perth mint also ramped up production last month and shipped bars to the Comex.

    “It is a seller’s market because of the premium and the buyers are stuck right now,” Peter Thomas, a senior vice president at Chicago-based broker Zaner Group, said in a telephone interview. “Do you want to deliver now, or do you want to deliver into the back, where the premium is high?”

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    It's Not The Virus: Mexico's Broken Hospitals Become Killers, Too

    This article by Natalie Kitroeff and Paulina Villegas for New York Times may be of interest to subscribers. Here is a section:

    Years of neglect had already hobbled Mexico’s health care system, leaving it dangerously short of doctors, nurses and equipment to fight a virus that has overwhelmed far richer nations.

    Now, the pandemic is making matters much worse, sickening more than 11,000 Mexican health workers — one of the highest rates in the world — and depleting the already thin ranks in hospitals. Some hospitals have lost half their staff to illness and absenteeism. Others are running low on basic equipment, like heart monitors.

    The shortages have had devastating consequences for patients, according to interviews with health workers across the country. Several doctors and nurses recounted dozens of preventable deaths in hospitals — the result of neglect or mistakes that never should have happened.

    “We have had many of what we call ‘dumb deaths,’” said Pablo Villaseñor, a doctor at the General Hospital in Tijuana, the center of an outbreak. “It’s not the virus that is killing them. It’s the lack of proper care.”

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    U.S. Says Hong Kong's Autonomy Is Gone, Sowing China Trade Doubt

    This article by Nick Wadhams for Bloomberg may be of interest to subscribers. Here is a section:

    Under the U.S.-Hong Kong Policy Act of 1992, Washington agreed to treat Hong Kong as fully autonomous for trade and economic matters even after China took control. That meant Hong Kong was exempt from Trump’s punitive tariffs on China, can import certain sensitive technologies and enjoys U.S. support for its participation in international bodies like the World Trade Organization.

    But the law enacted last year gives the administration broad authority to impose sanctions or other punishments. The administration can also revoke Hong Kong’s special trading status if it chooses.

    Such a decision, however, would have far-reaching consequences and jeopardize Hong Kong’s role as one of the world’s leading trade and banking hubs, so the Trump administration may start with smaller steps targeting Chinese Communist Party officials rather than moves that would have far-reaching economic consequences, particularly during the coronavirus pandemic.

     

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    Email of the day on the potential for a second wave of infections

    Dear Eoin, thank you for the excellent insights into market dynamics. There is one thing which you state from time to time - viz that you do not believe there will be a second wave of the virus in the Autumn. What leads you to believe that - we don't seem to know that much about the virus. So how can you know that there will not be a second wave in the Autumn? Although I definitely agree with you that authorities will do everything in their power to avoid more lock-downs. Many thanks, A

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    ECB Says Euro-Area Economy Is Headed for Worst-Case Slump

    This article by Carolynn Look for Bloomberg may be of interest to subscribers. Here is a section:

    “We’ll have a better sense in a few days as we publish our numbers in early June, but it’s likely we will be in between the medium and severe scenarios,” Lagarde said when asked about the outlook in an online question-and-answer session.

    The ECB is set to update its official projections for growth and inflation next, when the Governing Council also decides on policy. The central bank launched a 750-billion-euro emergency asset-purchase program in March, and economists are increasingly predicting it’ll be boosted at the June 4 session.

    The asset-buying has helped rein in borrowing costs and made it easier for governments to fund stimulus.

    And

    “All countries around the world had to respond, and as a result of that had to increase their debt,” she said. In the face of the pandemic, “use of debt is not only recommended, it’s the way to go.”

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