Morning Note: Markets Optimism Rise, Oil Drops.
Markets across the world showed increased optimism in yesterday’s sessions.
The S&P 500 Index climbed for the fourth time in five days even after a weekend full of negative pandemic news as President Donald Trump extended recommendations aimed at inhibiting the spread. The Nasdaq 100 advanced more than 3% with health-care shares among the biggest gainers. Abbott Laboratories surged after unveiling a five-minute coronavirus test and Johnson & Johnson announced a vaccine candidate for the virus.
The People’s Bank of China reduced the interest rate on 7-day reverse repurchase agreements to 2.2% from 2.4% when it injected 50 billion yuan ($7.1 billion) into the banking system, according to a statement Monday. The central bank said this will keep liquidity sufficient to help the real economy. This action has seen Asian stock markets rise in early Tuesday trading, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was up 1 per cent while Hong Kong’s Hang Seng rose 1.7 per cent.
The Nairobi Securities Exchange recorded another straight run as investors came back into the market. Cooperative Bank and Safaricom continue to be the most active stocks in terms of capital appreciation in yesterday’s trading sessions. Equity Group took more beatings as they announced their plan for acquisition of banking institutions in 5 African countries will be delayed further. Equity now roams at levels of 33.25 while it’s trading twin KCB closed at 36.00.
Today, we expect market activity to remain moderate at these levels with one volatility factor in place, investors who bought these shares at low prices over the past three weeks maybe planning to dump when they reach an optimum gain. Stocks that have rallied more than 10% could be faced with these predicament.
Likewise, counters that are currently trading on cum-dividend are likely to maintain their trading positions at these levels.
Investors should prepare themselves for the worst quarter in decades as business will take a hit from the Corona virus pandemic.
In commodities, the global oil market remains broken, overwhelmed by an unmanageable surplus as virus lockdowns cascade through the world’s largest economies.
Onshore tanks in many markets are full, forcing traders to store excess oil in idle supertankers. Refineries are starting to shut down because nobody needs the fuels they produce. In physical oil markets, barrels are already changing hands for less than $10, and in a few landlocked markets producers are paying consumers to take away their crude