Asia Morning: Covid Cold Continues

Unfortunately, Covid-19 looks set to continue dominating the thoughts of the world as we start the week. US markets faded on Friday as buy the rumour, sell the fact swept financial markets into the weeks close. The long-awaited $2 Trillion stimulus package was finally signed into being.


Nothing has really changed over the weekend. Despite the aggressive lockdowns across Europe, Australasia, the United States and seemingly, every destination in between, the rate of new Covid-19 infections and deaths stubbornly refuses to show any signs of slowing down. “Locked-down for longer” seems to be the mantra that the world is begrudgingly having to accept as the price of bringing the Wuhan virus under control.


That is unlikely to be good news for asset markets, with most monetary and fiscal good news well and truly out there, last week’s rally in stocks, for example, looks almost certain to run out of steam. The sad reality is that until the world starts making evidential progress in the fight against Covid-19, and by that, I mean the United States and Europe, pricing in a v-shaped recovery in asset markets remains delusional hype at best, or reckless stupidity at worst.


The Monetary Authority of Singapore become probably the last central bank of the easing rank today, removing all appreciation bias for the Singapore Dollar at its six-monthly policy meeting. That should be of surprise to absolutely no one at all and is more flag-waving exercise than substance. The unique nature of the way the MAS manages monetary policy leaves the burden of stimulus squarely on the shoulders of the government.


With Initial Jobless Claims in the US exploding higher last week, these weeks highlight from the data from with by the US Non-Farm Payrolls data this Friday. Here we should gain further insight into the ravages of Covid-19 on the US economy with last months outsized 273,000 gains surely consigned to the dustbin of history. Early estimates suggest that Payrolls will shrink by 100,000 jobs, but it would not surprise me in the least if that number shrinks even further than the initial assessment.


We will receive a slew of PMI data from around the world in the 2nd half of the week. It will, of course, be stating the obvious, that the world is well and truly in the grasp of a recession. In the bigger picture, the data itself only confirms what we already know. What is required, is evidence that the fight against Covid-19 is being won, and I suspect that day is some way off yet.




Wall Street fell on Friday after an impressive rally through the earlier part of the week. With the US stimulus package finally signed into law, the fall on Friday had profit-taking look about it. Pundits will move into “what’s next” mode, and that will limit any equity gains as the week starts. All of these packages and easings from around the world are there to keep the lights on in the global economy; they are not magic panaceas for the world’s ills. The S&P 500 fell 3.37%, the Nasdaq fell 3.79%, and the Dow Jones fell 4.06%.


In Asia today, equity markets have slid in sympathy, with both S&P and Nasdaq futures easing by 1.0% this morning. The Nikkei 225 has fallen 3.25% with the Singapore Straits Times lower by 4.0%. The Kospi is 2.0% lower, and the Hang Seng is 1.40% lower. Mainland stocks have eased slightly, the Shanghai Composite falling 1.20% and the CS! 300 lowers by 1.60%. Australia continues to forge its own path, the ASX 200 and All Ord’s both higher by 2.0%, confounding the street and the author.


Overall, most of the good news on the fiscal and monetary front is now out there. Short of some remarkable and sudden progress on the Covid-19 from, equities are now likely to run out of momentum and ready themselves for further losses over the week.




The story is much the same with the currency markets with most of the negative news vis-a-vis the US Dollar now out there. That means that that Dollar strength should reassert itself as the week commences. The majors are mostly lower versus the greenback, with the EUR/USD down 0.45% to 1.1080, the GBP/USD is 0.50% lower at 1.2385 and USD/CNY edging back above 7.1000, climbing 0.30% to 7.1085.


The Australian and New Zealand Dollars are both 0.35% lower and chatter that South Africa is about to call in the IMF, sees the USD/ZAR climbing 1.50% to 17.9000 today.


Asian regional currencies are gently lower versus the Dollar today, with volumes very light as Asia settles into a wait and see mode. The exception is the USD/IDR, which has fallen by 1.10% today to 16,100.00. One suspects that the Bank of Indonesia is using the relatively quiet start to the week to indulge in some judicious “smoothing” action with much talk here over the weekend, that Jakarta would be “locked down” this week. I have my doubts.


Overall, US Dollar strength looks set to continue despite the underwhelming Covid-19 response by the Federal Government. Things are going to get much worse in America before they get better, but that news appears to be largely priced into markets for now.




Oil has fallen in Asia this morning as hopes that some sort of Saudi Arabia and Russian rapprochement over the weekend were dashed. Brent crude has declined 6.50% to $23.25 a barrel today, with WTI also down $6.80% to $20.40 a barrel.


With the world awash with price war oil that nobody wants, the Brent contango at record highs, and the world mired in a virus recession, only the wildest optimist could construct a reason to be long oil, even at these levels. More than likely, any rallies this week will last a day at the most and be met with a wall of sellers. That said, Brent crude around the $20.00 a barrel region, appears to have a hint of reaching equilibrium for now.




Gold enjoyed an impressive rally in the middle part of last week, as the mass liquidation of haven assets appeared to have run its course at long last. That had started to look like it had run its course on Friday with gold easing 0.50% lower to finish around $1620.00 an ounce.


In the absence of any other compelling news to emerge from the weekend, the direct correlation with equities appears to be quietly reasserting itself this morning in Asia. Gold has fallen 0.30% to $1618.50 an ounce in morning trade.


If anything, gold looks vulnerable to a deeper pullback below $1600.00 an ounce if equities do as expected, and underperform as the week gets underway. Although fundamentally, gold should be a screaming buy still, even after the 180 Dollar rally last week. Nervous trigger fingers and a clear preference by global investors for cash, meaning that gold is unlikely to challenge $1650.00 an ounce this week.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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