Market Quick Take - April 14, 2020

Market Quick Take - April 14, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  Markets are coming back online in Europe this week for the first trading session after the Eurogroup emergency spending deal. After this agreed deal and the latest massive push from the Fed to provide support for small businesses and even junk bonds, markets are in a hopeful mood, even as visibility from here for the real economy remains poor. Despite the historic OPEC++ deal crude oil remains troubled by an overhang of supply as lockdowns continue to suppress demand.


What is our trading focus?

  • US100.I (NASDAQ 100 Index) and US500.I (US S&P500 Index) – the S&P 500 rally has rallied to the 50% retracement of the enormous sell-off into the March lows (2786) and even slightly beyond. As markets get back fully online globally today, this local resistance area (as high as 2820) is the latest pivot point for whether markets can continue to trust that the Fed put is alive and well. Next levels higher are the 61.8% retracement at 2930 and then the 200-day moving average near 3000.
  • XAUUSD (Spot gold) – the key multi-year highs ahead of 1700 have been broken in the spot market as we watch whether gold continues to rally here, driven by fears of inflation and financial repression from limitless fiscal spending in an environment of zero yield.
  • JPMorgan (JPM:xnys) and Wells Fargo (WFC:xnys) – the two giants in the US financials sector are both reporting Q1 earnings figures today ahead of the US equity session. Analysts expect JPMorgan to post Q1 EPS down 19% from the same period last year and Wells Fargo Q1 EPS down 47% as the economic pain begins to hit the major banks. If outlook is terrible this could be a serious test of the market rally in equities.
  • OILUKJUN20 (Brent crude) and OILUSMAY20 (WTI crude) –  Crude oil’s failure to rally following the historic OPEC++ production cut agreement highlights the continued downside risks. At best the deal may help stabilize the market until lockdowns are being lifted and demand returns. Focus on compliance (or lack off given recent history) and U.S. production data.
  • AUDUSD – we continue to watch AUDUSD as a proxy for risk appetite and the status of the US dollar withing the G10 as a key driver of the comeback in risk sentiment in global markets is the weaker greenback. The pair is nearing an “ultimate” resistance area of note in the 0.6450 (61.8% retracement of 2020 sell-off) and the more psychological, round 0.6500 level.
  • DIS:xnys (Disney) – An interesting single name to track on the degree this market is taking a leap of faith on the shape of a recovery and return to normalcy as such a large portion of this storied company’s revenues is based on travel to its parks, cruise bookings (three new cruise ships actively under construction) and sales of movie tickets. The company has just borrowed $6 billion dollars to see it through the storm.

What is going on?

Recap – latest Fed bazooka last Thursday – this was another aggressive Fed moves that has likely provided a considerable portion of the market’s improved sentiment. The Fed last Thursday announced another $2.3 trillion in backstops for the economy in announcing, among other measures, purchases of junk debt (if downgrades were made to junk after March 22) as well as a lending program for small businesses and direct financing for states, municipalities and counties.

Covid19: talk in the US of a return to normalization, with few plans on the ground for what this looks like and a very divided opinion across the US depending on the region. Europe is on a more forward timeline than the US and many countries have extended lockdowns into early May, although some countries like Austria and Denmark will start a slow opening up this week.

Australia NAB Business survey saw confidence plummeting to -66 in March from -2 in February, an unheard of drop and compares with a financial crisis low of -31.

 


What we are watching next?

The mood in Europe – a late Eurogroup deal to provide EUR 540 billion in emergency funding across the EU was hammered out last Thursday after European markets closed, and today is the first day back from holiday for most EU markets after the Easter break.

Beginning of earnings season – the Q1 earnings season starts today and this week focus will be on financials which have been lagging the overall market. Earnings outlook from financials this week will be the first real test of sentiment in equity markets.

 


Economic Calendar (times GMT)

  • 1535-1900 – US Fed regional presidents Bullard, Bostic and Evans (none are FOMC voters) will be out speaking.

 

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992