back
Details Cookies
International
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Market Quick Take - May 13, 2020 Market Quick Take - May 13, 2020 Market Quick Take - May 13, 2020

Market Quick Take - May 13, 2020

Macro 3 minutes to read
Strats-Steen-88x88
Steen Jakobsen

Chief Investment Officer

Summary:  The US equity market rolled over to the downside in an ugly late slide that saw the worst day for the market in over a week on no specific catalyst. Elsewhere, NOK rallied on a major stimulus announcement, and the kiwi sold off as the RBNZ surprised with new QE and a hint at negative rates. Today US Fed Chair Powell is set to speak


What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (Nasdaq 100 Index) – the technical outlook for the US equity markets turned more negative with yesterday’s slide as the S&P 500 held its resistance line over the last week. The tech-heavy Nasdaq 100 saw an “engulfing” candlestick yesterday in which the day’s open was the highest for the cycle, while the close was below the prior two days’ trading range.
  • 10YUSTNOTEJUN20 (US 10Y futures) – US treasury yields dropped yesterday as the record $32 billion US 10-year auction saw the strongest bid-cover demand in well over two years, suggesting strong safe haven demand for US treasuries and driving the US 10-year benchmark yield back a few basis points lower and into the recent range. Today sees a record auction of 30-year T-bonds from the US treasury.
  • NZDUSD and AUDNZD – the RBNZ meeting overnight saw the central bank surprising with a doubling of its QE programme as it also flagged the possibility of taking the policy rate into negative territory if it felt the move was necessary, taking the market by surprise and driving a strong sell-off in the NZD across the board. There could be more distance for this currency to travel to the downside to absorb the news, particularly if general risk sentiment comes under pressure again.
  • EURNOK – yesterday saw the Norwegian government announcing an enormous stimulus package, much of it to be funded by sales of assets from its petroleum fund rather than through debt issuance. This will mean large scale purchases of NOK to bring stimulus to the economy – see more here. Yesterday, EURNOK broke key support around 11.05 and traded as low as 10.96 on the news.
  • OILUSJUL20 (WTI) and OILUKJUL20 (Brent) – WTI crude oil narrowed its discount to Brent yesterday after the EIA in their ‘Short Term Energy Outlook’ - as expected - lowered its production forecast for the year. Further support was provided by an American Petroleum Institute report saying that stocks at Cushing, the WTI delivery hub, fell last week. If confirmed by the EIA in their weekly report today at 14:30 GMT it would be the first drop since late February. Despite the additional cuts from GCC producers earlier in the week, Brent have problems breaking above $30/b, trading near the weakest level in a week. Around noon CET today OPEC will publish its ‘Oil Market Report’ with focus on world oil demand developments. Some forecasters saying it could take a year before demand returns to pre-virus levels.
  • WHEATJUL20 (CBOT Wheat) - traded lower after the USDA in their monthly World Agriculture Supply and Demand Estimates report (WASDE) predicted that global supplies would rise to a record. A rebound in crop production in Russia and Australia would lift stocks to 310 million tons, thereby making it harder for US farmers to compete in world markets. The uptrend from May 2019 at $5.05/bu in focus with a break initially targeting the March low at $4.9/bu.
  • COFFEENYJUL20 & SUGARNYJUL20 – both under pressure from a Brazilian real in free-fall. The currency has weakened by almost 50% this year with President Bolsonaro’s mishandling of the coronavirus outbreak putting the economy and his political future at risk.  The harvesting of Arabica coffee beans is expected to pick-up speed from next week with some initial worries about lack of farmhands not being a major issue so far. Trend-line support on Arabica coffee at $1.04/lb. Sugar also under pressure due a massive jump in sugar production according to Unica via Reuters. The industry group said the plunge in ethanol demand had triggered a 93% jump in sugar production during the second half of April. 

What is going on?

The US Federal programme to begin purchasing Bond ETFs started yesterday, with the major LQD bond ETF of investment grade debt jumping well over a percent at the open before closing some 0.3% off the highs.

Investment legend Stanley Druckenmiller was out with a very negative outlook in a talk before the Economic Club of New York in which he cast heavy doubt on the potential for a V-shaped recovery and said that the equity market was poorly priced for risk/reward, though he liked the potential for long/short plays in the market.


What we are watching next?

US Fed Chair Powell is set to speak today in a webinar hosted by the Peterson Institute for International Economics, discussing “Current Economic Issues” and there will be a question and answer session. This could see the market highly reactive to any surprise comments from the Fed Chair.


Economic Calendar Highlights (times GMT)

  • 0600 – UK Mar. Visible Trade Balance – Is UK heading back to running large deficits? Currency risk if so.
  • 1300 – US Fed Chair Powell to Speak – see above.
  • 1430 – US DoE Weekly Crude Oil and Product Inventories
  • 2301 – UK Apr. RICS House Price Balance – house sales had surged after the Brexit clarity but are now impacted by the Covid19 crisis, with market expecting a deeply negative reading.
  • 0130 – Australia Apr. Employment Change / Unemployment Rate – a large jump expected in unemployment, even as the government has moved mountains to keep many workers stilly nominally classified as employed.

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

Apple Sportify Soundcloud Stitcher

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/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. 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

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.