Market Quick Take - April 20, 2020

Macro 3 minutes to read

Steen Jakobsen

Chief Investment Officer

Summary:  Market are opening the new week of trading in steady fashion as still upbeat equity markets seem to be looking across the abyss in earnings results incoming for this quarter. We look ahead to a critical week for Europe after Italian president Conte demanded mutual EU debt in an interview over the weekend. Collapsing oil prices in the background threaten widening insolvencies.


What is our trading focus?

  • 10YBTPJun20 – the Italian 10-year sovereign bond future: we will be watching the Italian sovereign bond market all week as we await a critical Thursday meeting of the European council and how the EU plans to approach aid to Italy, which has been the worst hit economy, together with Spain, by the coronavirus. Italian leader Conte was out with forceful language over the weekend (see below in What’s going on).
  • EURCHF and EURJPY– together with the Italian BTP’s noted above, we will watch the euro closely for signs of strain all week as the EU council meeting is set for Thursday. EURCHF has been posting new lows even as risk sentiment generally has been strong in recent weeks, and even as the SNB leans hard against further CHF strength with a steady intervention.
  • Nasdaq100 – we are getting close to the moment of truth of whether fundamentals matter anymore as equities trade on central bank-fueled hopium of TINA (there is no alternative) and zero rates and liquidity provision rather than on  earnings fundamentals. The high-flying Nasdaq100 close Friday with in the green for the year with a gain of over 1% for the 2020 calendar year thus far.
  • GOLD (XAUUSD) – remains in corrective mode as signs of virus easing damps demand but so far staying clear of the key support at $1650/oz. The latest COT report covering the week to April 14, saw limited fund appetite for gold despite the rally to a 7-year high following the latest Fed bailout.  
  • IBM (IBM:xnys) – with its 350,000 employees IBM has a massive footprint in economy and especially on technology spending from companies. Will give some early insight into the potential CAPEX destruction.
  • OILUSJUN20 (WTI crude) and OILUKJUN20 (Brent crude): The May WTI Crude oil contract is posting eye-popping losses and traded below 15 dollars per barrel overnight ahead of its expiry tomorrow as traders roll into the more liquid June contract, which is trading at a more than 50% premium above 23.5 per barrel. If production cuts and demand recovery are not sufficient to skirt the risk of a feared topping out of storage, downside pressure could continue for the June contracts.

What is going on?

Italy’s president Conte demands mutual EU bonds over the weekend: Ahead of a pivotal Thursday EU Council meeting of EU national leaders, Italian leader Conte, in an interview with Germany’s Sueddeutsche Zeitung, demanded mutual EU bonds to address Italy’s economic and health crisis. Italy is politically against all aid linked to the ESM. The previously agreed deal among Eurogroup finance ministers relied in part on ESM funding. Bloomberg coverage of the story.

US Covid19 response: US President Trump and the US Congress are signaling that a deal is close to top up a small business loan program, with as much as $450 billion in funds. Meanwhile, Trump is feeding the flames of the divide over the coronavirus response as he tweets to “liberate” the states with the strictest lockdown measures.

Q1 earnings season: The earnings season kicks into gear this week with many interesting companies reporting such as Netflix (Tue), Chubb (Tue), Biogen (Wed), Delta Airlines (Wed), Intel (Thu), Credit Suisse (Thu) , American Express (Fri), Boeing (Fri). Next week the big focus will be on technology companies with our focus on Facebook and Google as we believe the market is not adequately pricing in the sharp decline in online advertising that has taken place.

 


What we are watching next?

Signals from EU leaders all week and into critical Thursday EU council meeting – the stakes for Europe could not be higher and watching all indicators for how seriously the market is treating the risk of a new EU existential crisis will be critical all week, especially on the other side of a . The FT’s Munchau offers thoughts (paywall) on how this could play out, while underlining the uncertainty and risk of the unthinkable.

Stock market internals  Financials, small caps versus big tech, etc...

Economic Calendar (times GMT)

  • 0800 – Switzerland Weekly Sight Deposits ­– this is a weekly look at how much intervention the SNB is carrying out to keep the CHF from appreciating more rapidly. It has been rising in steep fashion in recent weeks.
  • 1230 – Canada Mar. Teranet/National Bank Home Price Index – not sure when the data is collected for this survey, but Canada exceptionally vulnerable to any bad news on the housing front because of the scale of the country’s housing bubble since the financial crisis.

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 is not intended to and does not change or expand on this. 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-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.