Chief Investment Officer
Summary: US markets suffered one of the worst sell-offs in history, coming even with massive policy moves from global governments to get ahead of the crisis. Large US banks under major pressure on the draw on credit lines. Today we look at the bounce overnight and focus on interesting developments in gold and gold miners.
What is our trading focus?
The stock markets yesterday was another day for the record book. It came amidst major policy initiatives from global government and increased lock-down in Europe. US Major banks fell more than 15% on the day. Overnight there has been a nice bounce of the low close with ASX in Australia leading the charge higher. One interesting aspect of yesterday's move was that Gold mining stocks GDX:arcx rallied 18% on the day. Why is that so interesting? In 2008 the GDX led the market off it's low, then followed by GLD:arcx
What is going on?
Major US banks starts tapping Fed's discount window. This is sign Fed wants no stigma for weaker banks to use the lending window.
US Empire Manufacturing, the first regional manufacturing survey out of the US for March, dropped by a record from +12.9 in February to -21.5 in March.
The US VIX measure of equity volatility closed at its highest daily close ever at 82.6 (intraday record from 2008 still intact at 89.5) and the 2nd futures contracts in VIX trades 70% lower than the spot indicating traders are still betting on long volatility.
Australia’s stock market posted its largest rally since 1997, closing some 5.8% higher just a day after posting its worst sell-off ever.
Yesterday’s G7 meeting produced a statement vowing “whatever it takes” to support economies that was short on specifics and reassurances that ongoing dialogue among finance minister would continue.
Policymakers are moving with increasing aggression on the bailout front – skipping quickly from talk of traditional stimulus to cash handouts for companies and individuals. France has led in Europe with French president Macron vowing to go to war on the virus and the government back EUR 300 billion in bank loans and announcing a few tens of billions in other measures, saying no business would be allowed to fail as the country looks set to become the new epicenter of the virus outbreak in Europe, together with Spain.
Ideas for giving every citizen in the US $1,000 are already circulating in US Congress as a way to address the situation.
What we are watching next?
US airline industry bailout request to the tune of $50+ billion after years of using most of cash flow to buy back stock and reward executives – will be interesting to see how US Congress treats the industry.
Market wise: Keep a close eye on GDX and GLD in US sessions. We expect both of those ETF's to lead a potential turn-around.
Calendar (times GMT)
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
