On April 21, the Dow Jones fell nearly 600 points as oil continues to plummet. Today, Asian markets followed suit as Brent dropped over 10%.
With oil showing signs of dropping as early as April 20 to start the week, the entire sentiment of the global markets seems to be reacting negatively.
Stocks in the Asia Pacific declined in Wednesday afternoon trade amid the sharp losses brought by the oil markets overnight.
Here are the following market moves from the Asia-Pacific markets as of this writing:
- Despite the majority of Mainland Chinese stocks dipped lower by the afternoon, the Shanghai Composite slightly rose 0.15%.
- The Nikkei 225 led losses among the region’s major markets as it fell 1.3% in afternoon trade while the Topix index slipped 0.67%.
- South Korea’s Kospi dropped 0.43% while the Kosdaq index shed 0.35%.
- in Australia, the S&P/ASX 200 declined around 0.31%.
Aside from oil showing evident signs of weakness, currencies had mixed results today:
- U.S. dollar index goes back above 100 levels after seeing it below 99.5 last week.
- Japanese yen is trying to sustain above 107.6 levels after weakening from levels below 107.6 yesterday.
- The Australian dollar is currently holding $0.630 following a decline from levels above $0.635 seen earlier this week.
Has the S&P 500 reached its topped already?
While other analysts are looking at around 2,900 – 3,000 as a resistance level, it seems that the S&P 500 may have found its peak.
Equity strategist at Canaccord Genuity Tony Dwyer warns investors that they may want to wait for prices to fall significantly lower before buying into U.S. stocks while an ongoing fight against COVID-19 is still happening.
He mentions three indicators to look out for should investors and traders decide to buy the S&P 500:
- Inspect the yield curve of the U.S. Treasury, as Dwyer argues – “remains too flat”. He also adds that the spread between the yield on the 2-year U.S. Treasury note and the 10-year note has long been a sign of an incoming economic weakness or recovery, with the spread narrowing or inverting before recessions and steepening before recoveries.
- Check the 26-week rate of change in business loan demand, which spiked by 17.3% in the week ended April 17. He also hints in his note that business loan demand sharply drops just before the beginning of an economic recovery.
- Lastly, he points to the Chicago Federal Reserve’s National Financial Conditions Index to measure the overall availability of credit to businesses. In recent Fed developments in its willingness to support bond markets, credit conditions continue to grow more restrictive by this measure.
Trump: Energy and Treasury, do something
U.S. President Donald Trump also mentioned in a tweet instructing both the Secretary of Energy and the Secretary of Treasury to formulate a plan to save jobs in the oil and gas industry.
We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!
— Donald J. Trump (@realDonaldTrump) April 21, 2020
Traders and investors wait patiently as to how these events will slowly unfold and how much economic impact would this oil crisis bring.