Market Quick Take - July 8, 2020 Market Quick Take - July 8, 2020 Market Quick Take - July 8, 2020

Market Quick Take - July 8, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  The equity market is retreating after failing to push higher as nervousness is building over the deteriorating COVID-19 situation in the US with forecasting now suggesting a significant increase in deaths over the coming months. Gold is close to pushing through 1,800 as inflation expectations are rising and oil is following equities lower. We are also highlighting the VIX Index today as the index is up to almost 30 from 25 in just two sessions indicating the options market is pricing in a different information picture than the cash equity market.

What is our trading focus?

  • US500.I (S&P 500 Index) and USNAS100.I (NASDAQ 100 Index) – the S&P 500 is trading below yesterday lows and seems fragile amid the big move higher in the VIX Index over the past two sessions. We are leaning towards a retracement to the 3,100 as the first move as the market will begin pricing in the COVID-19 developments across the Sun Belt states with increasing ICU capacity being maxed out.

  • OILUSAUG20 (WTI) and OILUKSEP20 (Brent) - trades lower within a tight range after being rejected at the $43.50 level in Brent crude. It supports our view that oil remain range-bound with rising virus infections across the three biggest fuel-consuming U.S. states and abroad raising concerns about a continued recovery in demand. IEA’s monthly overview of the worldwide oil market on Thursday is a key event.

  • XAUUSD (spot gold) - sentiment remains strong the 1,800 level in sight and a breakout will attract more bets from CTAs which could then accelerate the trend. With nominal rates remaining steady and break-even rates moving higher the inflation expectations are rising which will most likely continue to support the move higher.

  • EURUSD – the USD has strengthened broadly the last two sessions following the general pause in risk-on evident across equities and commodities. EURUSD is boxed into a tight range but is most likely skewed for a move lower if the situation in the US with COVID-19 infections worsen even further.

  • LQD:arcx (US investment grade bonds) - the momentum in US investment grade bonds continued yesterday reaching a new all-time high despite high uncertainty over credit quality in the second half of the year. The risk-reward ratio looks bad in investment grade bonds and this bond segment is fragile to adverse developments in the US.

  • VOOL:xetr (Long volatility / VIX futures) - with the VIX up from 25 to almost 30 in two sessions despite less volatile equity sessions the options market is clearly pricing a different information picture than the cash equity market.

What is going on?

  • VIX is getting close to 30 again as options are pricing in high volatility over the coming months with the important Q2 earnings season during July and August. In addition, the acceleration in new COVID-19 infections globally could at one point create a new risk-off environment.

  • US banks are estimated to get close to $24bn in fees from PPP loans for the service of facilitating the government’s aid programme to small businesses. JPMorgan and Bank of America are estimated to get $1.5bn and $2.6bn respectively from the programme. These temporary fees could lift Q2 earnings for US banks.

  • Civil rights groups leave Facebook meeting disappointed as the groups’ demands have largely not been met. This could continue to fuel the advertisement boycott of Facebook which now accounts 1,000 advertisers including big names such as Verizon, Unilever and Ford.

  • Offshore wind spending is set to overtake offshore oil & gas for the first time according to a report from Wood Mackenzie as the green transformation continues despite the economic setback from the pandemic. Earlier this year we coined green investing as one of the biggest themes in the coming decade and our view is still that some of the largest firms going forward will be those that address environmental challenges with smart technological solutions. The green agenda in Europe also got a boost from Lagarde saying ECB should ‘explore every avenue’ in the green transformation.

  • Chinese officials hit by US visa restrictions over issues related to Tibet. This is another sign that US-China tensions continue to rise and will cause disruptions in the years going forward.

What we are watching next?

  • Whether the COVID-19 resurgence extends to rising daily deaths as hospitalizations are now on the rise nationally in the US and with Texas setting new daily infections record yesterday.

  • Initial Jobless Claims and Continuing Claims for the US economy are one of best timely indicators we have on the US economy. With the mixed signals we are getting across many macro variables, and especially on the labour market, these two series will be intensely watched. If these claims numbers fail to show solid progress amid their latest stagnation, then the market could get spooked.

  • Q2 earnings season starts next week which will be the most exciting in many years as 80% of S&P 500 companies skipped their guidance in Q1 leaving investors to fly blind into the storm. With US technology stock valuations at record levels there is little margin for error so any revenue miss could lead to steep declines. The record high index weight concentration in S&P 500 by the large technology stocks mean that their results will make or break the equity market over the summer months.

  • Corn traders will look towards the World Agriculture Demand & Supply (WASDE) report on July 10 for confirmation that the recent 10% rally can be sustained. Will the smaller than expected planted acreage announced recently be enough to make up for declining demand from ethanol producers thereby helping to keep inventories under control.

Economic Calendar Highlights (times GMT)

  • 14:00 – ECB Vice President Luis de Guindos speech 

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

Apple Sportify Soundcloud Stitcher

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


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 (

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 is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo 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 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