Market Quick Take - May 12, 2020 Market Quick Take - May 12, 2020 Market Quick Take - May 12, 2020

Market Quick Take - May 12, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Economist & CIO

Summary:  Markets were in a more cautious mood overnight, as a Covid19 outbreak in South Korea pressured sentiment there, and the Australian equity market fell sharply as China announced a ban on imports of red meat from a number of processors. The US dollar is back on the rise ahead almost across the board ahead of a record large auction of US 10-year treasuries today.

What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (Nasdaq 100 Index) – the S&P 500 index continues to languish below the key 2,965 local high, while the NASDAQ 100 managed yet another surge to a new local high before stumbling in late trading and easing lower overnight. The very high concentration of the market rally in the largest US names continues to serve as a sign of shaky market health.
  • 10YUSTNOTEJUN20 (US 10Y futures) – US treasury yields rose slightly yesterday after a rather strong auction of record size of US 3-year treasuries. Today we see a record large auction of 10-year treasuries and tomorrow of 30-year T-bonds. The 10-year yield has traded between 0.50% and 0.75% since late March. Watching for a break of the range to suggest whether the market sees any dynamism in yields.
  • AUDUSD – the Aussie has traded firmly against its commodity dollar peers recently, but was sharply lower overnight on the news that China was banning imports of meat from four of Australia’s processors (more below). We watch the AUDUSD as the G10 FX pair perhaps most sensitive to the combination of risk sentiment, hopes for a growth recovery and further risks of tension between China and its trading partners and/or USDCNH volatility.
  • EURUSD – while the confrontation between the German constitutional court ruling and EU institutions could generate further risks over the medium term, we are also simply watching the technical status of the euro versus the JPY and the USD as we traded below 1.0800 briefly overnight. A close south of the 1.0800 level and especially south of perhaps 1.0750 is a sign of a technical breakdown and the USD on the rise.
  • USDCNH – this is the USD versus the offshore yuan. This exchange rate bears watching as we are only a bit more than  percent from the key 7.20 area that could come under pressure if the USD continues to broadly strengthen. Concerns that China will allow its currency to slip have been a factor in significant episodes of global market volatility – most notably back in 2015-16.
  • OILUSJUL20 (WTI) and OILUKJUL20 (Brent) – Crude oil received a temporary boost yesterday after Saudi Arabia said they would cut June production by an additional 1 million b/d to 7.5 million, the lowest since 2002. While supporting the rebalancing process, the market interpreted the move as a sign that demand, despite green shoots emerging across the world, still remains weak. Focus now turns to monthly oil market reports starting today with EIA, OPEC tomorrow and the IEA on Thursday. One week from today the June WTI futures will expire but with Genscape reporting a draw last week at Cushing, the storage and delivery hub for WTI crude oil futures, the risk of a disorderly expiry has almost been removed.
  • CORNJUL20, WHEATJUL20 & SOYBEANSJUL20 - The grains market is waiting for the monthly World Agricultural Supply and Demand Estimates report (WASDE) from the US Department of Agriculture today at 1600 GMT. Some focus on adjustments for corn demand and exports following the recent slump in demand from ethanol producers (one-third of US demand). Estimates on Chinese demand for US farm goods will also be watched closely as the trade-deal receives new focus from the White House.

What is going on?

China banned imports of red meat from four Australian processors representing some 35% of Australia’s exports to China. Some may see the move as retaliation for Australia’s questioning of China’s transparency and actions during the early phases of the Covid19 outbreak, but the Australia Trade Minister denied this and said the bans were linked to labeling issues.

South Korea has seen a new outbreak of Covid19 with rapid transmission to at least 100 people in Seoul’s nightclubs, making it clear that opening up is a difficult process. The Kospi index took the news relatively well, only down 0.50% by early European hours.

What we are watching next?

Monthly Oil Market reports from the U.S. Energy Information Administration on Tuesday, OPEC on Wednesday and the International Energy Agency on Thursday will be watched closely following a month of carnage in the oil market. With the price beginning to recover the market will be watching closely any changes in the outlook for demand and supply.

US long treasury yields – we wonder if this market is still “alive” after a tight several weeks of very tight range trading as bond bears are perhaps concerned that the Fed will cap yields to keep the cost of government funding and longer term borrowing low. Bond bears, meanwhile, perhaps question the ability of yields to head lower still . As noted above, 0.50% and 0.75% look like important psychological and approximate chart level as well for the 10-year benchmark as the US Treasury auctions 10-year treasuries today and 30-year T-bonds tomorrow.

Economic Calendar Highlights (times GMT)

  • 0730 – Norway Q1 GDP –. EURNOK hasn’t yet managed to break below the important 11.00 area.
  • 1000 – US Apr. NFIB Small Business Optimism-  sentiment will be terrible, we all know that – it is how subsequent months shape up that is important for the outlook.
  • 1230 – US Apr. CPI – expected to drop to 1.7% year-on-year ex Food and Energy, which would be the lowest reading in over two years.
  • 1300 – US Fed’s Kashkari to Speak – An FOMC voter this year, the Minneapolis Fed president is an outspoken dove and will speak up for the Fed to do more.
  • 1400 – US Fed’s Harker to Speak – The Philadelphia Fed president is an FOMC voter this year.
  • 1400 – US Fed’s Quarles to Speak ­ - before a Senate banking committee. Quarles is an FOMC voter on the Board of Governors.
  • 1600 – Short Term Energy Outlook from the U.S. Energy Information Administration
  • 1800 – World Agriculture Supply and Demand Estimates from the U.S. Department of Agriculture
  • 0200 – New Zealand RBNZ Announcement – The RBNZ seen likely to increase QE, the kiwi has been lower against the AUD recently until the latter’s overnight stumble, as the RBNZ may ease more aggressively.


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

Apple Sportify Soundcloud Stitcher


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.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

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, Product Disclosure Statement and Target Market Determination 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. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

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.