Stocks: SP rises but traders tread with caution

The SP 500 rose again Tuesday, closing 0.9% higher, as more states took steps to reopen businesses. California indicated that retailers could open from Friday, with further steps possible in counties with fewer cases. Those measures have supported oil markets as well; the front WTI contract is up 20.5% and Brent prices back above USD30 per barrel for the first time since mid-April. That prompted the US President to remark that, "demand begins again!" 

But there’s a distinct risk-off tone to greet China coming back from holiday. With Trump & Co. still on the Wuhan lab rampage, traders are incredibly cautious this morning, weighing all the possible China responses. And the one that would hurt the most would be for China to reduce imports of US oil. 

As far as the data goes, markets continue to focus less on the beats and misses and more on reopenings. Despite the move higher in both oil and equity markets overnight, traders remain extremely cautious at current levels. The virus situation remains extremely fluid while heightened US-China tensions are taking their toll on sentiment as President Trump seems adamant, on the surface anyway, to move ahead with plans to remove global supply chains from China.

It’s never a good idea to get too comfortable when geopolitical risk starts to rear its ugly head as it usually has cascading effects, triggering unrest in numerous hot spots.  

According to the think tank Center for Strategic and International Studies, North Korea appears to be nearing completion of a ballistic missile facility with the capacity to test-fire intercontinental ballistic missiles, which is now bringing more attention to bear on the Korean peninsula; Kim Jong-un will be another US election focal point as geopolitical risk ratchets up another level or two. Risk assets took a quick nosedive, with the touchy and extremely sensitive to growth oil market buckling on the news as fast money traders are looking to take no prisoners on any risk wobble.  

Speaking of hotspots and US election focal points, the outlook for Hong Kong remains ugly after recording the worst quarterly performance since data was made available from Q1 1974. But this could be a case of going from very bad to even worse amid considerable challenges to overall growth, such as weak tourism, external demand and a possible resurgence of social unrest – the latter will likely waste no time in rearing its ugly head given the White House’s outsized focus on the tenuous US-China relationship.

Germany's constitutional court has ordered the government to conduct a "proportionality assessment" to ensure the fiscal effects of the ECB's new bond-buying program do not outweigh the objectives. I’m not a lawyer but, deciphering the legalese, it would be challenging to not envision the market turning flat out bearish on the EUR – if not the entire Eurozone complex. 

In Korea, it’s surprising to note there have only been five positive net equity inflow days into Korea since February 21, as concern over export end demand has held back inflows. 

On the domestic front, however, Korea offers a guidelight to how well consumer demand will normalize; the country reported zero locally-transmitted cases today – the fourth such day in six.   

The propensity for Koreans to open up their purse strings in shared spaces such as bars restaurants and shopping malls will provide the rest of the world with some guidance in how much consumer behavior could change i