Analysts JPMorgan They do not trust the rebound that the world stock markets have starred since the annual lows marked a few sessions ago. “Given the speed of the crash, a relief rally has occurred, but it’s likely to end up fading“argue these experts, who consider the current rebound as”tactical

According to his calculations, global equities are down 34% on average from its annual maximums due to the negative impact of the coronavirus. Subsequently, the stimulus measures adopted by the central banks (Unlimited QE of the Federal Reserve, along with the purchase of credit; and QE program of ECB); and the fiscal measures of the governments, have caused a great rise in the equity markets and have softened the financial conditions at the global level.

In addition, the strictest European quarantine measures should spike contagion rates in Europe relatively soon. “All of the above is useful for the market, but Does this mean that we have seen the minimum of the year?“these analysts ask.

“This will largely depend,” they reply, “on whether we see a re-acceleration of infections in China, now that the country has begun to normalize. The latest blockades in India, Australia, Singapore and a relapse in Hong Kong do not bode well for the seasonality of the virus argument. “

In addition, they add, for the recovery to continue, the negative spiral between the weakening labor market, depressed end demand and falling earnings should not take root. Although “it is unlikely that we will see much clarity about it before the summer,” they admit.

Finally, they explain that in the last two recessions, business profits fell by 40% and 20%, respectively, compared to 3% today. Therefore, they consider that the stock markets have not yet discounted all the bad news that is yet to come.

HSBC NEVER SEES A FLOOR … STILL

Other analysts believe that only one ingredient is missing for the markets to continue bouncing. Although perhaps the most difficult: the containment of the pandemic. The market is “in rebound phase”, but still “has not made ground”. That is the assessment made by analysts of HSBC of the current market situation. “In general, our narrative remains cautious. We are approaching the ground and the risk / reward ratio is improving“they state.

The broad fiscal and monetary stimulus announced by governments and central banks is very supportive, but they need to see “a slowdown in the number of new Covid-19 cases globally before starting to add more cyclical exposure. “

The broad fiscal and monetary stimulus announced by governments and central banks is very supportive, but they need to see “a slowdown in the number of new Covid-19 cases globally before starting to add more cyclical exposure. “

For these experts, the most important question for the markets is whether a “V”, “U” or “L” recovery will occur. So, all eyes are now on Mainland China. If your economy can quickly return to business as usual, it should serve as a model for the rest of the world.

However, if the nature of the coronavirus means that the Capacity utilization requires several quarters to reach its 2019 levels, the impact on the equity markets could be “much deeper and more durable”they claim.

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