Bassanese Bites: Testing support – May 18 2020
Last week I headlined my Bites report ‘Testing resistance’, given the focus on whether the S&P 500 could break through recent highs of 2,930 and march onward to 3,000. As it turned out, the market did test, but failed to break, this resistance, given the double blows from both U.S. virus guru Dr. Fauci and Fed chair Powell. With growing speculation of a move to negative interest rates by some central banks, gold prices also pushed higher, even as the $US firmed.
Fauci doused re-opening euphoria by reminding the U.S. public that the virus was not yet under control across the country, and opening up too quickly could hurt more than help the economy. Powell, meanwhile, pleaded for more fiscal stimulus, noting the U.S. recovery was still subject to “significant downside risks”. Simmering U.S.- China tensions added to the market unease. A higher than expected 2.9 million filed for jobless claims last week, taking the total over recent weeks to 36 million. Various ‘nowcast’ estimates suggest the annualised decline in Q2 U.S. GDP is likely to be anywhere from 30% to 50%.