Wednesday, 29 Apr 2020 09:14 AM MYT
Trillions of dollars in stimulus from governments and central banks, and moves to start re-opening businesses, are contributing to the bounce-back.Wall Street’s fear gauge, the Cboe Volatility Index as well as the Euro STOXX 50 volatility index have steadily dropped over the past month to the low 30s, their lowest level since early March. Both indexes spiked past 80 at the height of the market sell-off last month.
“What we see is that the market is anticipating a recovery,” said Roland Kaloyan, head of European equity strategy at SocGen. “It is already looking at 2021. If you look at sectors, the so- called market darlings in the technology, pharma, luxury goods, all have priced in a V-shape recovery.” Equities have also displayed remarkable resilience in the face of data, which in the course of just weeks saw the loss of all the US jobs created in the past decade. From March 19 to April 16, the S&P 500 rose five Thursdays in a row, barely blinking at eye-popping US jobless claims figures released on those days.
Stocks have risen alongside an increase in global vehicle traffic as countries ease restrictions, UBS strategist Keith Parker wrote in a note on Monday. A calmer VIX in itself also doesn’t tell the full story. The index remains well above its usual levels, and VIX futures point to expectations for elevated volatility throughout the year. Likewise, in foreign exchange markets, a Deutsche Bank index of currency volatility is still some distance above the record lows it hit early this year.