"Bear market rally is over": futures slide as the dollar rises, increasing bonds

S&P futures fell after Novartis CEO said coronavirus vaccine may not be available until 2H 2021 and European stocks fell Thursday as investors feared the current economic slowdown may not has been here longer than originally planned after Fed President Jerome Powell warned of the unprecedented risks of coronavirus as he awaits the latest unemployment data in the United States after a new sale on Wall Street.

"Opinions are beginning to state that the 2020 bear market recovery may have run its course,"Said Matthew Sherwood, director of investment strategy at Perpetual Investment Management.

After two sessions of sharp declines, the first three US stock indices. United States They fell for the third day Following a report that President Donald Trump "examines" Chinese companies trading on the US stock exchanges, And now they are headed for their worst week since mid-March, when hopes for a rapid economic recovery have been dashed after the disappointing words of Federal Reserve Chairman Jerome Powell and the famous American specialist infectious disease, Anthony Fauci.

Among the first to move, Cisco Systems Inc grew 2.5% before market after beating quarterly revenue and profit estimates as locks increased global demand for its remote work tools and devices. network equipment. Norwegian Cruise Line Holdings, S&P's worst performance since sales started in February, rose in the previous market after stating There is always a demand for cruise vacations, particularly from the fourth quarter. The results season is in its final stretch with 448 S&P 500 companies reporting to date. On average, First-quarter profits expected to drop 12.2%, according to Refinitiv data.

The Stoxx Europe 600 index fell, with insurance and auto stocks lagging behind. The Stoxx Europe 600 core resources index fell to 2.1% due to rising tensions between the United States and China, while the Fed warns of economic risk and Goldman Sachs sees the fall of iron ore. The four major diversified miners fell: Rio Tinto -1.2%, BHP -1.2%, Glencore -3.2%, Anglo American -3.5%.

Earlier in the session, Asian stocks fell, led by energy and finance, and Japan and Australia suffered some of the biggest drops after rising in the last session. Topix fell 1.9% as Sawafuji Elec and eRex continued to fall. Shanghai composite index fell 1%, Chahua Modern Housewares and Sailun Group showing the largest slides

Emerging market stocks and currencies weakened after Powell warned of unprecedented risks to the economy if policy makers did not tackle the consequences of the coronavirus. The MSCI measure of developing country stocks resumed losses after a day of stability, while almost all currencies weakened against the dollar. Mexico's central bank is expected to cut its key rate by 50 basis points to the lowest level since 2016 later today. Investors are assessing whether the financial markets are correctly assessing the economic reality of a pandemic that has closed factories and caused increased unemployment worldwide. The extra yield they are asking to hold developing country debt instead of treasury bills has increased. "The president was nervous," said a note from Commerzbank strategists, including Ulrich Leuchtmann, based in Frankfurt. "His speech provided a reason to allow existing fears to take their course. "

The rebound in global stocks since the lows of March, fueled by the hope of a rebound in trading activity like several U.S. states. USA They've cut blockades to curb the spread of the coronavirus, it is showing more signs of stagnation this week amid comments from some big investors like Druckenmiller and Tepper, that stocks have risen too high in the economic uncertainty. Fed President Jerome Powell has suggested that additional budget support may be needed to combat the effects of the pandemic. In this regard, Republicans have rejected a $ 3 trillion stimulus package written by House Democrats, but the draft plan has the seeds of a possible lesser compromise.

At FX, the biggest driver overnight was the dollar, which came out of a falling triangle, jump to the highest level since April 26. The Bloomberg Dollar Spot index strengthened for the fourth consecutive session, increasing with the yen, as the sentiment of the sour market maintained demand for safe haven currencies. Greenback advance continued against most of its G-10 counterparts amid risky moves in Asia and Europe after Federal Reserve President Jerome Powell warned against the economic challenges of the coronavirus pandemic and removed negative rates from the table. "Powell's negative message has helped increase the risk of day-to-day trading conditions, which also helps support the US dollar," said Lee Hardman, currency analyst at MUFG.

Yesterday we explained why the next surge in the dollar was just beginning when an avalanche of cash flow problems was draining around $ 1 trillion in market liquidity.

The yen and the Canadian dollar led gains among the Group of 10 currencies, while the euro remained close to falling below 1.08 per dollar. Swedish crown led losses and the Australian dollar weakened for a fourth day against the dollar after the country's employment dropped from a record in April. The pound fell to its lowest level in a month due to low risk sentiment and speculation about further easing by the central bank.

On the rate side, treasury bills flatten up for the third consecutive session, and long-term yields fall below 1.30% following strong demand from the 30-year bond auction Wednesday. T-bills are also taking advantage of weak stocks after the CEO of Novartis said a coronavirus vaccine may not be available until 2S2021. Treasury yields fell by more than 6bp at the end with 2s10s and 5s30, both flatter at more than 3bp; The 10-year yield fell by 4 bp to 0.615%. European bonds were mainly obtained through underperforming treasury bills, fearing a lasting recession. The German Bunds are 3 bp cheaper compared to Treasury bills, the widest gilts almost 4 bp.

In commodities, the previous month’s futures, WTI and Brent, remain on the front line after a somewhat uneven APAC trading session, with modest new impetus across the complex stemming from the latest IEA oil market report, which was found to be more optimistic compared to its OPEC and OPEC counterparts EIA. The agency lowered its 2020 demand growth forecast by 690,000 BPD (compared to 2.23 million BPD from OPEC and 2.9 ml BPD from EIA) while asserting that the drop in demand for H1 oil is not as strong as originally feared, with an improvement in the balance amidst deep production However, IEA chief Birol said he did not believe in the recently announced reductions (i.e. over-compliance by Saudi Arabia), United Arab Emirates and Kuwait) are enough to balance the markets.

The next day, today’s highlight will likely be the first unemployment claims from the United States. United States Weekly. Meanwhile, there will also be the final reading of the German CPI for April, orders for machine tools from Japan for April, the Italian trade balance for March and Canadian manufacturers' sales for March. From central banks, the Governor of the Bank of England, Bailey, will speak during a webinar, and we will also hear Kashkari, Bostic and Kaplan from the Federal Reserve, as well as the Vice President of the BCE in Guindos. Finally, the ECB will publish its Economic Bulletin, while the Mexican central bank will decide on the rates.

Market overview

• S&P 500 futures changed little to 2,813.50
• STOXX Europe 600 fell 1.7% to 328.36
• MXAP fell 1.4% to 144.70
• MXAPJ fell 1.3% to 465.75
• Nikkei down 1.7% to 19,914.78
• Topix down 1.9% to 1,446.55
• The Hang Seng Index fell 1.5% to 23,829.74
• Shanghai Composite fell 1% to 2,870.34
• Sensex down 2.5% to 31,205.67
• Australia S & P / ASX 200 down 1.7% to 5,328.72
• Kospi lost 0.8% to 1,924.96
• The German 10-year rate fell by 1.4 bp to -0.544%
• Euro down 0.03% to $ 1.0815
• The Italian 10-year rate fell 8.7 bp to 1,628%
• Spanish 10-year yield fell 1.7 bp to 0.718%
• Brent futures rose 2.6% to $ 29.96 / barrel
• The golden spot changed little at $ 1,716.54
• The US dollar index changed little at 100.23

Overnight news

• Germany recorded the highest number of new coronavirus cases in five days as government gradually lifts restrictions on daily life
• The coronavirus threatens to transform the long fault line that divides Europe between its richest north and its poorest south into an economic chasm that puts its currency in danger.
• Bundesbank holds talks with German authorities over clash over controversial court ruling calling into question the European Central Bank's bond purchase program, said Fabio Panetta , member of the ECB Executive Board.
• A change in the way the Governor of the Bank of Japan, Haruhiko Kurodatalks, talks about lowering the bank's negative interest rate could suggest that the option is now further down the list of his favorite tools.
• Activity continues to recover on the financing markets on both sides of the Atlantic, even if prices in Europe remain a critical point, rates having increased in the commercial role of quality.
• Prospects for world oil markets have "improved a bit", with demand a little stronger than expected and supply controlled by a sharp fall in prices, said the International Energy Agency.
• Roche Holding AG's coronavirus antibody test has been approved by a British health authority, a boost for Prime Minister Boris Johnson as he seeks ways to gradually loosen blocking restrictions
• While the rest of the world took refuge in his home, the Swedes continued to eat in restaurants, shop and go to work. Swedish model trades more disease for less economic damage

Asian stocks were trading negatively, the appetite for global risk having diminished due to lingering tensions between the United States. United Statess. ASX 200 (-1.7%) was dominated by energy and finance after equally underperforming sectors in the United States and with participants digesting alarming employment data which showed a decrease of almost 600,000 jobs. The Nikkei 225 (-1.7%) remained under the influence of a firmer currency and earnings releases also provided a catalyst for price action, including Sony. Elsewhere, Hang Seng (-1.5%) and Shanghai Comp. (-1.0%) were pessimistic since the tensions between EEs. United States And China has risen a bit after sources said China would soon impose countermeasures on those seeking to harm China's COVID-19 and the President. U.S. Huawei and ZTE for another year, while the PBoC also disappointed expectations for an MLF announcement and an associated rate cut of 20 basis points that did not materialize. Ultimately, 10-year JGBs were initially higher, as prices took advantage of risk aversion and gains on T-notes, then returned higher after a 30-year mixed auction which resulted in prices. lower accepted.

Top Asian news

• New Zealand plans debt increase thanks to historic fiscal stimulus
• Russian epidemic spreads to neighbor with Mongolian leap
• Australian stocks fall as employment declines by registered majority
• Kuroda suggests that reduction rates can now be ranked lower in the BOJ Toolkit

Europe took the lead in the APAC (Euro Stoxx 50 -1.9%) session with rising tensions between the United States. United States And China Continues To Affect Sentiment, while the heavy downplaying of NIRP by Fed President Powell does not help the equity complex. Large companies see widespread losses without standing out among the best indices. The sectors are firmly in red in all areas with more pronounced losses than those observed in cyclicals (excluding telecommunications). The distribution of the sector sees the automotive and parts as well as travel and leisure as laggards. Telecommunications tops the list: losses in the sector are amortized with Deutsche Telekom earrings (+ 0.6%) led by Adj. Estimates of EBITDA, confirmed confirmations, and stated that the epidemic had a limited impact on the finances of the company. After German profits, Merck (+ 1.1%) remains buoyant after having outperformed estimates of all parameters in the first quarter, while the guide has been printed in accordance with analysts' estimates. The other DAX components linked to results include: Wirecard (-0.7%), RWE (-0.7%). Elsewhere, Fiat Chrysler (-1.7%) and PSA (-1.1%) are under pressure after simultaneously drawing the dividend from fiscal year 20; the dividend was part of their merger. Finally, Roche (+ 0.2%) remains afloat after the approval of its COVID-19 antibody test by Public Health England. Co. is in talks with the NHS and the British government on rolling out the tests as soon as possible. The British government is negotiating to buy millions of kits.

Top European News

• The German economy in free fall does not only suffer amid the virus
• BMW faces scrutiny of shareholders for more than $ 1.8 billion in dividends
• Fight against UK virus brought on by Roche Antibody Suppression Test
• UK stimulus package unlocked $ 100 billion in transactions

At FX, We start with AUD / NZD: it is not exactly a role reversal, but the hierarchy has changed to some extent after a drop of almost 600,000 from the Australian payroll, a marked increase in the participation rate and pain forecasts. more pronounced labor market ahead. Aud / Usd duly pulled out of 0.6500+ peaks to oscillate at 0.6450 and Aud / Nzd loses momentum below 1.0800 despite Kiwi still under pressure after RBNZ over expectations of NIRP and neo government -Zealanders are pushing their COVID-19 recovery fund up to 20% of GDP. In fact, Nzd / Usd has now lost control of the 0.6000 mango before the April PMI manufacturing.

• JPY: Yen continues to outperform general trend and outperform otherwise strong dollar, DXY looks more comfortable above 100,000 in a range of 100,420 to 140, while risk-free positioning intensifies and keeps the current limited USD / Jpy up to 107.00. No adverse reaction to the more moderate rhetoric of the Governor of the Bank of Japan, Kuroda, was offset by the firm conviction that Japan will not return to deflation and that it is not necessary to further lower benchmark rates even if the recession continues. in the second quarter.
• GBP / SEK / NOK – The British Pound Continues To Be A Victim Of Historical Downtrends And Increasingly Negative Technical Impulses As Cable Abandoned Another Round Digit At 1.2200 To Test Deeper Support Before 1.2150 (around 1.2166) before finding any underlying offers, with perhaps a fundamental weakness. from BoE governor Bailey, acknowledging that markets are anticipating more QE. Meanwhile, the aforementioned risk aversion pushed the Swedish krona out of its rhythm and fell back below 10.6000 against the euro, but firm oil prices after a monthly report from the euro. The less pessimistic IEA in terms of the destruction of world demand is helping Eur / Nok on a downward path towards 11,000, although outside the two-month low of Wednesday below 10.9250.
• CAD / CHF / EUR: Floating oil also supports the loonie on each side of 1.4100 against its American counterpart in view of the BoC's FSR, while the Franco is again in a fixed or divergent position since the USD / Chf remains above 0.9700 unlike Eur / Chf which retreats towards 1.0500 while the single currency straddles 1.0800 against the US dollar after the light stops soar , but it is not said that the largest are less than 1.0775. Note that Eur / Usd is wrapped in a group of large expiration options ranging from 1.0750 to 1.0930 – see the newsfeed at 7.23BST for full details and other major attacks at play.
• EM – Even the deterioration of the environment in the middle of the second wave of COVID-19 and the relations between the United States and China or the increase in crude oil prices can not affect the ardor of the Try, as the read remains above 7.0000 and is currently attracting traction in the hope that the CBRT can organize exchange lines with foreign peers.

In raw materials, First month WTI and Brent futures remain on the front line after somewhat hectic APAC trading session, with modest new momentum in the complex stemming from the latest IEA oil market report, which was more optimistic. against their OPEC and EIA counterparts. The agency lowered its 2020 demand growth forecast by 690,000 BPD (compared to 2.23 million BPD from OPEC and 2.9 ml BPD from EIA) while asserting that the drop in demand for H1 oil is not as strong as originally feared, with an improvement in the balance amidst deep production However, IEA chief Birol said he did not believe in the recently announced reductions (i.e. over-compliance by Saudi Arabia), United Arab Emirates and Kuwait) are enough to balance the markets. Saudi Arabia is said to have cut oil sales in the United States in half. United States And Europe, deeper cuts than in Asia, because production has declined. Deliveries to certain American and European buyers will drop by 60 to 70% compared to the volumes normally contracted. This is happening against the backdrop of an increase in Aramco OSPs in all regions, lower sales in Europe and the United States. United States They could be a function of a drop in demand for locks. Apart from that, the news flow was light for the station: the WTI June is around the session peaks north of $ 26 / barrel (against lows of 25.18 / barrel), while Brent July is also seen north of $ 30 / barrel (versus 28.88 barrels / barrel). Elsewhere, spot gold remains relatively flat north of $ 1,700 / oz and towards the middle of the current narrow range of $ 1,712-1719 / oz pending further macroeconomic stimulus or dollar action . Meanwhile, copper prices posted share losses as well as a bitter sentiment and are near $ 2,400 / lb, after testing support at $ 2.3350 / lb earlier in the day. session.

Calendar of events in the United States United States

• 8:30 am: Initial unemployment claims, est. 2.5 m, before 3.17 m; Continuous claims, is. 25.1 m, previous 22.6 m
• 8:30 a.m .: MoM Import Price Index, est. -3.2%, -2.3% previously; Import price index from one year to another, is. -7.35%, before -4.1%
• 8:30 a.m .: MoM export price index, est. -2.3%, -1.6% previous; Export price index year-on-year, -3.6% previous
• 9.45 a.m .: Bloomberg Consumer Comfort, before 36.9

Jim Reid of DB ends the evening

Yesterday we published Konzept – the DB Research magazine. You can see it here. The theme of this issue is "Life after Covid-19", where we see twenty articles covering how the world will be different in the future. We cover macro and micro topics, as well as how the post-virus landscape will change your life.

One of the main features is whether this virus will end up being deflationary or inflationary. It is fair to say that this argument divides DB Research like few others. To give you an idea of ​​the debate, we have included opposing opinions in two contradictory articles in the magazine. On this point, we launched a podcast this morning (in our Podzept series) where I moderate a discussion between the main authors. We have Robin Winkler in the red corner fighting for his deflationary views and Oliver Harvey in the blue corner to counter his inflationary views. You can listen here or subscribe to Podzept on Spotify, Apple and Google Podcast and Stitcher, just search for Podzept.

In our monthly opinion poll, you can vote if you think this crisis will be inflationary or deflationary. The investigation has many other questions about his take on how the virus affects his life and the world around him. We also include market related issues. This link is here and the results will be published in the coming days.

As markets continue to struggle with the "Life After Covid-19" aspect, yesterday was another day of weakness, as global stock markets continued to decline. We have almost managed to cope with a negative assessment from the President of Fed Powell, but we have not been able, after new evidence, that the relationship between the United States and China is deteriorating even more.

On the latter, President Trump first tweeted that "dealing with China is a very expensive thing to do." We have just concluded an excellent trade agreement, the ink was barely dry and the world has been struck by the Chinese plague. 100 trade deals wouldn't make a difference, and all those innocent lives lost! "This was followed by headlines from the China Global Times stating that China was" extremely dissatisfied "with the possibility that the United States would sanction or punish China for the coronavirus epidemic and that they would seek to retaliate and contemplate punitive countermeasures against individuals, entities, and representatives of American states such as the Attorney General of Missouri, who has sued China for damages for the coronavirus pandemic "All this before a Bloomberg report saying that the Federal Retirement Savings Investment Board in the United States The United States, a federal employee savings plan, would not allocate about $ 50 billion from its international fund to follow an MSCI All Country World index, capturing China. This move would have been supported by the administration of the president and some members of Congress.

In addition to negative American news. USA / China, the renowned founder of Appaloosa Management, David Tepper, assessed the US stock market. United States As the most overvalued he saw outside the tech bubble in 1999, he called some tech appraisals "crazy." These comments mirrored those of experienced investor Stan Druckenmiler the day before. He called it the worst action-risk award he had ever seen in his career. Tepper also asked if there were incorrect capital allocations after the Fed's actions, but also acknowledged that the stock market may not retest March funds.

In terms of movements, the equity indices fell overall with the S&P 500 down -1.75% and the NASDAQ down -1.55%. Although the market has recovered almost one percent in the last 30 minutes of trading, it was the first time in more than 3 weeks that we have seen the S&P fall by more than 1% for two days in a row, while the VIX index rose + 2.2 points to its highest level in more than a week. European equities also experienced sustained declines, with the STOXX 600 falling -1.94% and the DAX losing -2.56%.

The Asian markets continued this morning with the Nikkei (-0.86%), the Hang Seng (-1.11%), the Shanghai Comp (-0.47%) and the Kospi (-1.00%) all falling. Elsewhere, the S&P 500 futures traded unchanged, while 10-year USTS yields fell -1.1 bps. In other overnight news, Saudi Aramco announced a reduction in contract volumes for the June load to at least eight Asian customers, indicating that the country could adhere to the announced production reductions. WTI oil prices are up + 0.55% at the time of writing.

Fed Chairman Powell, in his speech scheduled for yesterday, warned that the outlook was "very uncertain and subject to significant negative risks". While Powell's findings probably weren't a surprise, which was remarkable in his comments, this is how he lingered for a while on the permanent effects that a recession of a 39 such magnitude may have, stating that "they can leave lasting damage to productivity". . savings capacity. "Therefore, the markets certainly had pretty negative headlines to ponder. Regarding future policy, he said:" We will continue to use our tools to the fullest until the crisis and recovery end economic. ongoing ", and that" additional budget support could be costly, but it would be worth it if it helps prevent long-term economic damage and leaves us with a stronger recovery ".

However, the main conclusion concerned the negative rates, where Powell said that the FOMC's views had not changed and that it was not something they were seeing. However, as a result of comments, the federal fund futures contract negative prices in January 2021 on the Bloomberg WIRP page.

As investors moved from risky assets to safe havens, sovereign debt picked up yesterday on both sides of the Atlantic, with Treasury yields falling -1.3 bp to 0.653%. 10-year bonds also fell to -2.5bp. Comments by Fed Chairman Powell don't seem to have had much influence on returns, as 10-year yields did not move until the risk of disagreement reached all active a little later in the American session. United. There was an adjustment of peripheral spreads in Europe, with those of Italian (-6.3bps), Spanish (-2.8bps), Portuguese (-5.4bps) and Greek (-3.7bps) debt to ten years, all more adjusted to bonds. And in the UK, 2-year gold yields fell to a record low of -0.03%.

Late last night, Italy announced that the government had approved a 55 billion euro fiscal stimulus package, which will focus on small business liquidity and individual loans. Jusqu'à 15 milliards de dollars seront réservés aux entreprises pour payer les travailleurs actuellement autorisés, avec des fonds d'urgence supplémentaires pour les chômeurs. Il y aura également environ 4 milliards d'euros de réductions d'impôts pour les Italiens, ainsi qu'un bonus de 500 € pour certains à utiliser pour les dépenses de vacances pour certains. Le plan de relance italien est venu avec la nouvelle que le gouverneur de la BoE Bailey a annoncé que des achats supplémentaires d'obligations viendraient. Il a reconnu qu'il est "assez clair" que les investisseurs attendent plus de QE et que la banque centrale a laissé l'option ouverte pour en faire plus. On a également reconnu un peu plus que la Banque d'Angleterre finançait effectivement le déficit pour l'instant et répartissait les coûts de la pandémie au fil du temps. Auparavant, la Banque d'Angleterre avait été légèrement plus agressive en reconnaissant qu'elle finançait effectivement le gouvernement.

En ce qui concerne la trajectoire à court terme de l'économie, les économistes porteront une attention particulière au rapport hebdomadaire hebdomadaire initial américain sur les réclamations sans emploi couvrant la semaine jusqu'au 9 mai. C'est la première depuis que le rapport sur l'emploi vendredi dernier en avril a confirmé que les États-Unis ont maintenant leur taux de chômage le plus élevé depuis la Grande Dépression, à 14,7%, et malheureusement nous n'avons probablement pas encore vu le pire. Pour ce qui est du nombre de réclamations d'aujourd'hui, l'appel de nos économistes américains. Etats-Unis C'est pour une lecture de 2 503 millions, qui marquerait la sixième semaine consécutive que le nombre a diminué, passant d'un pic de 6 867 millions au cours de la semaine au 27 mars. Sin embargo, incluso si lo compara con el número total de nóminas no agrícolas anteriores a Covid, eso significa que todavía estamos viendo más del 1% de la fuerza laboral haciendo reclamos iniciales en una sola semana.

Los datos económicos comenzaron ayer con cifras que mostraban que el PIB se había contraído un -2.0% en el primer trimestre (frente al -2.6% esperado), que es la mayor disminución trimestral de la economía del Reino Unido desde el cuarto trimestre de 2008. Como era de esperar, el daño real fue evidente una vez que el El bloqueo comenzó en marzo, con una disminución mensual de -5.8% (frente a -7.9% esperado), en contraste con un crecimiento de + 0.1% en enero y una contracción de -0.2% en febrero. Además, esa es la peor contracción mensual registrada en los datos mensuales que se remontan a 1997.

Terminando con otros datos de ayer, y la producción industrial de la zona del euro cayó un -11,3% en marzo (frente al -12,5% esperado), que fue el mayor descenso mensual desde la formación de la moneda única en 1999. Mientras tanto, los precios al productor de EE. Etats-Unis Cayeron en -1.3% mes a mes en abril (vs. -0.5% esperado).

Hasta el día de hoy, y los datos destacados de hoy probablemente serán las solicitudes iniciales de desempleo de los EE. Etats-Unis Semanales. Mientras tanto, también habrá la lectura final del IPC alemán para abril, los pedidos de máquinas herramienta de Japón para abril, la balanza comercial italiana para marzo y las ventas de fabricación canadiense para marzo. Desde los bancos centrales, el gobernador del Banco de Inglaterra, Bailey, hablará en un seminario web, y también escucharemos de Kashkari, Bostic y Kaplan de la Reserva Federal, junto con el vicepresidente de Guindos del BCE. Finalmente, el BCE publicará su Boletín Económico, mientras que el banco central mexicano decidirá sobre las tasas.