Monday 30 March 2020

Week to Mar 27th

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

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%.

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 - 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 TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Sunday 22 March 2020

Week to Mar 20th

Coronavirus still dominates everything, New records set, Government bailouts everywhere.

In a week that saw a substantial increase in coronavirus cases worldwide and particularly in the US which is behind the curve, huge efforts were made by governments globally, not only in the area of fiscal easing, but in employment-related support. Nevertheless, markets had their worst week of the year and indeed since 2008.

Next week, there is still no end in sight to the virus, new cases are still increasing exponentially, as the western world goes into a productivity-destroying lockdown. We are still three weeks away from earnings season, where the extent of the damage will to some extent be quantified, so it looks like another week of whipsaw reaction to each piece of unscheduled news, and huge differences in the performance of individual shares as traders try to work out the losers and (relative) winners in this crisis. We have already seen AMZN and NFLX outperform, whereas travel businesses are suffering much worse than average. Expect more of this going forward.

Mon Mar 16
Markets plunged again today, with the DJIA down 12.93%, its second largest single day loss ever, beaten only by Black Monday 1987. The Fed basically cut rates to zero and announced an asset purchase program of $750Bn with no effect on the stock market, but it did depress the dollar, DXY was done with EUR, and curiously, JPY, rising, although other currencies were down, as was Gold. Unlike bonds, these two have stopped reacting in the normal risk-off way. Oil was down an amazing 13%, and bonds were of course sharply up, with the IEF ETF putting in its best day since March 2009, up 2.64%.

Tuesday March 17
After the second worst day in history, SPX today had its ninth best day of the century, and best since the start of this bull market in March 2009, adding 6%, following a $1trn stimulus package announced by TreasSec Mnuchin, which includes possible $1,000 checks sent to every American. It was a clean sweep for USD up across the board, and bonds were down 2.51%, their worst day of the century. However, Oil carried on falling, and Gold was up, bucking the trend in these unprecedented times.

Wednesday March 18
Impatience at the failure of fiscal measures, and the government’s efforts being seen as falling short led to another down day and a new low, the ninth worst day this century, three of the worse days being in the last two weeks. There are a few winners in this crisis, WMT shares today hit $128, a new intraday ATH.

Another clean sweep day for USD across the board, with AUD, GBP and NZD collapsing over 3%. Oil had its second worst day of the century, beaten only by last week. It dropped 17.51% to as low as 20.10 at one point, a level not seen since 1991,  which had a huge effect on oil companies, for example CVX dropped 22.1%. All three haven assets Gold, Bonds and JPY were also down, the first time for a long time that not even one responded in line.

Thursday March 19
Markets took a breather today, and were more or less flat (by current standards, for example DJIA was up 0.95%). The Dow still took a 1,400 point journey to do this. Tech and FANGS outperformed and you can see from the table that crisis winners such as AMZN (isolation delivery) and NFLX (isolation leisure) outperformed. At HOD, these two were only 11% down from the pre-crash top, compared to 27% for SPX as a whole, 60% for AAL, and 70% for BA, both of which are back at 2013 prices.

The US dollar had a third day up against all currencies (and Gold). Bonds were up slightly, but the most noticeable move was Oil, posting its best day of the century, up 14.01% but still under the 2016 support level which is now resistance.

Friday March 20
The Fed announced even more stimulus today, and markets rallied hard, during the Asian and early European sessions SPX futures rose by 6%. However from 1000GMT, as NYC traders opened their desks, they slid again by nearly 10% to close 4.34% down on the day and 14.98% down for the week, the worst since 2008. DJIA’s performance was even worse, down 17.3% largely due to certain key stocks such as BA. Oil was down 8% in line, the 14th worst day of the century hardly being mentioned.

After three days up against all currencies, USD finally reversed slightly and was down across the board. This meant that all three haven assets (Gold, Oil and Bonds) moved up. 

The top forex trade for a second week was to sell AUDUSD, down a further 6.28% and at one point down 11.02%, but still at levels not seen since 2002. Our USDJPY play last week did not work, despite markets falling, and we lost 2.81%. This brings the seven week total to 3.56%, and 3 out of 7 trades right. This week’s trade is to buy AUDNZD.

The biggest index move was DJIA, and the biggest overall move Oil, down 29.02%, its worst week since January 1991. Bitcoin added a round 10% whereas ETH hardly moved. FANGS were varied, with isolation-friendly AMZN and NFLX bucking the trend.

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)

  • Coronavirus still dominates
  • Expect no let up in volatility
  • Jobless Claims assumes importance
  • Watch out for more government actions

Monday March 23
Another week where everything will be dominated by coronavirus, and in particular statistics coming out of the US, which is behind the curve in the pandemic. The German Bundesbank monthly report is published today.

12:30 USD Chicago Fed National Activity Index

Tuesday March 24
Notably we have a raft of PMIs (all three manufacturing, services and composite) which are for March and so should show the effect of the virus so far. Note all estimates are still currently similar to last month’s figures. Also there is a German Constitutional Court Ruling on the legality of the latest round of ECB QE. We have been here before, and nothing market-shaking is expected. There is a rate decision in Hungary. Markets are closed in Argentina, Indonesia and Greece.

08:30 EUR Germany Markit Prelim Manuf PMI (e49.4 p48.0)
09:00 EUR Eurozone Markit Composite PMI (e51.0 p51.6)
09:30 GBP UK Markit Services PMI (p53.2)
09:30 USD US Markit Prelim PMIs
14:00 USD US New Home Sales (MoM) (Feb)
21:45 NZD NZ Imports/Exports/TB

Wednesday March 25
The RBNZ already made an emergency rate cut to 0.25% on Mar 15, and the currency is already at 2009 lows. It is difficult to see what impact the meeting would have. There is a rate decision in Thailand.

01:00 NZD RBNZ Rate Decision/Statement (e0.25% hold)
09:00 EUR Germany IFO Business Sentiment
09:30 GBP UK CPI (YoY e1.7% p1.8%)
12:30 USD US ND Capital Goods (p1.1%)
13:00 USD US Housing Price Index (MoM) (Jan)

Thursday March 26
As with New Zealand, the BoE have already made their emergency rate cut to 0.1%, so little is expected today. Of more interest is the US Jobless claims figure, which peaked last week, and is a more current barometer on the virus crisis. As well as the UK, there are rate decisions in Czechia and Mexico.

07:00 EUR Germany Gfk Consumer Confidence
09:30 GBP UK Retail Sales
12:00 GBP BoE Rate Decision/Statement (e0.1%)
12:30 USD US PCE QoQ
12:30 USD US 19Q4 GDP Annualised
12:30 USD US Jobless Claims (e214k p281k)
21:45 NZD NZ Total Filled Jobs (Feb)
23:30 JPY Tokyo CPI YoY (e0.4% p0.5%)

Friday March 27
The key report today is the Michigan Consumer Sentiment Index, already well down, and the estimate suggests further substantial decline. Previous Fridays have shown large moves in the US afternoon session, there is no reason for this to be different. There is a rate decision in Egypt.

12:30 USD US PCE MoM and YoY
15:00 USD Michigan CSI (Mar) (e89.5 p95.9)

This report is published every week as an email by - 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 TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.

Sunday 15 March 2020

Week to Mar 14th

Coronavirus still dominates, Biden recovers his lead, Black Thursday, biggest loss since 1987

In a week where again, the only driver was COVID-19, the sell-off reached brutal proportions, with many records broken. Other news hardly registered as markets gyrated wildly. The key events were an initially bungled response from President Trump which caused the fourth largest one-day market drop ever on Thursday (beaten only by 1929 and 1987), followed by the 10th largest recovery as he improved matters on Friday by declaring a state of emergency and $50bn spending package.

Next week should be more of the same, and there is no way of knowing whether the bottom is in. We are now in the fastest and most violent technical bear market of all time. For what it’s worth, next week’s Fed rate decision on Wednesday has an unprecedented expectation of a further 100bp cut (68%) to 0.25% or at least 75bp (32%) to 0.50%. Amazing to think that only one month ago 2.25% was 84% priced in for Mar 18th. Given that the emergency 50bp cut had no positive effect on the market, at least we can assume that if the Fed does not make this enormous further cut, it may not have a negative effect.

Mon Mar 09
COVID-19 panic gripped the markets again, and markets suffered their worst one-day fall since December 2008, with SPX down 7.6%. This was exacerbated by Saudi Arabia’s decision to reject cuts and increase oil output. Oil fell 25%, its worst day in 29 years. Against all this currencies behaved as you would expect, commodity currencies AUD and CAD fell, and JPY, along with Gold and Bonds rose. The name ‘Black Monday (2020)’ was given to the day, although as we will see, that didn’t last long.

Tuesday March 10
President Trump floated the idea of a zero payroll tax (employer’s contribution) for the rest of 2020, and Joe Biden comfortably won the six mini Super Tuesday states today. What would in formal circumstance be seen as a blowout day (stocks up around 5%, the 13th best day this century) was really only a correction from yesterday’s lows, such is the volatility of this market. Everything else reversed as well, Oil jumped over 11% (its second best day of the century), and Gold, Bonds and JPY were sharply down. Otherwise it was a dollar clean sweep as all other currencies fell.

Wednesday March 11
The US inflation beat was ignored as investor panicked again as coronavirus infection numbers grow and there does not appear to be any governmental response. Markets gave up Tuesday’s gains. To put this in perspective, the 5.86% drop in DJIA was the 8th worst day this century (Monday was the 3rd worst). Oil was relatively stable, only dropping 4.14%. The dollar was up across the board with only JPY beating it, of course. Oddly Gold and Bonds did not follow suit, in fact Gold dropped 4% to a 2020 low, its worst day since June 2013, and presumably an oversold reaction as there was no specific gold-related news.

Thursday March 12
Today now has a Wikipedia page, Black Thursday. Following a lacklustre Trump speech about plans to combat coronavirus, the Dow fell a whisker short of 10%, and all indices had the worst day this century (the worst since 9/11 for DAX). Airlines fell 20%, cruise lines fell 30%. Prices in many cases fell below even the December 2018 lows. Oil fell 5.76% from of course a much lower base. Oddly, once again, Gold fell sharply, although bonds and JPY rose. USD had a good day, up across the board. GBP fell 0.7% as investors worried about the cost of Wednesday’s “giveaway” budget from new Chancellor (Finance Minister) Sunak. The Euro fell after the dovish ECB increased bond purchases (QE). AUD and NZD were sharply down on virus-linked trade fears, the former posting its worst day for 10 years.

Friday March 13
On Friday, President Trump got serious and declared a state of emergency, and promised that 1.4 million coronavirus test kits (the experts preferred method of containing the pandemic) would be available, 50,000 within a week. Stocks bounced back, adding 9.2%, their best day since 2008, and Oil added 6.42%. This still left SPX nearly 9% down on the violent week. Gold and AUD fell again heavily, as you would expect and JPY had its worst day since April 2013, and fourth worst of the century. AUDUSD posted its lowest closing price for nearly 17 years. Only CAD managed to outperform the dollar, in line with the Oil move. Bonds were also down in line.

The top forex trade was to sell AUDUSD, down an amazing 7.06%. Our own trade selling GBPAUD was a loser, as the pair was up 1.15%. We correctly predicted the decline in GBP but could not foresee the even greater collapse of AUD, so our hit rate is four out of six 66%, with net gains of 6.37%. Technicals suggest every currency should recover against USD, but I will play safe and short USDJPY, a proxy for another downturn in the market.

The worst equity market was DAX, down 20% because it closed too early to benefit from a huge closing surge in US markets. Cryptos had a terrible week, down around 40%, and FANG shares generally did worse than NDX as a whole.

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)

  • Fed meeting may cut rates further
  • Coronavirus dominates everything
  • Largest crash since 2008
  • Generally light US news week

IG Weekend Prices 1840GMT Sun Mar 15
Monday March 16
In the absence of scheduled news, expect everything to be driven by coronavirus updates. Weekend markets run by UK broker IG already point to futures opening 4% down, erasing the late Friday rally, in a similar vein to the weekend of Feb 29/Mar 1. Markets are closed in Mexico today.

23:50 JPY Japan Machinery Orders (Sunday)
02:00 CNY China Industrial Production/Retail Sales
02:30 CNY China NBS Press Conference (time approx.)

Tuesday March 17
The Retail Sales report for February will reflect some degree of confidence, as will the German ZEW survey, the estimate for which is hugely down. Markets are closed in Ireland for St Patricks Day.

00:30 AUD RBA Meeting Minutes
04:30 JPY Japan Industrial Production
09:30 GBP UnEmp/AHE (UnEmp e3.8% p3.8%)
10:00 EUR Germany ZEW Economic Sentiment (e-23.4 p8.7)
12:30 USD US Retail Sales (MoM p0.0%) 
13:15 USD US Industrial Production
14:30 NZD NZ GDT Milk Index (time approx.)
23:00 AUD RBA Ellis speech
23:30 AUD Aus Westpac Leading Index
23:50 JPY Japan Imports/Exports/TB

Wednesday March 18
All eyes are on the Fed today. After the 50bp emergency cut two weeks ago, the CME FedWatch tool is pricing in an unprecedented 100bp (1%) cut. to 0.75%. Amazing that only a month ago, this meeting had 2.25% priced in. There is also a rate decision in Brazil.

10:00 EUR Eurozone CPI
12:30 USD US Building Permits/Housing Starts
12:30 CAD Canada CPI (BoC Core YoY e1.7% p1.8%)
18:00 USD Fed Rate Decision/Statement
18:30 USD FOMC Press Conference
21:45 NZD NZ 19Q4 GDP (e0.5% p0.7%)
23:30 JPY Japan National CPI

Thursday March 19
Markets will no doubt continue to react to the Fed today. It will be interesting to see what Japan and Switzerland do. They already have negative base rates, and we saw how the Eurozone did not cut last week. There are also rate decisions in Norway, Turkey, and South Africa

00:30 AUD Australia NFP/UnEmp (NFP e11.6k p13.5k)
03:00 JPY Japan Rate Decision/Statement (e-0.1% hold)
04:30 JPY Japan All Industry Activity Index
06:00 JPY Japan BoJ Press Conference
08:30 CHF SNB Rate Decision/Statement (p-0.75%)
12:30 USD Philly Fed Manuf Survey
12:30 USD US Jobless Claims

Friday March 20
A light day on news, so once again, coronavirus should dominate. As well as the Chinese rate decision, which may give an indication of how bad the PBoC thinks things are, there is also a rate decision in Russia. Today is also quarterly OpEx day where, for example, many index options will expire, so expect volatility. Markets are closed in South Africa.

01:30 CNY PBoC Rate Decision/Statement (p 4.05%)
07:00 EUR Germany PPI
12:30 CAD Canada Retail Sales (e0.3% p0.0%)
14:00 USD US Existing Home Sales

This report is published every week as an email by - 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 TwitterFacebookStocktwitsTradingView or Linkedin (all open in separate windows). Details of how I compile the report are here.