Market Quick Take - May 6, 2020 Market Quick Take - May 6, 2020 Market Quick Take - May 6, 2020

Market Quick Take - May 6, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Economist & CIO

Summary:  US equities ran up considerably higher before consolidating rather sharply in the final hour of trading and then bounced again overnight. Elsewhere, the euro is under pressure after the German Constitutional Court ruling on the legality of the ECB purchase programme, a move that has driven the euro, and especially EURJPY to new lows. Elsewhere, front oil market contracts have rallied hard.

What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (Nasdaq 100 Index) – the high beta US Nasdaq 100 index ran well up beyond its 61.8% retracement of the recent sell-off at 8920, but did find resistance near the more obscure 78.6% retracement and just north of 9,000 before settling back a bit lower overnight. For its part, the S&P 500 found resistance precisely at the 61.8% retracement near 2890 – the latest bull-bear line in the sand after last week’s late sell-off. Technically equities are bid here short-term although we do not believe fundamentals warrant it. Our technical stop loss in NASDAQ 100 is based on 15-day SMA on close which is around 8,778 this morning.
  • GER30.I (DAX Index) – the leading German stock index is fighting to close the Monday opening gap vs. Friday close at 10,851 and also digesting yesterday’s German Constitutional Court ruling on ECB purchase programme. If the gap is closed the index will most likely swing back to 11,000 as sentiment in equities remain technically strong.
  • DIS:xnys (Disney) – shares down 3% in aft-mkt trading as EPS declined 70% y/y due to ad revenue decline in ESPN, theme parks closure and movie theatres being closed in many key markets. Disney also received CARES Act credit of $150mn during the quarter and generally the net-debt-to-EBITDA ratio looks stretched if the US economy is not opening up soon. This quarter’s revenue number is expected to be down 32% y/y. On the positive side Disney+ (the company’s online video streaming service) reached 54.5mn subscribers making it now the biggest competitor to Netflix.
  • USDCNH – with China back on-line there was little shift in the mainland USDCNY rate to signal the kind of concern after Friday (a holiday) saw the offshore USDCNH rate pike higher. The USDCNY rate merely moved as much as 0.5% higher toward 7.10 before settling back and USCNH settled back toward the same level. This exchange rate bears close watching on increasingly hostile rhetorical exchanges between the US and China and because a notable move lower in CNH would spark widening volatility across markets as seen in 2015, the last time China launched a major overhaul of its exchange rate regime.
  • EURJPY and EURUSD – The euro is broadly under pressure and EURJPY has run to new lows for the cycle in the wake of the German court decision and concerns that it could open a new existential rift in the EU. Next steps are today’s meeting of EU leaders today (more below) and we watch EURUSD and whether it joins EURJPY in showing signs of breaking lower with a move below 1.0750.
  • 10YBTPJun20 – the Italian June, 10-year sovereign bond (BTP) future: Italian BTP futures settled at their lowest level in over a week (yields and yield spread to Germany several basis points higher)  after the German Constitutional Court ruling on the ECB program and its request for a response on key issues from the ECB within 3 months or it would move to prevent the German Bundesbank from participating in the deal.
  • OILUSJUL20 (WTI) and OILUKJUL20 (Brent): A nine dollar rally in the July WTI futures contract in the past six trading days will stand its first test today when the EIA publishes its ‘Weekly Petroleum Status Report’ at 14:30 GMT. The market has rallied strongly on signs that easing lock-downs and production cuts have narrowed the up until recently wide gap between supply and demand. The market will particularly be focusing on storage levels at Cushing, the WTI delivery hub, gasoline consumption and crude oil production. The speculative driven rally carries the risk of becoming self-defeating should the price reach levels where producers postpone or abandoned plans to reduce production.

What is going on?

The German Constitutional Court ruled against the legality of parts of ECB purchase programme in terms of whether it follows EU Treaties and German law – in what will likely prove a controversial decision. The GCC requested that the ECB return within three months with documentation on “balancing”, i.e., that it has weighed the negative effects of its po. This added some 10 basis points to the German-Italian yield spread and sets a divisive precedent .

US-China tensions: US President Trump showing increasing tendency to question China over origins of the Covid19 virus, a position supported by VP Pence and Secretary of State Pompeo, and the Trump administration is pressuring the EU To support an international inquiry into China’s handling of the early stages of the outbreak, as well as the virus’ origins.

Hungary declared to no longer be a democracy, according to Freedom House, a Washington-based rights group, in its annual survey of CEE countries behind the former Iron Curtain. The country was labeled a “hybrid regime”, somewhere between a democracy and an autocracy. Hungary is an EU member.

What we are watching next?

EU leaders to meet with leaders of the Western Balkans. This may not prompt many new developments on the EU existential front, as the German court ruling has already prompted a new angle on that. This meeting seems aimed at the EU shoring up its presence in the Western Balkans (the five countries from former Yugoslavia regions plus Albania) after those countries were showered with attention from Russia and China in the wake of the Covid19 outbreak.

More Q1 earnings – this remaining earnings to watch this week are PayPal (Wed), Shopify (Wed), Uber Technologies (Thu), Booking (Thu) and Siemens (Fri).

US Apr. ADP Payrolls the US payrolls data today (the private ADP survey) and Friday (the official Nonfarm payrolls change) brings the last test for whether the April data has any relevance for the markets or whether we will need the May data cycle and subsequent months to show the shape of the recovery before markets take note. Today’s ADP private payrolls change survey running at -21M, according to Bloomberg.

US-China relationship – this is a critical additional layer to this crisis, as a further falling out between the world’s two largest economies and renewal of trade tensions or worse will add another level of seriousness to concerns that the recovery will stumble. USDCNH, noted above, is a key market barometer, but new Trump tariffs, etc., would also dent confidence broadly.


Economic Calendar Highlights (times GMT)

  • 0600 – Germany Mar. Factory Orders – unlikely a market mover
  • 0715-0800 – Euro Zone final Apr. Services PMI – we all know that April services activity was nearly nonexistent across the EU – watching for the May data cycle and beyond for these kinds of surveys.
  • 1230 – US Apr. ADP payrolls change – expected at -21M, an unheard of figure, but market is only looking at hopes for the shape of the recovery from here.
  • 1430 – US Weekly DoE Crude Oil and Product Inventories interesting time here as storage is full or near full and after yesterday’s massive rally in crude oil and products.
  • 2100– Brazil Selic Rate Brazil’s currency has dropped sharply this year – but still another cut to a record low for the policy rate is expected (currently 3.75%)

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.