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Yesterday’s risk party has left participants with a bit of a hangover: risk assets have taken a bit of a beating today amid a slew of pretty rotten economic data and an ECB presser that maybe wasn’t all that. There is also a sense that equity markets rode too aggressively on the Gilead news and need to see more evidence, whilst the FTSE has notably underperformed thanks to the oil majors.

The S&P 500 opened down more than 1% before paring losses to trade 0.5% lower after half an hour of trading, whilst European stocks extended losses through the trading session to erase yesterday’s rally. The FTSE 100 has been knocked back under 6,000 as Shell tumbled on its dividend cut. Shell scrubbed around 60 points off the index, or about 1% of the value of the market. BP scrubbed another 15 points or so as the Shell effect weighed on its peer – dividend doubts creeping in. AstraZeneca put on the most index points on hopes it will have a vaccine ready for limited use this year.

Aside from the meltdown for Shell shareholders and income investors, the news on the economic front has not been terribly good. Eurozone growth was -3.8% in Q1, whilst US personal spending declined 7.5% in March and US initial job claims surged by another 3.8m – taking total losses to almost 30m since the crisis broke.

FX markets showed a very sharp reversal for risk later on in the session as the AUD tumbled. AUDJPY broke the 0.6930 swing low before paring losses in a sharp move lower in the afternoon. AUDUSD also slid, taking an 0.64 handle briefly as it balked at the 100-day SMA at 0.65670. EURUSD was pretty well flat on the day as it endured the usual ECB whipsaw.

On that, the ECB didn’t really wow the markets with any major new support but did try to smooth bank liquidity operations with a new acronym – PELTROs, or pandemic emergency longer-term refinancing operations. The central bank did not expand the PEPP envelope but made it very clear

More focus was on the presser and whilst Christine Lagarde’s delivery is still not very smooth, she repeated commitments on country-specific support in a clear and determined fashion that indicates the ECB is not going to let peripheral spreads blowout.

Charts

The peak hit ahead of the European open was the highest we’ve seen all day. The S&P 500 topped out at the Mar 6th cash close at 2973 before the European session got underway and headed weaker through to the cash open on Wall Street, with SPX testing the 2900 level again, which was rejected firmly. Looking to reclaim the 61.8% retracement at 2934, with support at 2885.

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