Market Quick Take - March 25, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Economist & CIO

Summary:  Markets put in their strongest close-to-close rally in the US since 1933 yesterday in a delayed response to the massive new Fed backstop and the anticipation of US fiscal rescue package, which was forthcoming in late Asian trading hours this morning and looks set to be a whopping $2 trillion. Is this enough to allow the market to pause for breath, at least into quarter end?

What is our trading focus?

A massive $2 trillion rescue package deal has been agreed by the US Congress and President Trump and will likely be signed tonight, providing a further boost in sentiment overnight – more details below, but trading focus now is on whether, for example the US S&P500 can post its first two consecutive up-days in a row since this entire sell-off was set in motion.

  • AUDJPY – the classic proxy for risk appetite in G10 FX, this one has bounced from almost 60 to above 67 and is running out of room and will be nearing important resistance at 0.7000.
  • ITALY40.I (Italian equities) – the positive news off the Fed’s open-ended QE programme and the big US stimulus package almost voted through the Congress could lift Italian equities - one of the most hard hit equity market. The major short-term level in FTSE MIB futures is 16,746 and then a bit longer term 18,417 (38.2% retracement level).
  • EUN5:xetr (EUR investment grade corporate bonds) – US investment grade corporate bonds were up 11.5% from the lows which means that European investment grade corporate bonds could have another 3-5% on the upside.
  • XAGUSD (Silver spot) – As per our latest note we see further upside to silver given its historical cheapness to gold and as industrial metals in general receives a boost from the FED action and emerging supply bottlenecks.

What is going on?

The US government delivers an enormous $2 trillion package, which is nearly 10% of US GDP – not all details are clear on the deal, but a Democratic proposal late yesterday included measures like requiring creditor forbearance on mortgage and car payments.

March  flash PMIs collapsed everywhere – particular for services, with the EU Flash Mar. Services  PMI at an unprecedented 28.4, UK Services at 35.4 (UK going into full Covid19 shutdown only yesterday) and the US Markit Flash Mar. Services PMI at 39.1.

Covid 19: India has announced its own profound shutdown levels for the nation of 1.3 billion, and Indonesia may be tilting that way after an acceleration in cases and restrictions there.. In the US, significant shutdowns are now affecting around 100 million, so almost a third of the population. In the UK, Boris Johnson is ordering temporary hospitals to be built to deal with a mounting crush of patients.

Volatile volatility as the VIX fell all the way to 36.24 during the rally but then came roaring back to close at 61.67 and the curve went further into backwardation. A potential sign that the volatility market is not really buying this rally.

Gold rallied strongly yesterday after the US Fed introduced open ended QE. This was a reminder of the actions in 2009 which triggered a strong rally in precious metals during the following years. The blowout in the basis between spot and COMEX futures has highlighted the risk to supplies as the coronavirus has led to the shutdown of three major refiners in Switzerland. The world is not running out of gold but it is currently held either in the wrong bar size or in the wrong locations.


What we are watching next?

Quarter end bump in risk appetite? – after the brutal sell-off in equities since the Market top just a little over a month ago, equities posted their strongest single day rally since 1933. It is an important inflection point now that the Fed has gone about as big as it can at the start of the week and the US government has followed up with its massive rescue package.

EU coronabonds and ESM support on fiscal side: the EU is the next focus for a major fiscal response that goes beyond the individual countries efforts to stimulate their respective domestic economies. The idea of “coronabonds” to bring relief across the union has been circulated as a backdoor to the beginning of at least partial debt mutualization – the size of the program will be an important signal for further reducing existential concerns for the union. Eurogroup President Mario Centeno said yesterday that there is broad support for tapping the European Stability Mechanism (ESM) for 2% of respective national GDP levels. This looks rather cautious, but it’s a start.

The USD and the JPY into Japan financial year end. A coincident indicator of relief across global markets would be a weaker USD and weaker JPY into the end of this month as well, as Japan closes its books on its financial year at the end of the month.

Calendar on Monday (times GMT)

  • 0900 – Germany Mar. Final IFO Business Climate Survey (original reading 87.7)
  • 1430 – US Weekly DoE Crude Oil and Product Inventories (implied demand figures will be interesting for sense of the scale of the US shutdown)

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, 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. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such 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.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide and Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.