Back
Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Market Quick Take - March 24, 2020 Market Quick Take - March 24, 2020 Market Quick Take - March 24, 2020

Market Quick Take - March 24, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  Overnight Asia market rallied hard: KOSPI +8%, Nikkei +7% & ASX-100 and Hang Seng + 4%. Meanwhile the US lawmakers continue to dither on the content of the rescue package and have yet to deliver, the US Federal Reserve yesterday came out big yesterday with unlimited QE, new facilities for purchase corporate debt for the first time and much more.


What is our trading focus?

In a hectic trading environment with asset markets gyrating viciously, so much of the market moves up and down in synch, so it is tough to find diversification. Despite the US equity market posting new lows yesterday, market volatility has registered a notable drop and markets bounce again overnight.

  • EURUSD, USDJPY – the recent US dollar strength is an important sign of stress on global liquidity, and is one of the most important market indicators to watch – looking at EURUSD moving above 1.10 and/or USDJPY moving below 107.50 (eventually 105.00) for a suggestion that the market is getting ahead of USD funding pressures.
  • US500.I – the price to the 200-day moving average has now reached -26% which is the 1.5% percentile since 1927 which means that the S&P 500 is extremely oversold at this point. Three month future return has had a mean return on 4.1% whenever the market has been this oversold. Could lure buyers into buying equities at these levels.
  • OILUSMAY20 and OILUKMAY20 both trades higher for a second day as risk appetite returns to Asia after the Fed unleashed its support measures. Also China, the world’s biggest importer, said they would lift the lockdown over Wuhan on April 8.
  • XAUUSD surged higher as new Fed measures brought back memories of the 2008 debasement worries. Goldman’s issued a buy note targeting $1700/oz. The next major upside level to watch being $1607/oz.
  • 10YBTPJUN20 (Italian 10-year government bonds, or BTP’s) – a key indicator on whether the German move to provide stimulus is seen as having wider EU implications (i.e., supporting BTP’s), particularly after ECB hinted it is willing to bend the rules on purchasing more peripheral debt
  • LQD:arcx (US investment grade corporate bond ETF) – the Fed creating facilities to buy corporate debt saw a 7% jump in this ETF yesterday. This is an important indicator for pressure on corporate credit across the board.
  • HYG:arcx (US high yield bond ETF) – high yield corporate debt suffered further pressure yesterday as the new Fed corporate bond purchases won’t extend to high yield.
  • NKE:xnys (Nike) – Nike reports FY20 Q3 earnings (fiscal quarter ending in February) at 19:15 GMT and could provide clues for investors on consumer demand impact. Watch out for the FY20 Q4 outlook.

What is going on?

The US Federal Reserve – announced its largest effort yet to get ahead of the systemic financial contagion in announcing unlimited QE to purchase treasuries and mortgages, new facilities to purchase corporate debt and commercial MBS, the relaunch of the infamous TALF, bridge loans to companies in trouble and more. A colorful rundown from wolfstreet.com.

The US Congress failed to deliver a package once again as Democrats accused Republicans of favouring businesses over workers and Republicans accused Democrats of opportunism and rolling all manner of Covid19 unrelated “political goodies” into the mix, like CO2 emissions and voter registration issues.

Covid-19: UK has announced a three-week lockdown on activity on par with lockdown in major EU countries. The USA: The Trump administration is increasingly at odds with the recommendations of public health officials, on claims that the US economy can’t afford a total lockdown that extends from weeks to months. Italy: case counts give hope that the outbreak there is peaking.

 


What we are watching next?

Signs of low in place? – Last 24 hours US Treasuries rallied hard (yields lower), Volatility is coming off panic-highs and we see improvement in sentiment overall. Two things remains to confirm potential for low: A real turn for the dollar and credit spreads to narrow.

EU: talk of “coronabonds” since Friday has been circulating as a kind of backdoor to debt mutualization in the EU. This and the recent large ECB QE have helped put a lid on peripheral spreads, but we need to see a further fiscal commitment across Europe to bring sustained confidence to the euro and EU bond markets and assets.

The US rescue package – the Fed’s new massive All-in-QE has bought the US congress a bit of time by putting a supporting hand under the market, but the rescue package must still arrive and fast to mitigate the risks of the catastrophic reduction in economy activity, employment and confidence.

The USD itself – besides risk sentiment generally, we need to see the USD turning lower soon for a better sense that the tide is beginning to turn – we note EURUSD and USDJPY above, but EM and commodity currencies will prove more sensitive to USD direction here.

 


Calendar on Monday (times GMT)

  • 0815-0900 – France, Germany, EU flash Mar. Services and Manufacturing PMI
  • 0930 – UK flash Mar. Services and Manufacturing PMI
  • 1345 – US flash Mar. Services and Manufacturing PMI

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

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

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.

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.