Market Quick Take - September 9, 2020 Market Quick Take - September 9, 2020 Market Quick Take - September 9, 2020

Market Quick Take - September 9, 2020

John Hardy

Head of FX Strategy

Summary:  US stocks continued their steep descent yesterday, with the Nasdaq 100 suffering nearly a five percent drop. The broader market fared rather better, but still suffered an ugly day, while European equities have managed so far to trade within the tight range of the last two months. Elsewhere, oil prices went into a nosedive and the USD and JPY have risen sharply on save haven demand.

What is our trading focus?

  • S&P 500 Index (US500.I) and NASDAQ 100 Index (USNAS100.I) – yesterday was another tough session for the bulls as Nasdaq 100 and S&P 500 were down 4% and 2.4% respectively. The declines continued into today’s session, but technical buying has pushed up both index futures with Nasdaq 100 futures up 1%. From the all-time high last week to the local lows today the drawdown in Nasdaq 100 is 12.3% which is in line with a normal correction in a high volatility asset. Before everyone goes out at sell every technology stock they own, let us make two key observations. Nasdaq 100 is valued at a free cash flow yield of 3.3%, which is quite attractive vs bonds given the underlying growth, and the digitalization of the economy will continue for another decade.

  • STOXX 50 Index (EU50.I) – the index was firmly rejected around the 3,300 level yesterday and it is now back into the lower half of the 3,200-3,400 trading range that the market has been boxed into the last five weeks. There is simply a lack of positive narrative as the resurgence in COVID-19 cases is causing uncertainty over the economic rebound in Europe. We wrote a research note on European equities yesterday which shows how fragmented the European equity market is terms of performance. Our view is that investors should take an active and stock picking approach to European equities.

  • EURGBP and GBPUSD sterling suffered one of its weakest days in recent memory, dropping on the aggressive new stance taken by Boris Johnson in Brexit negotiations, as he seeks a deal by October 15 and has laid the groundwork to override some of the original conditions that led to the Brexit withdrawal agreement in the first place. GBPUSD traded all the way below 1.3000 and could tumble further to 1.2750 or lower, while EURGBP suddenly finds itself back above 0.9000 and within shouting distance of the range highs of the last few months into 0.9150-75.

  • Spot Gold (XAUUSD) - once again managed to bounce higher after finding support ahead of $1900/oz. US-China tensions and a drop in bond yields amid the continued stock market weakness offsetting the negative impact of a stronger dollar. The AstraZeneca vaccine news (see below) may potentially add another layer of support given the obstacles companies may have in finding a workable and safe vaccine. Additional weakness likely to be led by dollar strength (short covering) and gold becoming the ATM should the current stock market weakness accelerate further. Having been long since $1765/oz, our breakout model will go neutral on a break below $1902/oz.

  • WTI Crude Oil (OILUSOCT20) & Brent Crude Oil (OILUKNOV20) - Brent’s first sub-$40 close since Mid-June could signal a deeper short-term correction towards $37/b. Driven by doubts about the strength of the global demand recovery amid a pandemic not yet under control and concerns that a Covid-19 vaccine may get delayed. Adding to these a souring risk sentiment filtering through from stocks and the bullish narrative has suddenly been turned on its head with momentum and breakout strategies being forced to cut long positions. Later today at 16:00 GMT, the EIA will publish its Short-Term Energy Outlook followed by the API stock report at 20:30 GMT. EIA’s weekly stock report delayed until Thursday.

  • USDCAD – USDCAD has put in a solid bounce from the sub-1.3000 lows and is fast approaching a key resistance zone into 1.3300-50 ahead of today’s Bank of Canada meeting after the volatility in equity markets and especially the ugly slide in crude oil have weighed on CAD in recent days. At the prior Bank of Canada meeting, the BoC provided forward guidance in a commitment to keep rates at 0.25% for at least two more years and purchase CAD 5 billion per week of Canadian government bonds. No significant shifts in the BoC outlook are expected.

  • Tesla (TSLA:xnas) - shares were down 18% ending the session at the lows taking the drawdown from last week to 34.4% wiping out gains across cash stocks and weekly call options. The stock is still up 292% for the year meaning that many likely sits on gains that they now want to lock in thus putting massive selling pressure on the stock. Also, short sellers might be smelling blood re-entering their positions adding further pressure. The levels 300 and 273 are the next critical support levels for the stock.

  • Zscaler (ZS:xnas) – reports FY20 Q4 earnings (ending 31 July) tonight after the US market close. Zscaler is software security company offering various online security solutions and has been growing rapidly at +35% growth rate for the past 10 quarters. Even in the quarter ending 30 April the company managed to increase its growth rate highlighting its robustness amid the COVID-19 pandemic.

What is going on?

  • Phase 3 trials of AstraZeneca COVID-19 vaccine candidate halted after a participant in the trial caught an unexplained illness. This vaccine candidate, developed in cooperation with Oxford University, is one of the most advanced in terms of the testing process.  The pause in the trial is a precautionary step and it is unknown whether the illness is linked to the vaccine. AstraZeneca shares (AZN:xlon) will bear watching in today’s UK session.

  • UK is limiting public gatherings to six people as the UK is suffering a resurgence of COVID-19 cases.

  • Berkshire Hathaway to invest $570mn in Snowflake IPO in an unusual step for the investment company that has rarely participated in IPOs. Berkshire Hathaway has almost entirely missed the digitialization except for its investment in Apple, and its previous investment in IBM was an utter failure, so in that sense the investment in Snowflake makes sense and also because cloud infrastructure has interesting business characteristics. The decision is interesting given the latest talks about a style drift at SoftBank Group.

What we are watching next?

  • The degree to which market volatility is a US-only phenomenon. So far we have seen very little contagion from the US market volatility to the rest of the world, just as the last legs of the huge rally in US megacaps before this recent sell-off was also a US-only development. If this episode continues to fail to spread wider contagion, global markets can avoid wider fall-out.

  • Boris Johnson’s aggressive Brexit stance making waves, with sterling selling off steeply as the market begins to price in the risk that the UK is willing to end the Brexit transition period with No Deal rather than submit to EU terms on fisheries and especially state aid (UK internal investments favouring various industries). The pressure on the pound could build further if talks this week fail to budge the EU’s position. Boris Johnson has set an October 15 deadline for striking an agreement.

  • ECB Meeting tomorrow – to what degree does the ECB believe it can engineer a higher level of inflation and what will have on offer at this Thursday’s meeting? The market is beginning to price in higher likelihood of another rate cut and an expansion of the PEPP programme of QE is likely in the works at this meeting, but can these measures and other guidance move the needle?

  • WASDE on Friday will be watched closely by the grain market following recent strong gains and rapid rise in speculative longs. The rally during the past few months has been driven by dry US weather potentially hurting crop prospects and strong Chinese demand. The combined speculative long in corn, wheat and soybeans sits at 325,000 lots or 1.6 billion bushels above the five-year average. This at a time of year where funds generally tend to be net sellers given the lack of unknowns ahead of the arrival of the new harvest.

Economic Calendar Highlights for today (times GMT)

  • 1215 – Canada Aug. Housing Starts
  • 1400 – Canada Bank of Canada Rate Decision
  • 1400 – US Jul. JOLTS Job Openings
  • 1600 – EIA's Short-Term Energy Outlook
  • 1700 – US 10-year Treasury Note Auction
  • 2230 – American Petroleum Institute weekly stock report
  • 2301 – UK Aug. RICS House Price Balance

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.