Morning Note: Did the Bull take out the bear, Higher Volatility looms.

A global rally in risk assets looked set to gather pace on Friday as investors bet the massive fiscal and monetary responses to the coronavirus crisis will ease its economic impact. The NSE share indices gained and clocked higher turnover despite having a continued onset of foreign sales. The Kenya shilling also recovered from Tuesday’s four and half year low of 106.54 units to the dollar to exchange at 105.50 in afternoon interbank trading, the best in the last five days.

In major global indices, the S&P 500 rose more than 6%, for its first three-day rally since February, while the dollar slumped for a third day. Equity futures in Japan, Hong Kong and Australia were all more than 3% higher. The MSCI All Country World Index is on course for a 13% advance this week, following the rout that dragged stocks around the globe into bear markets.

Treasuries edged higher, while crude retreated. Data is beginning to show the extent of the economic damage of the outbreak — as businesses shut down to help prevent the spread of the CoronaVirus. While the reading exceeded estimates, government aid may help to cushion the impact on workers and businesses. But have we hit a false bottom, or is this the start of something really big?

In corporate development, I&M Holdings Plc reported a net profit increase of 26.6 percent to Sh10.76 billion last year supported by growth in non-interest income and reduced expenses, causing it to be one of the top gainers in yesterday’s session.

Haven assets rose on Friday. Japan’s yen strengthened 0.9 per cent to ¥108.61 per dollar, while the 10-year US Treasury yield fell 4 basis points to 0.808 per cent. Yields fall as bond prices rise.

So, has the bull taken over the market, or the bear is hiding, planning for another attack?! Well, these types of rallies are not uncommon in periods of extreme volatility. During the height of the financial crisis, in October 2008, global markets posted two single-day gains of more than 10% in a matter of two weeks. The current price action means that the stock market’s recent lows could be retested in the short run.

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