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Is the economy ready for opening?

By Marius-Cristian Frunza
Weekly Briefs

Political leaders are eager to announce the end of the lockdown and the return to a normal life.  However, what could be the new normal under the constraints of social distancing?

While the impact on the functioning of blue-collar sectors may be limited, the rest of the economy needs to reengineer the interactions in the workplace. Therefore, the tertiary industry may need to say farewell to overcrowded open-spaces, tiny meeting rooms and vending machines. The social dynamic in the workplace may go through a structural reconfiguration.

Moreover, industries like entertainment, catering, hostelry and tourism could suffer most of the damages. Countries like Italy, Spain or France that rely massively on those industries could enter in a long cycle of depression.

History shows that periods of seclusion were prolific for many writers, artists or scientists. For example, in 1830 due to the outbreak of cholera in the Russian Empire, Alexander Pushkin remained in quarantine for few months in Boldino, a city near Moscow. That period known as “Boldino autumn” was the most prolific in the life of the great poet, and it was during that lockdown that he wrote the masterpiece “Yevgeny Onegin”

Similarly, the current lockdown period could be fruitful for those companies that need the inspiration to reshape their products for the after-pandemic world.  The big winners of this reconfiguration are the technology companies that need to step in and provide sound solutions that could fill the gap of the foreseeable mass social distancing policies.

Habit is heaven's gift to us: a substitute for happiness. Alexander Pushkin, Eugene Onegin

Market overview

The stock market nailed its colour to the mast and ended up in the positive territory, lifted by hopes of progress on an efficient COVID remedy. With few exceptions in the pharma and technology sectors, there are no fundamental reasons to observe positive drifts on most of the stocks. The current prices are driven by behavioural trading that aims to alter the likelihood of a massive panic amid a global lockdown. Severe corrections should come in the second half of May when the economies of developed countries will reopen.

Bitcoin continues to follow the trend of the stock market. The post-pandemic world may bring a paradigm shift.  The use of cash in the real economy could be severely limited, and alternatives will be needed. Thus, Bitcoin may have a fresh start and experience a new bubble.

Stock market focus:

Gilead

Over the last five weeks, half of the world's population behaved like hydroxychloroquine addicts, desperate to get their dose. This primary antimalarial drug became more expensive and more challenging to get than some of the heavy narcotics.  

Gilead Sciences, a California based pharmaceutical firm announced last week that its antiviral Remdesivir gave promising results on COVID patients.  The market seems to be already aware of this development, and consequently, the Gilead stock has moved into the positive territory since the beginning of the pandemic. Meanwhile, the shares of the leading pharmaceutical companies dipped following the market trends.

Commodities market:

More coffee breaks

When most commodities prices are retreating amid the pandemic outbreak, coffee prices found support and progressed over the past weeks. The prolongated lockdown had, without any doubt, a positive impact on the consumption of coffee.

The other soft commodities, including wheat and corn, do not show any signs of excessive price growth amid fears of low supply.

Market outlook

The stock market ended a second week in the green, but it will not take too long to reprice the post-reopening reality. Thus, our prognosis is still unfavourable for the stock market and remains positive for gold. The Brent should remain directionless over the next week until new data about oil stocks is published.

General Disclaimer

The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial in- strument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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