Amazon record high a sign of excess, Oil 1-week low
09:23 am BST | April 15th, 2020
The post-Easter bounce in markets has hit the rails somewhat. The mood has darkened since the IMF’s doom-laden global recession prediction and Donald Trump’s decision to cut WHO funding.
European stocks opened softer on Wednesday, having already turned south yesterday afternoon. Asian shares were flat with a Chinese rate cut helping keep a floor under the declines. China cuts its medium-term funding rate to the lowest on record.
Dow Jones to open 283 points lower at 23,666
S&P 500 to open 35 points lower at 2811
FTSE leads declines
The FTSE 100 has been leading the declines with Wednesday’s opening losses adding to an over 1% decline on Tuesday. The lack of an ‘exit plan’ from the UK lockdown is starting to become a negative overhang for UK equities while left unresolved. Surging bad loans seen in US bank earnings has UK investors bracing for the same in the FTSE’s heavily weighted banking sector.
The losses on the FTSE coincide with one-month highs for the British pound, which has breached critical 1.25 and 1.15 levels against the dollar and euro, respectively.
Amazon reaches record high
If one were looking for signs of market excess, one needn’t look much beyond shares of Amazon that just broke out to a new record high. The more glass-half-full interpretation is that there are still pockets of the market that can benefit in this new environment.
There is a good investing case to be made for Amazon growing in the pandemic. It will be market share from brick and mortar retailers who can’t compete because they have been forced to shut, and AWS is dominating newfound demand for cloud services while businesses operate remotely. Nonetheless, we remain cautious. The valuations are underpinning Amazon’s stock price rest on a bullish market. When there is another liquidity event, Amazon shares could be some of the first to be sold.
Oil hits one-week low
Oil prices are rolling over on Wednesday. Brent crude oil hit its lowest since April 3rd. It was on April 2nd that Donald Trump said he had spoken to the Russian and Saudi leaders about a big cut to oil output.
Since the cuts were confirmed over the weekend, fresh doubts have grown about whether it’s enough. OPEC+ with the blessing of G20 energy ministers agreed to cut nearly 10 million barrels per day. The cuts were the minimum need to stabilise prices but not much more. Traders will be watching US inventories data today to judge the extent of the supply/demand imbalance after the cuts.