So today we have quieter volumes, stimulus updates and plenty of support levels to keep an eye on. The ECB announced 750bn euros of purchases until the end of the year (and left the door open for more) and the Fed announced another programme overnight. European equities tried to celebrate the news at the open but sadly the gains faded throughout the morning.
The new normal – Futures once again limit down overnight, but the circuit breaker did not get triggered until 12:56 today (versus just after the open the previous three times). Looking around at all of the assets, the only one trading in the green is the Dollar, as everyone is rushing to cash (not just investors). Oil is down 21%, a level last seen in 2002. Metal commodities are down, as well as Bonds. One technical level our team has been watching is the 2346 on the SPX (from Dec. 2018), the index has now broken it, next level is -15% from here.
Stimulus from Governments and Central Banks remain in the spotlight but the reality is that we all know that they will support the economy. The Fed opened an emergency lending facility for primary dealers overnight and Mr. Sunak announced an extra £20bn of new spending (on top of £7bn in the Budget) yesterday afternoon.
The New Normal Rolls On – From futures halting limit up last night, to US indices dipping into the red this morning, to stocks now coming off their intraday highs of almost 7% – when’s the last time we’ve had a dull moment? Trading remains volatile (to say the least) as many traders continue to adjust to working remotely and countries around the globe brace for the worst of the virus spread. San Francisco’s issuance of a “shelter in place” directive seems like a blueprint other cities will inevitably follow, yet the S&P has continued to hold above the lows made Christmas Eve 2018
It was the biggest move in the US since 1987!
The Trump pivot roiled markets and sparked the biggest sell off since 1987 overnight and that has rippled through to Europe today. We couldn’t understand why futures were indicating up and sure enough there was again no conviction (or volume) to the early rally and we’re having another down day. Lots of value as always from our charts team below with levels that are very much worth being aware of.
Grab Yourself a Snickers… Because most of us won’t be going anywhere for a while. Talk about a marketing campaign that keeps on giving! The impossible has become the inevitable, with some companies going split teams and most sending everyone to work from home. Schools have been closed and will continue to be so for likely much longer than initially anticipated and bars/restaurants are following suit, with talk of a national curfew possibly going into effect. Get comfortable.
Another week but more of the same as fear and uncertainty once again dominates. The Central Banks’ job is to step in when that happens and step in they did. The Fed cutting its main rate to 0-0.25% and confirmed $700Bn worth of QE (U$500bn of Treasuries; U$200bn of agency MBS). They also announced “co-ordinated action with other central banks to provide U$ swap lines” and took measures to ensure the supply of credit for US businesses and households. The measures are good (I guess any help counts!) but we continue to believe that more targeted measures are needed – click here to read our latest strategy piece on this topic. The RBNZ cut rates to 0.25% (from 1%), the PBOC injected more cash to the banking system and the BOK cut its rate to 0075% (from 1.25%). The BOJ announced much more targeted measures, which is what other parties should be doing. Keep your eyes on this space as we expect to hear more noise as the day progresses.
It started off well, and… Things started off nicely today with markets bouncing after yesterday’s big drop. Most sectors were trading higher (except Homebuilders, which has underperformed all session), but an announcement that Trump was going to hold a 3pm news conference to declare a National Emergency took some of the bid out. As the US waits, equities are rallying once again, with the S&P +3% from the European close. Leading that rally, Banks (+3.3% from EU cls), Transports (+3.3%) and Biotech (IBB +3.7%).
Well that was a hell of a week! After yesterday’s records falls, today sees the fightback with the STOXX600 up over 7%, the biggest move since Nov 2008! We walked in to short selling bans in (Italy, Spain, S Korea, Germany contemplating), more stimulus headline, various governments offering pretty much unlimited billions to fight coronavirus. Flow wise, we are better buyers overall (with only few sell tickets on the pad) so let’s see if the trend continues throughout the day, especially when the US comes into action.
Short and sweet (sour) today…
Nothing is in the green – Risk-off is now in every asset as investors move to cash. With little guidance from Washington, and events/ schools/ countries (Italy) shutting down, the economic impact is not even close to being felt. Sell first and then ask questions reigns. Investors want to see fiscal support, and they are not getting it yet.