Market Quick Take - April 8, 2020 Market Quick Take - April 8, 2020 Market Quick Take - April 8, 2020

Market Quick Take - April 8, 2020

Macro 3 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  In breaking news this morning, the Eurogroup finance ministers have declared they were unable to come to agreement on a coronavirus response, clearly a development that will spook markets and the euro this morning. This on top of an unconvincing follow-up rally in the US yesterday could have risk appetite on edge today.

Note that this will be our last Quick Take publication until next Tuesday, April 14 due to the Easter holiday.

What is our trading focus?

  • EURUSD and EURJPY – both are likely under pressure today on the lack of agreement from the Eurogroup meeting of finance ministers – even if the ECB is able to keep things orderly with its sovereign bond purchases.
  • DAX.I (German DAX index) – for those trading European equities today, in line with the above comments on the major US indices, the DAX pivot zone lies between yesterday’s highs toward 10590 and the support line of 10137 (formerly the resistance line on the way up). The Eurogroup meeting failure thus far adds potential downside pressure.
  • US100.I (NASDAQ 100 Index) and US500.I (US S&P500 Index) after yesterday’s aggressive extension of the rally in the wake of breaking key resistance, the later portion of the session was weak and saw both major indices retesting the key lines in the sand just broken: 8000 in the Nasdaq 100 index and 2641 in the S&P index. These remain the key bull/bear lines, with the added line in the sand of yesterday’s high.
  • XAUUSD (Spot gold)still looking pivotal after easing away from cycle highs since yesterday. Yesterday we noted the divergence in spot gold relative to the June gold future after the latter rallied to a cycle high – that price has reversed more sharply back into the former trading range, below 1700 and sharply reducing the spread to the spot price (by about half of yesterday’s maximum to about 30-35 dollars this morning). The 1690-1700 area for spot gold looks pivotal.
  • OILUKJUN20 (Brent crude) and OILUSMAY20 (WTI crude) – The market focus remains squarely on the world’s biggest producers and their ability to strike a  deal to curb production – and we are concerned that it is unlikely that producers can agree a sufficiently large cut relative to the demand shock of the Covid19 shutdowns. If that is the case, we continue to wa. Next test for the market is the meeting scheduled Thursday for OPEC plus Russia.
  • XLE:arcx (US energy sector), OIH:arcx (US oil services), OIL:xpar (European oil and gas) – With the current high level of uncertainty and volatility in crude oil markets and the difficulty in trading the long side of the crude oil market when the futures curve is in steep contango (low short term prices relative to higher longer term prices) investor with a long-term view on the energy market could instead consider strong energy companies or ETF’s tracking a basket of oil and gas related stocks.
  • MGM:xnys (MGM Resorts), MAR:xnys (Marriott International) and BA: xnys (The Boeing Co.)– These are three stocks we pulled out yesterday after wildly strong performances on Monday. All three saw large gap opens on the positive side but were sold heavily all day from the open, suggesting sellers out in force, even if only Boeing closed down on the day of the three. Interesting to watch these equities that represent some of the weakest industries during this Covid19 outbreak (Travel and leisure).

What is going on?

The Eurogroup meeting was a bust as no agreement on the virus response has yet been agreed. This is spooking markets in early trading in Europe this morning. Practically, it may not mean much as the ECB maintains firepower and an keep EU sovereign bond markets orderly, but it is a worrisome political signal that must be addressed – whether by this meeting (set to continue) or very soon.

S&P Ratings downgrades Australia’s sovereign debt outlook from stable to negative – this is the first bond ratings agency to do so on Australia’s AAA rating. S&P said that the fiscal and economic risks are tilted toward the downside and that “ we could lower our rating within the next two years if the Covid19 outbreak causes economic damage that is more severe or prolonged than what we currently expect.”

China’s Wuhan province, the ground zero of the Covid19 outbreak, has been reopened for travel, a further sign of normalization in China.

UK Prime Minister Boris Johnson remains in ICU – but no update on his condition, as the last available information is that he is receiving oxygen but not on a respirator.

US pushes back on OPEC request to join oil output cuts – but US shale production will likely fall rapidly anyway, as it is easier production to shut in and as individual well decline curves are very steep and a slowdown in new drilling will mean few new wells coming online.


What we are watching next?

Follow up political signals from EU after today’s Eurogroup meeting failure – extremely important in the medium run or markets will have to begin pricing a growing EU existential crisis. The only hopeful angle is that the meeting is set to continue tomorrow, according to Eurogroup president Centeno.

Equity markets after yesterday’s weak close – as we note above, the technical status of the rally after yesterday’s nominally bearish “shooting star” candlestick on the main averages raises the stakes further on the bull/bear status of this market – especially with long holiday weekend coming up for the US and Europe.

Oil prices – again, particularly with the recent rally, we see significant risk that any deal agreed on Thursday will prove too small to measure up to the magnitude of the demand collapse, leading to fresh pressure on the front months of the oil price curve to new lows below 20 dollars per barrel.

The unfolding shape of the Covid19 crisis and perhaps more importantly, the shape of the recovery. If the recent rally is based on hopes that we are seeing the light at the end of the Covid19 tunnel, we are concerned that some of the celebration is premature – the first nations to begin rolling out normalization-from-shutdown measures are moving with baby steps and in stepwise fashion that could take months to accomplish.


Economic Calendar (times GMT)

  • 1430 – US Weekly Crude Oil and Product Inventories – the focus in coming weeks will be the lack of additional facilities for storing oil and products.
  • 1800 - FOMC minutes
  • Thursday 1230 – US Weekly Initial Jobless Claims –  with Bloomberg expectations looking at another 5 million claims on top of the combined 10 million of the prior two weeks.
  • Friday – markets closed in US and Europe for Easter

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

Apple Sportify Soundcloud Stitcher


The Saxo 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 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 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 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 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 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 (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

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