(Bloomberg) -- A combination of President Donald Trump’s unprecedented travel restrictions between the U.S. and Europe and underwhelming stimulus measures sparked a fresh exodus from risk assets in global financial markets Thursday.
The rush to gauge the impact on the global economy and corporate earnings, a sense of disappointment at the lack of detail in the U.S. stimulus package and an impression that Washington has fallen behind the curve in its virus response occupied the minds of market participants
Here is a sample of their views:
Transatlantic Animosity
Sue Trinh, global macro strategist at Manulife Investment Management in Hong Kong:
“All the ‘solutions’ we are seeing from the powers that be are reminiscent of the great financial crisis. Bailing out the zombies while structural issues surrounding allocation of resources remain -- liquidity does not control the spread of this virus. Where are the hospital beds, ICUs, doctors, medical equipment and vaccine R&D?”
On Trump’s measures, “not much he can do without Congress and the Dems don’t want him re-elected. Nothing about canceling large events, increasing testing, no social distancing, so the virus will only become endemic. This is basically further decoupling from Europe - provoking further Transatlantic animosity.”
Won’t Get Better
Jeffrey Halley, senior market analyst at Oanda in Singapore:
“None of this was likely to inspire confidence in the markets, and the story won’t get better this evening when the ECB announces its latest rate decision. What is needed, though, is direct fiscal assistance.”
“Joint action is something that ECB President Lagarde has been screaming for but sadly, appears to be falling on deaf ears of the austerity gnomes. A coordinated rate cut and budget assistance such as the U.K. enacted aggressively, following Australia and the likes of China, Hong Kong and Singapore is the required medicine.”
No Endgame
Stephen Innes, global chief markets strategist at AxiCorp
“By criticizing Europe and not announcing stricter domestic travel measures in the U.S., President Trump is treating Covid-19 as a European and Asian problem. Clearly, the market doesn’t like this.” Announcing stricter containment efforts in the U.S. could have cushioned the sell-off, he said.
“Now the ‘no endgame in sight’ risk-off trade takes over as traders are hammering the sell button now thinking the U.S. government has fallen well behind the curve in its Covid-19 response.”
Lightweight Measures
Chris Weston, head of research at Pepperstone Group in Melbourne:
“Trump’s measures are so lightweight compared to what we’ve seen in countries like the U.K. -- we need Trump to be a general here, and markets needed to see something bi-partisan.”
“They want measures that will go through Congress and get done within days, not after the November election. Investors will not hesitate to show what they think to the Federal Reserve and governments over the next few sessions.”
Rolling Their Eyes
Robert Carnell, chief economist for Asia Pacific at ING Groep (AS:INGA) NV in Singapore:
“Trump’s hands are tied, he can’t come up with any meaningful spending on the virus without Congressional support, and that is difficult to achieve with the current political backdrop.”
“The deferment of tax payments does help the cash flow for firms, and isn’t meaningless, but I think markets will be looking at the claim that this is ‘This is the most aggressive and comprehensive effort to confront a foreign virus in modern history,’ and rolling their eyes.”
“The travel ban for Europe will have economic consequences, both in Europe and the U.S., and it may help to lower the eventual peak of the virus in the U.S. That is a highly debatable premise though without the widespread testing for the virus in the U.S.”
Negative Growth
Mark Matthews, head of Asia research of Swiss wealth firm Bank Julius Baer & Co. in Singapore:
“So I guess my question is -- what everybody wants to know is -- how much will earnings be down? And, nobody can answer that question because we don’t know how bad the coronavirus is going to get and we don’t know how severe government reactions will be to it.
“But clearly things like shutting down travel between U.S. and Europe has an impact on the economy, and consumer and business sentiment, so the consensus for global growth this year, which is 8%. It’s not going to be that, it’s going to be negative. But, will it be -2%? -3%? -10%? What’s it going to be? So that’s why markets are so volatile.”
More Severe
Shaun Roache, S&P’s Asia-Pacific chief economist in Singapore:
“Markets had hoped Trump would provide the circuit breaker to this vicious cycle we’ve seen in markets -- but he just didn’t deliver.”
“If you’re a country that’s going to do a big fiscal stimulus, but the biggest economy in the world isn’t, what might happen is that your currency appreciates against the dollar. In this sense, we need to see a globally coordinated response.”
“The danger is risk premiums continuing to rise and the economic downturn will be more severe than thought if the U.S. doesn’t give more concrete details.”
No Outstanding Feature
Jun Kato, chief market analyst at Shinkin Asset Management in Tokyo:
“Markets reacted initially by selling on the fact as details were pretty much within expectations but lacked an outstanding feature. It’s a disappointment reaction.”
Missing Tax
Ben Emons, a managing director at Medley Global Advisors
“What is missing is the certainty of a payroll tax cut, payroll tax holiday near-term,” he said. “I think that is what the market wants to see because such measures keep the economy afloat as the outbreak intensifies.”
Stronger Yen
Jingyi Pan, market strategist at IG Asia
“The key element of payroll tax relief remains missing at present and looks to be a difficult one to come by rendering the need for President Trump to make the call for a unified decision to implement it. Broadly, however, the suggestions of capital and liquidity provision for small businesses had perhaps been widely expected.”
“Dollar-yen can be seen continuing the slide past the 104 level, no surprise as risk aversion interest gathers with the travel ban announced, which is also expected to carry with it economic implications on both sides.”
Virus Spread
Ross Cameron, head of Northcape’s Japan office in Tokyo:
“In the absence of strong social distancing measures, which will likely have a severe economic cost, we believe the virus is likely to continue to spread rapidly. In aggregate markets are still not fully pricing this in our opinion.”
“However, so far the sell-off has been quite indiscriminate; there are already opportunities to selectively buy shares in companies, which are relatively unimpacted but are now trading at cheap valuations.”
Failed to Deliver
Mingze Wu, a trader at INTL FCStone in Singapore:
”Trump has failed to deliver any strong stimulus plan that market was hoping will help boost U.S. economy, and the travel ban is a bit excessive.”“Global central banks’ stimulus and interest rate cuts are inflationary measures in so far that they encourage spending to increase the velocity of money through the entire economy. However, this is not something that can be solved by lowering cost. I want to fly to Japan for my vacation but I literally can’t -- not because I cannot afford it, but because flights are canceled due to the virus.”
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