Market Quick Take - February 12, 2021 Market Quick Take - February 12, 2021 Market Quick Take - February 12, 2021

Market Quick Take - February 12, 2021

Macro 4 minutes to read
Saxo Strategy Team

Summary:  Equities traded mixed to slightly stronger yesterday, with sentiment generally weakening slightly overnight. The US Treasury struggled to sell 30-year T-bonds at an auction yesterday, with demand at the lower end of the recent range and long US yields popping back higher after the drop of the previous day. Gold struggled for air on the development while oil pared its weekly advance after the IEA, again, cut its global demand outlook.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) – fourth straight session with sideways US equity futures as S&P 500 futures hover around the 3,900 level. Equities are not getting any positive catalysts from earnings any longer and the macro numbers have also stalled with the US claims data yesterday on the weak side. Technically and given markets are headed into the weekend we could see a bit of risk-off in today’s session. The 3,885 level is the key support level to the downside.

Bitcoin (BITCOIN_XBTE:xome) and Ethereum (ETHEREUM_XBTE:xome) - Bitcoin had a go at new all-time highs overnight and nearly managed to breach $49,000 before dropping back about 2,000 dollars into this morning’s trading, while Ethereum is caught in the range established earlier this week between about 1,680 and the all-time high just below 1,840. The US payments company PayPal, which last fall opened up for its customers to buy, sell and hold four different crypto currencies (the two here plus Litecoin and Bitcoin cash) in the fall, said yesterday that it is unlikely to invest its cash in cryptocurrencies.

USDJPY – after tumbling lower in the wake of a weak US jobs report last week, the action in USDJPY has become bottled up in a tight range. Not helpful for those looking for lower levels here, the US long bond yield ticked up sharply yesterday after a weak US Treasury auction of 30-year T-bonds. Still, as long as the pair trades below perhaps 105.25-50, the bears will eye a breakdown through 104.50-00 as a sign that the recent squeeze was merely that and focus on a renewal of the structural bar move toward 100.00. US yields are likely a key coincident indicator and could disrupt the bearish hopes if they rise to new highs.

AUDUSD and EURUSD – EURUSD is clearly at a crossroads here in the 1.2100-1.2200 zone, having retraced about 50% of the sell-off wave from the 1.2350 area top recently. EURUSD bulls need the pair to maintain altitude above 1.2000 to keep the structural argument for higher levels alive. THere is little to celebrate in Europe and the vaccine roll-out simply must kick into a much higher gear soon to save some portion of the tourist season or southern Europe. AUDUSD is less close to pivotal downslide levels, but the bull move has lost considerable momentum there as the current price level near 0.7750 traded as far back as early January and one wonders if the pair can generate fresh upside momentum with Chinese markets off-line for a holiday there through next Wednesday.

Gold (XAUUSD) and silver (XAGUSD) - trade lower following a weak US 30-year bond auction yesterday helped drive bond yields higher while the dollar paired earlier losses. It highlights precious metals current dependency on the dollar while adapting to higher bond yields, most of which has been driven by a gold and silver supportive rise in breakevens or inflation expectations. The 50 and 200-day moving averages have both converged to create a band of resistance in high $1850’s. Platinum (XPTUSD) meanwhile reached a six-year high before profit taking emerged, driven by strong investment demand, stricter auto emissions rules and signs that catalyst producers have started to switch back to platinum from palladium.

Crude oil (OILUSMAR21 & OILUKAPR21) - both slipped after the IEA once again lowered its 2021 demand growth outlook, describing the market as fragile as the pandemic continues to hurt consumption from China to the US. Thereby leaving the current price strength dependent on continue restraint from the OPEC+ group of producers supported by "paper" demand from speculators. Despite of these uncertain forecasts, the oil market courtesy of Saudi’s unilateral production cuts continues to tighten while “paper” demand driven by momentum and deflation hedges remain firm. The next critical time for OPEC+ will be on March 4 when they meet to decide on production levels into the spring and summer months. Apart from psychological support at $60/b the first major level of support in Brent is at $59 followed by $58.

Weak 30-year US Treasury auction has revived the reflation trade (TLT, IEF). Yesterday’s bond auction was expected to benefit from the highest yield in a year, however bidding metrics showed unexpected weakness. The bid-to-cover ratio was the lowest since August and bids from indirect dealers, which represents foreign demand, were 60% down from the previous auction.

Italy takes advantage of positive market sentiments and successfully places 3-, 7- and 20- year BTPs (BT10). Despite the 20-year auction results were solid, 3-year BTPs drew market's attention. The three-years BTP auction had a bid-to-cover-ratio of 1.6x vs 1.4x from the previous auction and priced in deeper negative territory with a yield of –0.33% down 10bps from the previous. BTPs are poised for more upside as, Mario Draghi won the support of the biggest party in parliament, and he’s looking to make his cabinet picks as soon as today.

Disney (DIS:xnys) - FY21 Q1 earnings release was a bit better than expected with revenue at $16.3bn vs est. $15.9bn and Disney+ subscribers hit 94.9mn vs est. 90.7mn. The adjusted EPS was $-0.32 vs est. $-0.38 underscoring the bleeding that is still happening from the Parks, Experiences, and Products segment.

What is going on?

US housing prices rose nearly 15% year-on-year in Q4 - as a sign of the bizarre, K-shaped recovery for the US economy, lower rates for mortgages have driven a huge boom in US Housing prices, with prices accelerating further in Q4 of last year to a rate of 14.9% year-on-year for median prices. The rate for 30-year US mortgages crossed below 3% in November and has only risen around 10 bps despite the solid rise in US 30-year T-bond yield.

Mexico’s Central Bank cuts rates 25 bps to 4.00% as widely expected, with strength in the country’s currency and an economy that ran a current account surplus for the first time in decades last year (albeit on weak demand for imports on a struggling economy) helping the central bank to make the decision to provide easing. As the move was widely expected, the Mexican peso (MXN) reacted little and the recent action suggests the current level around 20.00 is an important psychological one for traders.

What are we watching next?

US initial University of MIchigan sentiment survey – out later today and one of the two large sentiment surveys in the US, together with the Conference Board survey. Generally, these surveys correlate historically most closely with the strength of the labour market, where some numbers have looked a bit more promising, but where the weekly jobless claims figures seem painfully slow to fall, as seen in yesterday’s latest data. The Conference Board survey was near the bottom of the range since the pandemic outbreak while the U. of MIchigan survey was far from the lows but still within the range of the prior four months. If sentiment remains bogged down, it suggests that on-the-ground conditions are far from positive for the average person.

Earnings releases to watch this week - strong numbers from Disney ended the earnings week on a strong note as the earnings releases expected today will not move market sentiment.

  • Today: Enbridge, Dominion Energy

Economic Calendar Highlights for today (times GMT)

0730 – Switzerland Jan. CPI

0800 – Hungary Jan. CPI

0900 – Poland Q4 GDP

1030 – Russian Central Bank announces interest rate

1500 – US Feb. University of Michigan Sentiment

 

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

Apple Sportify Soundcloud Stitcher

Disclaimer

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 (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

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