USA vs China, weakening of restrictions, more weak data

The start of the week was surprisingly calm. Volatility as for the last time was rather low. In many respects this was facilitated by the lack of important macroeconomic statistics, as well as the very busy previous week. In general, traders decided to take a breath.

The main event of yesterday in terms of macroeconomic statistics was the publication of Markit indexes on the Eurozone. Confidence fell to a record low in April, and job cuts were the sharpest since 2009. The overall activity in the Eurozone fell to 33.4, the lowest level since the start of publication in 1997. The manufacturing component fell to 18.1, well below level 50.

US manufacturing orders fell 10.3% in March.

The whole world this week is following the US rhetoric towards China, which is becoming more aggressive every day. The United States wants to blame China for the development of the virus and its subsequent spread in the world, the main victims of which were precisely the US. Potentially, this is a very bad situation with the worst possible consequences (as if the world economy lacked problems without it).

From conditionally positive news, it is worth noting that the economies of many countries are planning this week to remove some of the restrictive measures and begin the gradual release of their lockdowns. And if in Italy, Germany or Spain, this seems like a natural evolutionary process after 5 weeks of a downward tendency in the development of the epidemic, and then the removal of restrictions in the United States looks clearly premature, because there the pandemic is still at its peak and there is no any positive tendency yet. But some states are already opening parks, restaurants and introducing other mitigation measures. This is potentially fraught with stretching the duration of the epidemic or even reaching a new peak.

By the way, Japan against this background extends the state of emergency in the country until the end of May.

So we do not see any reason for optimism in the stock markets and continue to recommend sales primarily in the overbought US stock market.