Market Quick Take - June 24, 2020

Market Quick Take - June 24, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  Equity markets are crawling back higher today after a bit of profit taking into the US market close late yesterday after the tech-heavy Nasdaq 100 posted strong new all-time highs. The NZD was sharply weaker overnight on the RBNZ adding foreign assets to its list of possible purchases. Meanwhile, gold closed at its highest level in almost eight years.


What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (NASDAQ 100 Index) – the US equity market saw another strong session yesterday, but one still marked by notable divergences and with more than a little profit taking into the close. The Nasdaq 100 pulled to a new all-time high, while the S&P 500 has yet to break above local resistance in the tight trading area of late capped around 3,155.

  • XAUUSD (Spot Gold) - reached a fresh 8-year high as surging virus cases across the U.S. throws the reopening into disarray and after Mnuchin said the administration is discussing another stimulus package. Broad dollar weakness and lower real yields supported the break which occurred without triggering a cascade of fresh buying. A sign that very few short positions exit with many investors being long already, and that further – but expected - support from other markets will be needed to carry it higher towards the next key level at $1800/oz. The latest COT report showed hedge funds turning net buyers for the first time in four weeks. Having cut net longs by 50% since February the breakout is likely to force some buyers back into the market. Note: The break occurred without the sort from silver which remains perched below $18/oz.

  • OILUSAUG20 (WTI) and OILUKAUG20 (Brent) - both trading softer after hitting levels last seen in early March. The combination of a new virus threat potentially slowing the recovery in fuel demand and the API reporting a 1.75 million barrel climb in crude stocks last week the main reasons. Focus today on the weekly inventory report from the U.S. Energy Information Administration (EIA) at 14:30 GMT with surveys looking for a mixed result with rising oil stocks and falling product stocks. Overall, the market remains in crude health on a combination of dramatic production cuts and a rapid rebound in demand as regions across the world ease lockdown restrictions. But the virus threat remains acute hence the potential limited upside until the impact of and the reaction to the latest spikes becomes clearer.

  • WDI:xetr (Wirecard) - shares rebounded 19% yesterday but investors should stay cautious and not getting too optimistic on Wirecard. The company is facing an existential risk if card companies such as Mastercard or VISA revoke their licenses due to the ongoing scandal with €1.9bn in cash missing. Without those Wirecard cannot do business, but even with the license several large clients have spoken publicly about finding a substitute for its payments infrastructure which jeopardizing the whole rebounding case for Wirecard.

  • DELL:xnys (Dell Technologies) - the company has kicked off a process to start divesting its $50bn share in VMware which aims to unlock the value of Dell’s core PC and data-storage business. With Dell’s market value of $36bn the market is not putting any value on its core business. The divestment could become a longer term catalyst for the share price.

  • USDZAR – with the emergency South African budget announcement up today, we look for the ZAR to prove reactive after a period of passively following the improvement in EM credit spreads over the last two months. The debt dynamics for South Africa are unsustainable in the longer term and will require difficult austerity and reforms to avoid defaults or a potential IMF bailout, as Finance Minister Mboweni has warned.

  • USDJPY – the US dollar wilted broadly yesterday and USDJPY saw a sudden jolt lower that took out support levels below 106.58 and triggered stops before rebounding slightly – an odd move considering muted trading in safe haven fixed income and strong risk appetite across equities yesterday. The 106.00 area is even more prominent on the chart if the selling resumes and could open up considerable further downside, while a move and close back above 107.00 suggests yesterday’s move was a misleading development (possibly on SoftBank’s readying a massive, approximate  $20B sale of T-Mobile shares).

  • AUDNZD – watching this NZD cross for relative weakness in NZD after the RBNZ maintained its dovish reputation overnight and the pair leaped higher on the new statement that added foreign asset purchases to its list of “deployable tools”, indicating a readiness to do direct currency intervention to help support the economy.

What is going on?

  • The RBNZ continues to look at expanding its tool kit to support the economy in a dovish meeting and in its new statement, added foreign asset purchases to the list of “deployable tools” that it was looking into readying for possible use because it doesn’t see the economy recovering to pre-crisis levels until late 2021.

  • Hungary’s central bank surprised with a 15 bps rate cut to take the rate to 0.75%, taking the HUF lower across the board as the central bank had generally maintained a more restrictive posture during the early phase of the coronavirus crisis as HUF was under significant pressure at the time, but much of which had eased over the last two months.

  • Global Flash June PMI’s show mixed recovery: Australia had a strong Services PMI above 53 yesterday, while Japan’s Manufacturing PMI was still very weak below 40. Europe’s PMI’s were better than expected, but both were still below 50 (46.9 for Manufacturing and 47.3 for Services), while the US Services PMI number actually underperformed expectations at 46.7, with the Manufacturing survey reading at 49.6.  

What we are watching next?

  • South Africa supplementary budget announcement - To be announced today, with Finance Minister Mboweni leaning against support for SOE’s and pointing to the risk that South Africa eventually needs to ask the IMF for help in coming years if its deficit trajectory is not improved.

Economic Calendar Highlights (times GMT)

  • 0800 – Germany Jun. IFO Business Sentiment Survey
  • 1100 – Czech Central Bank Announcement
  • 1430 – US Weekly DoE Crude Oil and Product Inventories
  • 1630 – US Fed’s Evans (Non-voter) to Speak
  • 1900 – US Fed’s Bullard (Non-voter) to Speak

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

Apple Sportify Soundcloud Stitcher

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.