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New quarter to provide sunshine of hope

2 April 2020

The opening day of trading for the new quarter is yet to indicate a positive change of weather for global markets, after world stocks concluded the first quarter of 2020 suffering the steepest declines seen since the 2008 global financial crisis. Even with a 20% or more discount available and hanging over a number of different assets taking these items to the checkout doesn’t appear to be the best bargain opportunity and investors are likely to wait for more discounts to become available. Even President Donald Trump has changed his tune on the coronavirus after providing his bleakest outlook yet on the threat facing the United States, and the comments provided from UN Secretary General Antonio Guterres warning that the disease outbreak represents the biggest challenge since World War Two illustrates clearly that the world is still to see more darkness before light is available at the end of the tunnel.  

This negative vibe and undertone that surrounds investors is encouraging another day of losses for currencies belonging to emerging markets. Leading the declines at time of writing in Asia is the Malaysian Ringgit, Indonesian Rupiah and Indian Rupee with all lower close to 1% against the USD. The South African Rand is on the brink of another all-time low and it appears to be just a matter of time with USDZAR peeping back above 18 and another run lower for Oil prices holds the key for how much more carnage the Russian Ruble will take after it has already lost 26% year-to-date.

One might like to optimistically hope that after Oil prices collapsed by more than 60% to post the worst quarter on record that matters can only look up from here for the commodity, but this is still unlikely to be the case. Oil prices stare at the threat to falling below $20 for a prolonged period once economic data releases highlight the full impact the lockdown controls and restrictions on business environments are having on the world economy over the next one to two months - representing an unfortunate likelihood for Oil producers that valuations can still deteriorate to levels not seen since the 1990’s.

The test of time and the ultimate fortune for how a number of global assets will perform over the second quarter does hinge on the outlook for the USD. A catastrophic number of fatalities to the coronavirus that could see up to 200,000 pass away in the United States might question whether the 2020 run for the Dollar can continue, but we also should not discount the attraction to the Greenback from world buyers as a funding mechanism.  




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