Market Quick Take - April 27, 2020 Market Quick Take - April 27, 2020 Market Quick Take - April 27, 2020

Market Quick Take - April 27, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  The strong weekly close for equities last week has followed through into the start of this week. Overnight, the Bank of Japan removed limits on government bond purchases and tripled its targets for corporate bond purchases. It is an important week ahead for global economic data and for major US corporate earnings.

The week ahead looks important on perhaps three fronts this week:

  • Whether the market is truly putting EU existential concerns behind it after last Thursday’s EU Council meeting.
  • Whether the USD is turning lower after a weak close to last week’s trading and some follow through lower still to start this week – an FOMC meeting is up mid-week.
  • Whether US markets will continue to rally in their current, extremely concentrated fashion as we look at a blitz of important earnings report this week.

What is our trading focus?

  • 10YBTPJun20 – the Italian June, 10-year sovereign bond (BTP) future: Italian sovereign debt rallied strongly on Friday, the day after an important EU Council meeting. But we feel the outcome of that meeting has done little to allay long term fears of existential strains developing. So far, the rally looks like mere consolidation and Italian CDS prices (insurance on Italian sovereign debt) have not confirmed the rally. Fresh weakness in Italian BTPs would suggest that EU existential concerns continue.
  • OILUSJUL20 (WTI crude) and OILUKJUN20 (Brent crude) – Rallies in Brent and not least WTI look set to fade with reduced lockdowns and OPEC+ cuts beginning May 1 not yet strong enough to off-set the current loss in demand. Goldman analysts see the risk of global storage running out in 3-4 weeks’ time. If realized up towards 18 million barrels/day of global production will have to shut in. While OPEC+ is likely to step up their efforts to deliver the promised cuts the risk of close to zero priced oil remains.
  • US500.I (S&P 500) – US equities have pulled back from last week’s lows and are now close to the resistance level around the 2,870 level which is crucial for further upside gains. Sentiment is clearly being positively impacted from news that more European economies are beginning to reopen and factories starting to produce again. S&P 500 will have its most critical week this week with five major companies Apple, Amazon, Microsoft, Facebook and Alphabet (representing 20.2% of S&P 500) reporting earnings.
  • EURJPY (and EURUSD) – the euro has come back from a breakdown as the market decided that for the moment, there isn’t sufficient cause for concern along EU existential lines after last Thursday’s EU Council meeting (see Italian BTPs above on why we differ a bit – at least for the longer term – with that assessment). EURUSD traded back above 1.0800 after breaking down below that important level late last week, a sign of a technical reversal. EURJPY has also bounced, but the reversal there is a bit more tentative.
  • AUDUSD – The AUDUSD pair is an excellent proxy for the broader USD here and is technically interesting in a key week for risk appetite and for the overall connection between risk sentiment and a possible turn lower in the USD. The important 0.6450 resistance area is already coming under fire after a very narrow, sideways consolidation.

What is going on?

The Bank of Japan does what is always does – eases aggressively once again. As was flagged in recent statements, the Bank of Japan removed any cap on the amount of Japanese government bonds it will purchase and tripled the targets for corporate bond purchases. The JPY was mildly stronger in the wake of the meeting and Nikkei 225 was up over 4% from the Friday close.

Oil prices are sliding once again, and not just for the June futures contract month, as Goldman Sachs estimates that global storage for oil deliveries beyond demand is running out and could be exhausted in three to four weeks, at which point any excess production beyond end demand will have to either be stopped or spilled on the ground.


What we are watching next?

Most important earnings week – with global equities fighting back from the shock in March led by technology stocks this week will be the ultimate test of market sentiment. We have the five big companies Apple, Amazon, Microsoft, Facebook and Google reporting this week and those five alone now represent 20.2% of S&P 500 which is the biggest market cap concentration ever eclipsing the dot-com peak. This week major pharma, oil, European and Chinese banks will report earnings.

Big Oil delivering quarterly results – BP Plc, Royal Dutch Shell Plc, Exxon Mobil Corp and Chevron Corp all deliver earnings this week and their views on the global oil market and views on available storage will be watched closely. The XLE:arcx ETF with its 46% exposure to XOM and CVX has despite a further collapse in oil prices rallied by 47% since March 23.

What does opening up look like? – The first move states in the US, including Georgia and Oklahoma, have already moved to begin easing lock-down rules and will allow more businesses to open. France, Spain and Italy are set to announce plans this week for how they plan to open up their economies. Key for Europe is the degree to which this year’s tourist season will prove a bust, as tourism accounts for some 15-20% of GDP across Club Med southern Europe.

FOMC meeting on Wednesday – the US equity market seems to be ignoring any and all fundamental inputs and is rallying on the general assumption that the Powell Fed will provide an unlimited backstop for all asset prices – not just in the US but indirectly globally through its aggressive roll-out of USD swap lines. This market would not appreciate any indication of an easing off the monetary pedal from the Fed.


Economic Calendar Highlights (times GMT)

  • 0800 – Switzerland Swiss National Bank sight deposits ­– Interesting to see how hard the SNB was leaning against the pressure on EURCHF last week when the euro was under pressure due to EU existential concerns, as a particularly large build could suggest that the SNB is defending the 1.0500 level.

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

Apple Sportify Soundcloud Stitcher


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992