The beginning of the new week seems to bring an increase in risk appetite thanks to further positive news on the possible successful treatment of COVID-19. Futures on the major indices are trading above the last closing and futures on Nasdaq 100 set further records.
The markets still seem not to notice the threat of a potential next wave of infections, and yet another daily record of identified COVID-19 cases has been broken in Florida. In the entire United States, the number of infections has increased to almost 3.3 million and over 55 thousand new cases per day. In Tokyo, on the other hand, the number of detected cases exceeded 200 for the fourth day in a row. In India, more than 50 thousand new cases appeared during just a weekend – says Bloomberg agency.
Nevertheless, market sentiment has become more positive after the US company, which has been quite famous since the beginning of the epidemic, Gilead Sciences has reported that its drug remdesivir has shown improvements in clinical trials, reducing the risk of COVID-19 mortality. In addition, investors seem confident that governments and central banks will provide more support to the economy for fear of the reappearance of the infection in the US and elsewhere.
This may also reduce expected volatility in financial markets. Looking at the VIX index, it seems to slide to its lowest level in over a month, reaching 28 points. Although this is twice as high as the average of a few months before the outbreak of the epidemic, the latest trend seems to be downward. The situation is similar on the foreign exchange market.
The Australian dollar seems to benefit the most from the improvement in sentiment, gaining almost 0.5% to USD today. The British pound is also doing well, strengthening by 0.4%. The American currency, on the other hand, seems to be completely in reverse, with investors abandoning the dollar and buy other currencies on Monday morning.
Meanwhile, the oil market is seeing price stabilization before the OPEC + meeting scheduled for this week. The meeting may announce a plan to phase out or reduce historical cuts in oil production. The increase in new infections in many parts of the world may not stop OPEC from making such a decision. Furthermore, the IEA has raised its forecast of global oil demand growth for 2020 by 400,000 barrels per day, to 92.1 million barrels per day.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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