Market Update: 6 May 2020
Oil has continued its rally with a nod of approval from Trump as markets move towards an expected increase in demand earlier than later as countries including the US plan or start reopening. Having said that, despite over a $10 difference from last week, it’s not a linear path back to $60 – projections in 3 years are still at $40 from last week – even in 1yrs time, there’s only a $3 difference higher from last week. All it really means is inflation will have a shock in 1H, with only a partial bounce back in 2H but will maintain pressure on Oil producers viability at such low prices.
As with Australia, the US states have different strategies for reopen.. some aggressive, some quite conservative. The world watches for direction.
Nonetheless, US stocks closed +0.9% – giving away half its gain as Trump continued his negative trade with China stance.
What was also a near slip-up was German courts ruling out the case against the ECB actions as being unconstitutional … that being said, it still found the Bundesbank would have issues working within the ECB framework as it questioned its authority to use QE. The ECB has 3months to respond and can cause disruptions with members such as Italy who require more stimulus.
All in all though, currency fluctuations have been reduced and despite VIX falling and US 10yr treasuries rallying to 0.66%, the markets seem to be looking for a new direction.
Oil curve today (orange) vs a week ago (green)
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