The US and China are seemingly still on good terms over the phase-one trade deal, so that has removed some anxiety across markets. The Nasdaq Composite index just entered positive territory for 2020 bolstered by gains in top tech stocks. The dollar index is just under the key 100 level as markets wait for what is guaranteed to be the worst Non-Farm payroll report ever. The London Stock Exchange is closed for the celebration of V/E day, but other global markets remain open.
Both the US and China agreed to ‘meet their obligations’ under the phase-one trade deal in a phone call on Thursday night. If the countries are choosing to separate their quarrel over the coronavirus origin from their trade deal, then the economic outlook just got a little clearer. Phase two of the trade deal was always a post-US election affair, but it needs phase one to run smoothly first.
The Nasdaq Composite closed positive for 2020 on Thursday. The index is still well off its record high because of the gains made January through February when it peaked. One thing the virus hasn’t changed is the outperformance of FAANG stocks. Even with tech sector earnings turning lower.
Investors are taking the view that the pandemic is probably exacerbating disruption to sectors like retail, travel, and leisure from big tech firms. Growth has been outperforming value for years as an investment strategy. Now many traditional value firms are cutting their dividend, making them even less attractive.
The US dollar index is sitting close to 100 before the big US jobs report later. It Seems unlikely NFP will cause a breakout from the range unless the number of jobs lost is significantly more or less than the 22M expected.
Over 21 million Americans losing their jobs in April will equate to an unemployment rate of 14%. The sheer shock of such a bad number becoming a reality could jolt markets, but so far, investors have been unperturbed. The hope is that many jobs will return when the economy exits lockdown.
The Australian dollar was edging lower after the Reserve Bank of Australia forecast the worst recession on record. However, the losses might not last long since the Aussie should be a beneficiary of US-China trade relations staying on track.