Week to Apr 3rd

Coronavirus is everything, Worst jobs reports ever, Worst quarter in history

MY CALL FOR THIS WEEK : BUY GBPJPY

In a week where the epicentre of COVID-19 moved from Europe to the US, as signs of flattening were seen in Italy, markets closed their worst quarter in history. Volatility is inevitably declining after the record-breaking moves of the last few weeks, but new records are still being made.

The slight ‘green shoots’, such as a flattening of the curve in Italy coupled with a much more serious approach in the US meant that the week was flat overall, and indeed just inside last week. This was despite huge misses on the weekly Initial Jobless Claims and NFP, both posting their worst numbers ever. A degree of ‘virus fatigue’ is setting in, where it seems this constant bad news is being priced in.

The dollar also had an inside week, recovering about half of last week’s losses. Oil had its best day ever, on an announcement that President Trump had negotiated a cuts program with OPEC.

Next week is expected to be more of the same, although increasingly, traders are looking to quantify the scale of the disaster. Some more March economic releases may provide some clues, for example the US Initial Jobless claims. It may be of course that with the Easter holiday, the ball is kicked down to road into earnings season next week.

Mon Mar 30

After gapping down on Monday, something that has been happening a lot, markets continued their rally from Friday. All indices were up, as President Trump was seen to have taken charge of the crisis and JNJ (up 8%) said it had identified a candidate for a coronavirus vaccine. The dollar reversed course from last week, and was up against all currencies. Surprisingly, Gold and bonds were up, and Oil down. 

Tuesday March 31

Markets gave up Monday’s gains today, as the recovery rally stalled. There may have been some end-of-month profit taking. Things were not homogenous, as bank shares slipped but tech shares closed green. Nevertheless DJIA was down 1.84%, only a small move by current standards. Bonds were up in line. and Oil was flat. Unusually gold was sharply down 3.18%. There seems little connection between asset classes in these volatile times. The dollar pulled back slightly, although its main rival EUR was flat, and weak currencies AUD and NZD were down.

The quarter closed as the worst ever for stocks both in points and percentage.

Wednesday April 1

President Trump talked today about a “very very painful two weeks”, and the projection for the US coronavirus deaths is between 100k and 240k, and markets fell again, ignoring the mild ADP print of only -27k jobs. Of course, as sentiment is fairly consistently negative, technicals come to the fore, and the reversal may well have been linked to the 38.2% retracement line reached on Tuesday, which acted as resistance, as shown here. There was a little bit of haven correlation with Gold and JPY outperforming the dollar (which rose against everything else). Bonds were also up in line. Oil rose, despite the large miss on EIA stocks. Perhaps even more was anticipated, as estimates are being largely disregarded these days.

Thursday April 2

Markets today showed a slight recovery from yesterday’s pullback, and made a second failed attempt at the 38.2% line, despite the shocking 6.6 million Initial Jobless Claims, over double last week’s then record print. The dollar rose again, as EUR continued its downward trend although GBP and CAD were flat. Today was the week in microcosm for currencies, you can see from the main chart that EUR, AUD and NZD trended down all week, whereas GBP, CAD and JPY were more ranged. Gold was up slightly, and bonds were flat. The big story was Oil, which had its best day for decades after President Trump announced that he had persuaded OPEC to make cuts. The narrative now moves to next Monday’s online OPEC meeting.

Friday April 3

The final day of the week was relatively mild. as markets stayed within a narrow range and fell about 1.5%, almost flat by current standards. The dollar made a clean sweep up against all currencies, even JPY. Gold and bonds were flat in line. The Oil euphoria continued with the second best day in decades, and the up 32%, its best week ever. The notable point is that all indices had their least volatile week since the crisis began.

WEEKLY PRICE MOVEMENT

The biggest index move was NKY, down 8%, very de-correlated from other indices. The largest currency move was EURUSD down 3.19%. Cryptos were up after weeks of flatness. I was caught out by President Trump’s surprise announcement on Oil, which spoiled my call to buy EURCAD last week. It was down 1.41% moving my running total to 2.49% after nine weeks, with four wins. This week’s trade is to buy GBPJPY. (My other calls last week were 50/50, SPX 

went down, but Oil, as I say went up).

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• No letup in virus effect
• OPEC meeting to confirm cuts?
• Initial Jobless Claims record estimate
• Foreshortened Easter Week

Monday April 6
The week will inevitably start based on weekend coronavirus news. There is a rate decision in Israel.

01:00 AUD Aus TD Securities Inflation
06:00 EUR Germany Factory Orders (Feb)
14:30 CAD BoC Business Outlook Survey

Tuesday April 7
There is little news today, and so once again, the extent of the virus’ spread and its control will be the primary driver.

01:30 AUD Imports/Exports/TB (Feb)
04:30 AUD RBA Rate Decision/Statement (e0.25% hold)
06:00 EUR Germany Industrial Production (Feb)
14:00 CAD Canada Ivey PMI (Mar)
14:30 NZD NZ GDT Milk Index (time approx.)

Wednesday April 8
Another slow new day, but again Oil is in focus with the EIA report, after last week’s very high level of 13.8m. There is a rate decision in Poland. The Easter holiday starts early in Denmark where markets are closed.

10:30 EUR Germany 10Y Bond Auction
12:15 CAD Canada Housing Starts s.a (YoY) (Mar)
14:30 WTI US EIA Crude Oil Stocks Change (Apr 3)
18:00 USD FOMC Minutes

Thursday April 9
The main news of the day will be the US Initial Jobless Claims, with a record 5 million estimate. The estimate is a little lower than last week’s record figure. OPEC meet online today, and President Trump’s alleged ‘cuts’ deal will be put to the test. There is a rate decision in South Korea. Markets are closed now for the Easter holiday in Australia, New Zealand, and Hong Kong.

00:30 JPY BoJ Kuroda speech
06:00 GBP UK Industrial/Manuf Production (YoY) (Feb)
06:00 GBP UK GDP (MoM) (Feb)
07:00 EUR Germany TB
11:30 EUR ECB MPC Minutes
12:30 USD US PPI
12:30 USD US Jobless Claims (Apr 3) (Initial e5000k p6648k)
12:30 CAD Canada NFP/AHE/UnEmp (NFP e-500k p30.3k)
14:00 USD Michigan CSI (Apr) Prel (e75.0 p89.1)
19:00 WTI OPEC Meeting

Friday April 10

Markets are closed in the US, Europe, and most of the western world for Good Friday. Despite this the important US CPI releases, which is for March is another piece of the coronavirus damage jigsaw.

01:30 CNY China CPI (e5.2% p5.2%)

12:30 USD US CPI (Core YoY e2.3% p2.4%)

16:30 USD Fed Mester speech

18:00 USD US Monthly Budget Statement (Mar)

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Week to Mar 27th

No slowdown in Coronavirus, Worst week for USD since 1985, best for Dow since 1938

MY CALL FOR THIS WEEK : BUY EURCAD

In a week where coronavirus cases more than doubled globally, and US Jobless claims were six times higher than any previous high, the Fed passed the largest relief package in US history, and markets had their best week since 1933. Volatility, although reducing, was still rampant, and we started to see huge variations in individual stocks as traders started to evaluate which companies are the relative winners and losers in this unprecedented crisis which has put a quarter of the world’s citizens in lockdown. 

After the last two weeks’ huge moves down, Oil had a very stable inside week on low volume trading, which led to huge rebounds in oil-consumer stocks such as airlines, which had fallen much more than that the 35% SPX crash. A side-effect of the crisis has been a huge run on physical gold, although not the paper contracts, leading to a massive cash-futures divergence ($60 on Tuesday), although this seems to be rectifying itself.

Meanwhile, as the US passed 100,000 cases, the largest number of any country, the effect was seen on the dollar, which has so far been immune. DXY fell nearly 5%, its worst week since 1985.

Next week is still expected to be more of the same, as the focus on the pandemic moves from Europe to the US, which now has the largest number of cases, although the former is earlier in the curve, and traders will also be looking to see if infections are slowing down. Also expect more profit warnings (‘revised’ guidance) from companies ahead of earnings season which starts in two weeks. It is unlikely that there will be any more fiscal stimulus, it really is a matter now of slowing down the disease.

Also of course, we enter a new month which means a very important NFP print. Jobs and unemployment will be bad, it’s just a matter of how bad. Also there are key PMI prints from both the US and China, which will be interesting to contrast.

I will be doing a blog special on whether you can correlate the market moves to the coronavirus case numbers.

Mon Mar 23

After a gap down, markets climbed up but failed to close green, as the coronavirus support bill failed to pass in Congress, outweighing the open-ended QE announced by the Fed. There were wide variations in stocks, with Dow components BA up 11% whereas UTX was down 9%. Currency volatility varied with GBP and CAD down but other currencies up. Gold was up hugely as there was a panic run on the physical metal. Oil and yields were down in line with the market

Tuesday March 24

Today Nancy Pelosi put her support behind the coronavirus support bill, more or less ensuring its passage through the Democrat House. Markets leapt and the Dow had its best day since 1933, adding 11.37%. Other world markets soared in line. CVX added 23%. DAL added 21% on hopes of an airline bailout. The dollar was down across the board (except for JPY which inevitably fell on such amazing risk-on) on the fiscal easing. Oil and yields were down on this Turnaround Tuesday of Tuesdays.

Meantime, this was too late for an unusual physical run on gold, where bullion dealers reported being out of stock. This had the effect of creating a highly unusual but temporary $60 differential between the cash and futures price of the metal, as shown in this chart here. The last time this happened was in 2008, immediately preceding a further drop.

Wednesday March 25

he Senate agreed to pass the support bill today, and stocks continued to advance, although they came off at the end when Bernie Sanders said he would try and block the bill describing it as “$500Bn of corporate welfare”. Indices varied as a 24% rise in BA contrasted to a losses in FANG. The dollar fell again (except against coronavirus-sensitive AUD and NZD), and Gold was down and Oil up in line. Bonds were flat on the day.

Thursday March 26

Another day of contrasts. US new Jobless Claims came in at 3.2 million, the highest figure in history, fifteen times last week’s figure and six times as high as the previous record in 1985. Normally this would be a disaster, but the estimate was 3 million, and more to the point, the Senate passed the support bill. Stocks had another bumper day, with SPX up 6.24% and similar gains around the world. BA rose again, now up 91.7% (nearly double) on last Friday’s close, an unprecedented gain for a mega-cap.

US fell for a fourth straight day, on course for its worst week since 2008. Gold was done in line, although Oil faltered, dropping nearly 5%. Also bonds were slightly up despite the risk-on mood, but in line with the Jobless report.

Friday March 27

The rally collapsed today, with DJIA giving up 4%, but still closing its best week since 1938. Of course after the previous few weeks, sharp rebounds are the norm, but this correction/crash has broken many records. The trigger was probably sentiment as the US overtook Italy to have the most coronavirus cases in the world, as the Michigan CSI was nearly at estimate. As expected a lot of the move came towards the end. The dollar had a further down day as expected. Oil and yields were down in line, the latter a massive 7.45%. Gold was nearly flat, down 0.65%.

WEEKLY PRICE MOVEMENT

The top forex trade was to buy GBPUSD, up 6.91%. The top index trade was DJIA, up an amazing 12.84%. Crypto languished near flat, with DJIA six times as volatile as Bitcoin! FANGs all had a good week with AAPL showing the best performance.

Our trade last week to buy AUDNZD wasn’t great, up 0.34%, when there were so many bigger gains. Our eight-week total is running at 3.9%, and our score is now 50% of trades. My cross call this week is to buy EURCAD. I think continuing dollar weakness will benefit EUR, especially as the virus has ‘moved’ from Europe to the US, whereas CAD is dragged down by both weak oil, and proximity to the US. I’d also sell SPX and Oil, to be honest.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

• More coronavirus
• Jobs reports
• DST alignment
• End of quarter

Monday March 30

Daylight Saving Time in Europe starts, and so US and European/UK markets are once again aligned. Coronavirus still dominates, as traders start to grapple with the winners and losers, and look to estimate when the economic shutdown might end.

09:00 EUR Eurozone Business Climate

12:00 EUR Germany CPI (YoY e1.4% p1.7%)

14:00 USD US Pending Home Sales

14:30 USD Dallas Fed Manuf Business Index

23:30 JPY Jobs/Unemployment

23:50 JPY Retail Sales/Industrial Production

Tuesday March 31

Focus turns to Europe today, with the UK final GDP and Germany unemployment. The modest downward estimate may well be revised nearer the time. The last day of the month and quarter and the final tax month in the UK may give rise to additional volatility.

01:00 CNY China PMIs

06:00 GBP UK 19Q4 Final GDP (e0.0% p0.0%)

07:55 EUR Germany Unemployment Rate/Change (UnEmp e5.1% p5.0%)

09:00 EUR Eurozone CPI (Core YoY e1.1% p1.2%)

12:30 CAD Canada GDP

13:00 USD US S&P/Case-Shiller Home Price Indices

13:45 USD Chicago PMI

14:00 USD US Consumer Confidence

Wednesday April 1

The first day of a new month sometimes brings a change in sentiment. Today there will more than usual focus on the ADP jobs figure, being a preview of Friday’s NFP.

01:45 CNY China Caixin Manufacturing PMI (e45.8 p40.3)

06:00 EUR Germany Retail Sales

07:55 EUR Germany Markit Manuf PMI

08:30 GBP UK Markit Manuf PMI

09:00 EUR Eurozone Unemployment Rate (Feb)

12:15 USD US ADP Employment Change (Mar) (e-150k p183k)

13:30 CAD Canada Markit Manuf PMI

13:45 USD Markit Manufacturing PMI (Mar)

14:00 USD US ISM Manuf PMI (e44.3 p50.1)

14:30 WTI EIA Oil Stocks

Thursday April 2

After last week’s record figure, focus will be on the Jobless claims figure. This is new claims each week. The estimate is as bad as last week, and these are additional jobs lost.

12:30 USD US Trade Balance (Feb)

12:30 USD US Initial Jobless Claims (e3000k p3283k)

12:30 CAD Canada International Merchandise Trade (Feb)

14:00 USD US Factory Orders (MoM) (Feb)

Friday April 3

The first NFP of the ‘coronavirus era’ will be very telling, even with such a low estimate. Note the services PMI estimate is still very optimistic, this may change.

00:30 AUD Aus Retail Sales

01:45 CNY China Caixin Services PMI

07:55 EUR Germany Markit Composite PMI

08:00 EUR Eurozone Markit Composite PMI

08:30 GBP UK Markit Services PMI

09:00 EUR Eurozone Retail Sales (YoY) (Feb)

12:30 USD US NFP/AHE/UnEmp (e-123k p273k)

13:45 USD US Markit Services/Composite PMI

14:00 USD US ISM Non-Manufacturing PMI (Mar) (e55.1 p57.3)

This report is published every week as an email by MatrixTrade.com - you can sign up to receive it here. This blog is supported solely by advertising, so if any of the ads interest you, please click on them. If you want notification when the blog is updated, please follow me on Twitter, Facebook, Stocktwits, TradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.