Volgende week: Investeerders kijken uit naar Tesla Battery Day

Tesla organiseert dinsdag de langverwachte Battery Day. Investeerders hopen dat er baanbrekende technologische ontwikkelingen worden aangekondigd. Ondertussen blijven er economische cijfers binnenkomen, waaronder flash PMI’s voor de eurozone, het rentebesluit van de Reserve of Bank of New Zealand en het wekelijkse Amerikaanse banenrapport.

Jay Powell, voorzitter van de Fed en Andrew Bailley, gouverneur van de Bank of England, zullen de komende dagen toelichting geven na de FOMC- en MPC-vergaderingen van vorige week.

Tesla Battery Day

De algemene vergadering van aandeelhouders van Tesla voor 2020 vindt plaats op dinsdag 22 september 2020 om 13.30 uur Pacific Time. Onmiddellijk daarna organiseert Tesla de Battery Day, dat al voor evenveel speculatie in het aandeel heeft gezorgd als geruchten heeft gegenereerd over wat CEO Elon Musk op het punt staat te onthullen.

Onze volledige gids voor dit evenement is hier te vinden.

Hoe verloopt het economisch herstel?

Neemt het tempo van het wereldwijde economische herstel af? De snapback na opheffing van de lockdowns was het makkelijke deel. Terugkeren naar de niveaus van 2019 zal echter veel moeilijker zijn. Marginale winsten zijn steeds moeilijker te realiseren en sommige hoogfrequente economische indicatoren beginnen af te vlakken. PMI’s van de eurozone nemen bijvoorbeeld af.

Woensdag staan nieuwe productie- en dienstencijfers voor in de eurozone, het VK en de VS op de agenda. Ondertussen zullen beleggers op donderdag de wekelijkse Amerikaanse werkloosheidscijfers nauwlettend in de gaten houden, terwijl op vrijdag de Amerikaanse orders voor duurzame goederen inzicht bieden in de ontwikkeling van de zakelijke marktvraag.

Hoe reageren de centrale banken?

Vorige week wezen de Federal Reserve en de Bank of England erop dat zij bereid zijn om, indien nodig, nieuwe maatregelen te treffen en de rentetarieven de komende jaren laag te houden. Deze week zullen we meer horen over hoe de Reserve Bank of New Zealand gaat reageren op de ergste recessie in decennia.

Tussen april en juni is de economie van het land met 12,2 procent gekrompen, de grootste afname sinds men in 1987 is begonnen met het bijhouden van deze cijfers, als gevolg van de strenge lockdown-maatregelen.

De RBNZ kijkt expliciet naar negatieve rentetarieven, waarbij vicegouverneur Christian Hawkesby vorige maand aangaf dat de centrale bank bezig is „het fundament te leggen” voor aanvullende beleidsinstrumenten. Zullen ze de sprong maken of nog even de kat uit de boom kijken, hopend dat de economie als gevolg van het lage aantal besmettingen weer zal herstellen?

Hoogtepunten op XRay deze week

Bekijk de volledige agenda van financiële marktanalyses en trainingen.

15.00 UTC 21-Sep Tesla Battery Day Preview
17.00 UTC 21-Sep Blonde Markets
17.00 UTC 22⁠⁠⁠-⁠⁠⁠⁠⁠⁠Sep Webinar: Identify Trends and Choose Technical Indicators
14.45 UTC 24⁠⁠-⁠⁠⁠⁠⁠⁠Sep Master the Markets
17.00 UTC 24⁠-⁠⁠⁠⁠⁠⁠Sep Election2020 Weekly

Belangrijke economische agendapunten

Kijk uit naar de belangrijkste economische agendapunten deze week. Een volledige kalender met economische en corporate events is beschikbaar op het platform. 

06:00 UTC 

22-Sep  Kingfisher – Half-Year Results 
14.00 UTC  22-Sep  Eurozone Consumer Confidence 
02.00 UTC  23-Sep  Reserve Bank of New Zealand Rate Decision 
07.15 – 08.00 UTC  23-Sep  Eurozone Flash Services / Manufacturing PMIs 
Pre-Market  23-Sep  General Mills – Q1 2021 
08.30 UTC 23-Sep  UK Flash Services / Manufacturing PMIs 
14.30 UTC 23-Sep  US EIA Crude Oil Inventories 
23.50 UTC  23-Sep  Bank of Japan Meeting Minutes 
08.00 UTC  24-Sep  German Ifo Business Climate 
Pre-Market  24-Sep  Accenture – Q4 2020 
12.30 UTC 24-Sep  US Weekly Jobless Claims 
14.30 UTC  24-Sep  US EIA Natural Gas Storage 
After-Market  24-Sep  Costco Wholesale Corp – Q4 2020 
11.00 UTC  25-Sep  Bank of England Quarterly Bulletin 
12.30 UTC 25-Sep  US Durable Goods Orders 

 

Don’t become immune to what’s going on

We all want a vaccine to Covid-19 to be made, but let’s not become immune to the bad data. It’s very easy to be inoculated against the collapse in economic activity because we’ve had nothing but bad news for 6 months; what you could term the ‘new normal’.

Just as we are at risk of sleepwalking into a lower level of existence, worse education outcomes for our children, persistently lower incomes and reduced social interactions against our will, it’s far too easy to watch the economic data and think it’s not so bad after all. The truth is it remains shocking and will get worse.

UK debt rises, Spanish firms teeter on the brink of collapse

UK debt has risen above £2 trillion, or 100.5% of GDP. This need not be a problem in itself – governments in control of their own currency don’t need to ‘pay it back’ by returning to austerity and raising taxes. One in eight UK workers remains on furlough. Meanwhile 25% of Spanish businesses are in a ‘technical bankruptcy’, it was reported this morning. Germany wants to furlough workers for years, which would lead to a lost generation of zombie employees working at zombie companies. It needn’t be this way.

Weakness in US labour market highlights recovery obstacles

It was a soft initial claims print from the US Department of Labor – over 1.1m vs the sub-one-million number expected, which highlights the lumpy nature of the recovery now that the easy wins are behind us. However, the number of continuing claims and the unemployment rate were better.

The advance seasonally adjusted insured unemployment rate was 10.2% for the week ending August 8th, a decrease of 0.4 percentage points from the previous week’s 10.6%. Continuing claims were down over 600k to 14.8m, which was a tad better than the 15m anticipated. Giving with one hand but taking away with the other, but jobless claims are still extraordinarily high.

Wall Street hooked on stimulus

Of course, stocks don’t really care much. The Federal Reserve has successfully killed off bear markets as comprehensively as the passenger pigeon. If we define a bear market as when the S&P 500 declines 20% from its previous peak and ends when it reaches a trough and then subsequently rises 20%, then the 2020 bear market was by far and away the shortest on record.

The FTSE 100, which is a much better proxy for economic growth than the US markets are, has languished and is struggling to hold onto the 6,000 level this morning. Indeed equity markets in Europe were mixed after a solid session in Asia. Wall Street was a little higher yesterday as investors continue to hold grimly to record highs.

Eurozone PMIs undershoot expectations

A slew of Eurozone PMIs disappointed. Confidence in France seemed a good deal weaker than expected. The Manufacturing PMI fell under 50, indicating businesses are less confident than they were the previous month. Rising Covid cases in Europe and worries about a big second wave were cited. Germany’s survey was more positive but still fell short of expectations. PMIs may show lots more confidence, or they may not. But as detailed in the week ahead, there is so much wrong with these diffusion indices that we should be paying too much attention to them.

European equity indices opened higher, dropped sharply after the French miss and recovered on the more robust German figures. The euro fell on the softer-than-forecast PMIs, while sterling was close to its recent highs after putting in a strong session yesterday afternoon and overnight in Asian trade. Cable was a little softer having risen as high as 1.32550.

EIA Crude Inventories Preview: Crude oil back below $41 after mixed API data

Crude oil rose to test $41 yesterday as markets bet on a stronger-than-expected recovery in demand, with the actions of OPEC+ continuing to provide support. It was the highest since March 6th, although crude has today opened below $40.50 and briefly dipped below the $40 handle. Will today’s EIA crude oil inventories data given WTI some direction?

Data yesterday from the American Petroleum Institute indicated a 1.7 million barrel increase in US oil stocks. Analysts had forecast a rise of 300,000 barrels. Even though the data showed a higher-than-expected build, the injection was still the lowest for three weeks. The report also showed gasoline inventories fell, pointing to increased demand for fuel.

Yesterday’s run of PMIs from across the globe has helped reignite hopes of a quick economic rebound:

  • Australia’s services and composite indices unexpectedly leapt back into growth territory with readings above 50, while the manufacturing index printed just 0.2 points shy of the neutral level.
  • The French manufacturing, services, and composite indexes all blew past forecasts to return to growth.
  • PMIs for Germany and the Eurozone, while continuing to indicate a decline in output, rose further-than-expected to signal a slower pace of contraction than forecast.
  • The UK manufacturing sector grew fractionally in June, after the index recovered much further than analysts had predicted. Services and the composite index also bettered forecasts, although they still pointed to a decline.
  • US manufacturing shrank marginally in June, although the reading still beat expectations.

The readings helped improve the demand outlook. This, combined with support from a move towards greater compliance with production cuts from OPEC and its allies, helped crude oil hit three month highs yesterday, before profit-taking forced a retreat back towards $40.

Also supporting oil this week are revised average price forecasts for 2020 from Bank of America Global Research. Its average price forecast for WTI crude oil is now $39.70, an increase of nearly $8 per barrel.

Equity markets whipsaw on US-China trade uncertainty

It’s over, it’s not over: The White House looked to be as dysfunctional as ever as Peter Navarro, trade adviser to President Trump, said the US-China trade deal was over, prompting a sharp fall in risk assets in trading during the Asian session. He was forced to retract the statement, saying it was taken out of context, before Donald Trump himself quickly tweeted:

The reality is of course the US-China relations are exceptionally poor, but on paper at least, the trade deal lives. The market wouldn’t like fresh open conflict on trade between the two world’s largest economies, as it would make recovery from the pandemic even slower. Navarro may speak the truth, but it’s an inconvenient truth that the White House would prefer to avoid right now. Markets are happy to nod along as long as the Fed has their back.

Overnight, equity markets were whipsawed by the comments from Mr Navarro, but Asian stocks eventually rallied. US stocks edged higher on Monday but stayed well within the recent ranges; futures were all over the place overnight.

Europe opens higher, but second-wave risks cloud outlook

European stocks opened firmer having slipped yesterday, again though sticking to the near-term ranges. Whilst the FTSE is trading in the range and favouring the 61.8% level over the 38.2%, the market has made a series of success lower highs that may indicate bulls are not feeling very confident about recovering the post-pandemic highs any time soon. Rallies are still lacking conviction, but dips are still being bought.

Further increases in cases across big economies make the outlook uncertain. US cases continue to surge, while South Korea says it is in the midst of a second wave that arrived sooner than previously thought. Meanwhile England is set for reopening of pubs, restaurants and more on July 4th.

Pound hits resistance at 1.25, BoE governor Bailey due to speak later

In FX, the pound is higher having apparently found a near-term trough around the 1.2340 area. GBPUSD pushed up to 1.25 but hit resistance here and has retraced a little to the 1.2450 support area on the 50% retracement of the May-Jun rally. Andrew Bailey, the governor of the Bank of England, speaks today after giving some policy hints yesterday in an article in which he said the Old Lady was more likely to reduce its balance sheet before raising rates.

He also was widely reported to have said the Government could have run out of cash had it not been for the central bank, which is patently untrue, since governments which borrow and print their own currency cannot run out of money – what the Bank did was smooth out the functioning of bond and currency markets.  Indeed what Mr Bailey said was not that the government would run out of money – he knows it cannot; his comments were widely misreported and misinterpreted in the press.

Euro spikes on French PMI strength

The euro took off higher after French PMI data went over 50, signalling expansion. The PMIs are a bit of a wonky indicator right now given they are entirely sentiment-based and ask only a narrow question – whether things are better, worse or the same as the prior month.

Given the reopening of the economy in the last few weeks, it would be very strange indeed if the PMIs were not improving – it does mean the economy is out of the woods. EURUSD drove up to 1.13 but hit resistance here and turned back.

Gold eased a little off its highs above $1760 but looks well support around $1750. US benchmark real rates – 10yr Treasury Inflation Protected Securities (TIPS) – fell again, slipping to –0.63%, the lowest level in 7 years. Crude oil was firmer above $40 and managed to make a fresh post-negative-pricing high.

Volgende week: Scherpe opleving voor duurzame goederen VS, sentiment en PMI’s omhoog

Er staat deze week genoeg op de economische kalender om de markten bezig te houden, ook al blijft het nieuws onwaarschijnlijk stil. Vertrouwensgegevens uit Europa, PMI’s van over de hele wereld en enkele belangrijke Amerikaanse goederenbestellingen en uitgavencijfers zullen ons meer inzicht geven in de aanhoudende impact van COVID-19 en het economische hersteltraject.

Consumenten- en bedrijfsvertrouwen eurozone

Nieuwe sentimentgegevens uit Duitsland en de eurozone als geheel zullen nauwlettend in de gaten worden gehouden. De versoepeling van lockdowns en het heropenen van meer bedrijven zal naar verwachting zowel het bedrijfs- als consumentenvertrouwen stimuleren, hoewel de cijfers voor beide groepen vanzelfsprekend nog steeds zeer pessimistisch zullen zijn.

Verwacht wordt dat het consumentenvertrouwen in de eurozone in juni zal verbeteren tot -16 vergeleken met -18,8 in mei. De Ifo Business Climate Index van Duitsland zal naar verwachting stijgen tot 85,1 vergeleken met 79,5 een maand eerder, terwijl de GfK-consumentencijfers voor juli naar verwachting op -12 zullen eindigen, een verbetering ten opzichte van -18,9 in juni.

PMI’s geven vorm aan verwachtingen voor BBP in tweede kwartaal

Dinsdag staat een stortvloed aan dienstencijfers en industriële PMI’s gepland. De laatste cijfers zijn afkomstig uit de eurozone, het Verenigd Koninkrijk en de VS. Hoewel deze cijfers nog herzien kunnen worden, zullen ze helpen om de zo belangrijke verwachtingen van het BBP voor het tweede kwartaal vorm te geven.

Over de hele linie worden sterke stijgingen verwacht. Het heropenen van economieën wereldwijd heeft een stimulerend effect, met name in de dienstensector.

Toename aan orders van duurzame goederen in VS

Nadat de werkgelegenheid en detailhandelsverkopen onlangs flink zijn toegenomen en ieders verwachtingen overtroffen, lijkt het waarschijnlijk dat de gegevens over duurzame goederenbestellingen in de VS deze week ook weer een sterke opleving zullen laten zien.

Orders voor duurzame goederen zijn de afgelopen maanden ingestort in een tempo dat in jaren niet is gezien. De heropening van de Amerikaanse economie en de verbeterde vooruitzichten voor sommige consumenten en bedrijven zullen zich waarschijnlijk vertalen in een sterke opleving. Analisten verwachten dat de orders met 7,1% zullen stijgen, hoewel er net als bij alle rebounds na een scherpe daling nog een lange weg te gaan is voordat we weer terug zullen zijn op het niveau van voor de crisis.

Uitkeringsaanvragen staan op de planning voor donderdag. De consensus is dat de groei van het aantal aanvragen opnieuw zal afnemen. Naar verwachting is het aantal uitkeringsaanvragen nu met 1,3 miljoen toegenomen. Dit zou de eerste keer zijn sinds het recordaantal van 6,86 miljoen in de laatste week van maart dat het aantal nieuwe uitkeringsaanvragen onder de 1,5 miljoen per week is gebleven.

Consumentenuitgaven VS nemen toe na afzwakking lockdowns, meer werkgelegenheid

Besteedbaar inkomen steeg in april en met 10,5% dankzij nieuwe steunprogramma’s van de overheid, hoewel dit zich niet vertaalde in een toename van de consumentenuitgave: die namen juist met -13,6% af. Consumenten stortten dit geld op hun spaarrekening, waardoor de spaarquote met 33% is gestegen ten opzichte van de vorige maand.

Verwacht wordt dat inkomens in mei met -5% zijn gedaald, exclusief overheidshulp, terwijl uitgaven naar verwachting met 3% zijn toegenomen.

Hoogtepunten op XRay deze week

Bekijk de volledige agenda van financiële marktanalyses en trainingen.

07.15 UTC Daily European Morning Call
17.00 UTC 22-Jun Reading Candlestick Charts: Trading Patterns and Trends
From 15.30 UTC 23-Jun Weekly Gold, Silver, and Oil Forecasts
17.00 UTC 23-Jun Introduction to Currency Trading – Is it For Me?
14.45 UTC 25-June Master the Market with Andrew Barnett

 

Belangrijke economische agendapunten

Kijk uit naar de belangrijkste economische agendapunten deze week:

14.00 UTC 22-Jun Eurozone Flash Consumer Confidence
07.15 UTC 23-Jun Eurozone/ DE/ FR Flash Services, Manufacturing PMIs
08.30 UTC 23-Jun UK Flash Manufacturing/Services PMIs
13.45 UTC 23-Jun US Flash Manfacturing/Services PMI
03.00 UTC 24-Jun RBNZ Interest Rate Decision
08.00 UTC 24-Jun German ifo Business Climate
14.30 UTC 24-Jun US EIA Crude Oil Inventories
06.00 UTC 25-Jun German GfK Consumer Climate
12.30 UTC 25-Jun US Durable Goods Orders
00.30 UTC 25-Jun US Unemployment Claims
14.30 UTC 25-Jun US EIA Natural Gas Storage
Pre-Market 25-Jun Accenture Plc – Q3 2020, McCormick & Co – Q2 2020
12.30 UTC 26-Jun US PCE, Personal Spending, Personal Income
14.00 UTC 26-Jun Revised University of Michigan Sentiment Index

Week Ahead: Walmart and Home Depot Earnings, UK April Jobless Claims, May PMIs

We may be reaching the tail end of earnings season, but there are still some eagerly awaited releases lined up this week. Highlights will be reports from Walmart and Home Depot; stock in these companies has seen strong bid even as the wider market has tanked. 

We also have the FOMC minutes, a host of PMIs, and jobless claims data from the UK for April. Here’s your full breakdown of the coming events you need to know about. 

Japan Q1 GDP estimate 

Preliminary Q1 GDP data for Japan is due early on Monday, but as with all Q1 growth data it will serve as the prelude to something much worse. The economy is expected to have contracted -1.2% on the quarter, after a -1.8% decline in the final three months of 2019. Annualised growth is expected to print at -4.6%, again a slowdown from the -7.1% drop recorded in 2019 Q4. 

Forecasts for Q2 expect a 22% decline, the worst since the end of the Second World War. Will the Q1 figures give us any indication of how accurate those estimates might be, or will markets ignore the data and wait for more clarity? 

How many UK jobs have been lost in lockdown? 

The UK reports jobless claims data for April, when the workforce suffered an entire month of lockdown. The number of people filing jobless claims grew by over 12,000 in March: April’s figure is likely to print around 650,000. Unemployment rate figures are also scheduled, but these cover March and so are extremely backwards-looking by this point. A little later on Tuesday morning, the Labour Productivity Index for the first quarter is expected to print at -2.6%. 

UK inflation set to collapse 

April UK inflation data will feel the impact of collapsing retail sales, shuttered businesses, climbing unemployment and furloughed workers. Annualised price growth is expected to slump from 1.5% in May to 0.2% last month, with prices predicted to shrink -0.7% on the month after stagnating in April. The core inflation rate is predicted to drop to 1% on an annualised basis and -0.3% on the month. The contraction in producer prices is predicted to have accelerated to -3.9% on the year, and to have doubled to -0.4% on the month. 

High hopes for Walmart, Home Depot earnings 

Markets think Walmart and Home Depot are well-positioned to weather the coronavirus pandemic. Both stocks are over 4% higher year-to-date at the time of writing, compared to a -13% drop for the S&P 500. Walmart actually hit record highs at the end of April. 

The Wall Street Journal recently reported that Walmart saw a 20% increase in sales during March alone. Markets clearly expect a lot from the leading retailers, but can Walmart and Home Depot deliver? 

Both Walmart and Home Depot have “Strong Buy” ratings according to our Analyst Recommendations tool. Walmart has an average price target of $132.79 which represents a 7% upside on prices at the time of writing. Home Depot has a target price of $238.15, a 4% upside. 

Lowe’s, Target, and Best Buy are amongst the other companies reporting this week. 

FOMC meeting minutes 

We already know a lot more about the current thinking of the Federal Reserve thanks to last week’s speech from chair Jerome Powell. The minutes of the meeting at the end of April could be moot: Powell’s speech gave away what would likely have been the headlines from the minutes, namely that it was likely more stimulus would be necessary, but negative interest rates are not something being considered at this time. 

Eurozone economic sentiment set to go negative again 

April’s ZEW Economic Sentiment surveys for the Eurozone and Germany unexpectedly leapt back into positive territory. Assessment of current conditions remained dire, but investors began to focus on recovery. 

But the reality of the recession that lies between where we are now and where we’re trying to get back to is expected to hit sentiment hard again this month, with the German reading forecast to plummet back to -14 and the Eurozone wide reading dropping to -10. 

UK PMIs headed lower, Eurozone set to bounce off lows 

This week we get the flash PMI readings for May. UK manufacturing is expected to drop to 26.6, while the services index will slip to 9. The overall composite PMI is expected to drop from 13.8 to 9.2. 

Manufacturing and services in the Eurozone and its member states, however, are expected to rebound from their lows as economies began relaxing lockdown measures. Germany’s manufacturing index is predicted to jump around 10 points to 45, while services is forecast to more than double to 37 points. Overall the composite index is expected to climb from 17.4 to 40. The Eurozone composite is expected to rise from 13.6 to 34. 

It’s worth remembering that these figures still represent a huge rate of contraction across all areas of the economy. The Eurozone economy may have bounced back from the initial shock of COVID-19, but there is still a long road ahead – and expectations for how long are getting bigger all the time.

Heads-Up on Earnings 

The following companies are set to publish their quarterly earnings reports this week: 

18-May Ryanair – FY 2020
Pre-Market 19-May Walmart – Q1 2021
Pre-Market 19-May Home Depot – Q1 2020
19-May Imperial Brands – Q2 2020
Pre-Market 20-May Lowe’s – Q1 2020
Pre-Market 20-May Target Corp – Q1 2020
Pre-Market 20-May Analog Devices – Q2 2020
20-May Experian – FY 2020
Pre-Market 21-May Medtronic – Q4 2020
Pre-Market 21-May Best Buy – Q1 2021
After-Market 21-May Intuit – Q3 2020
After-Market 21-May Ross Stores – Q1 2020
After-Market 21-May Agilent Technologies – Q2 2020
After-Market 21-May Hewlett Packard Enterprise – Q2 2020
After-Market 21-May NVIDIA – Q1 2021
22-May Deere & Co – Q2 2020

Highlights on XRay this Week 

17.00 UTC   18-May  Blonde Markets
18.00 UTC  18-May   The Ten Rules of Trading
 15.30 UTC 19-May   Weekly Gold Forecast
 18.00 UTC 19-May Reading Candlestick Charts: Trading Patterns and Trends
11.00 UTC  20-May Midweek Lunch Wrap

Key Economic Events

Watch out for the biggest events on the economic calendar this week:

23.50 UTC 17-May Japan Preliminary Quarterly GDP
01.30 UTC 19-May RBA Monetary Policy Meeting Minutes
06.00 UTC 19-May UK Claimant Count Change / Unemployment Rate
09.00 UTC 19-May Germany / Eurozone ZEW Economic Sentiment
06.00 UTC 20-May UK Inflation
12.30 UTC 20-May Canada Inflation
14.30 UTC 20-May US EIA Crude Oil Inventories
18.00 UTC 20-May FOMC Meeting Minutes
07.15 – 08.00 UTC 21-May FR, DE, Eurozone Flash Services and Manufacturing PMIs
08.30 UTC 21-May UK Flash Manufacturing and Services PMIs
12.30 UTC 21-May US Jobless Claims
13.45 UTC 21-May US Flash Manufacturing and Services PMIs
22.45 UTC 21-May New Zealand Quarterly Retail Sales
06.00 UTC 22-May UK Retail Sales
12.30 UTC 22-May Canada Core Retail Sales

Stocks head lower after Gilead, EU disappointments

US stocks faded and European equity markets are broadly weaker following on reports Gilead’s Remdesivir drug isn’t what it was cracked up to be. It had been indications of early positive results for treating Covid-19 patients with the drug that sent markets up at the tail end of last week. We should note these are all leaked reports and the data is sketchy at best. What it shows is how the market is prepared to read into positive vaccine or anti-viral news with extreme optimism, setting the bar high for disappointment.

Data on the economy isn’t offering any disappointment – the bar is already so low that nothing can really be really upsetting. US initial jobless claims rose by more than 4m again, taking total unemployment claims to 26m from Covid-19. UK retail sales fell by a record 5.1% in March, but a drop of this magnitude was widely anticipated. Consumer confidence didn’t decline, but held steady at an 11-year low at -34.

Stimulus is being worked out. The US House of Representatives on Thursday approved the $484bn package for small businesses and hospitals.  More will be needed, you feel. Today’s data of note is the US durable goods orders, which are seen falling 12%, with the important core reading down 6%.

In Europe, Angela Merkel made sure Germany’s economic weight will stand behind a €1tn package for the Eurozone to prevent weaker economies from recovering a lot more slowly than richer ones. This will be defining moment for the EU – if it cannot pull together now, what is the point of it? Of course, there are still strong differences between nations on the actual size and nature of the fund. Critically, we don’t know whether cash will be dispensed as loans or grants. There was a definite sense from Thursday’s meeting of the EU kicking the can down the road. The problem for the EU and the euro is that we’re heading towards a world debt monetization and it cannot take part. German and Italian spreads widened.  Support needs to be agred – Lufthansa today says it will run out cash in weeks.

The euro continues to come under pressure on the disappointment and yesterday’s PMI horror show. Support at the early Apr lows around 1.07750 was tested as I suggested in yesterday’s note, which could open up a move back to 1.0640 without much support in the way.

Heading into the final day of trading for the week, the UK was outperforming – the Dow down 3% this week, while the FTSE was about 0.7% higher. The FTSE 100 shed about 100 points though in early trade Friday to give up its 5800 handle and head for a weekly loss.

Overall, it’s been a pretty indecisive week for indices with no significant developments in terms of the virus or economic data. It’s interesting that in terms of earnings releases, we are not seeing much other than a huge amount of uncertainty as companies scrap guidance. American Express is the main large cap reporting today. It’s already warned that Covid-19 would hit payments as lockdown measures force people to stay home. The momentum of the rally from the trough has faded this week and could see stocks roll over next week if there no more good news. It’s either a bullish flag pause, or a roll over to be signalled by a MACD bearish crossover. The question is do you think stocks should be down 10% or 20% from the all-time highs?

DAX: momentum fading

S&P 500: 50-day SMA proves the resistance with 2800. Watch the MACD.

Oil is proving to be more stable. Oklahoma’s energy regulator has said producers can close wells without losing their licences. Donald Trump started to look desperate, stoking tensions with Iran. You would not be surprised if it were a dastardly plan to boost oil prices. Treasury Secretary Mnuchin suggested the White House was looking at a bailout for the oil industry.

Today’s Baker Hughes rig count will be closely watched to see how much production is being shut in. Last week’s figures showed the sharpest decline in active rigs for 5 years, falling 66 to 438, around half the number drilling for oil the same time a year ago.

PMIs crash as social distancing looks set to last, European shares softer

Britain faces future of social distancing. The chief medical officer for England, Chris Witty, says some disruptive lockdown measures will remain in force for the rest of the year. Pubs and restaurants may not open until Christmas. If they can before, you only need to do the arithmetic and work out that a pub which could usually count on being chock full of a Friday night won’t do much business if everyone is forced to stand six feet apart. They will lose less money by staying shut. It’s increasingly looking like a total failure by the British government to implement the testing required to get the country moving. Lockdown measures cannot become normalised.

The economic damage from these lockdowns is still providing some remarkably ugly numbers, but I think equity markets have already discounted the worst. France’s services PMI slid to 10.4 in April, while the composite index slipped to 11.2 vs 26 forecast. Germany’s composite PMI was a little better, but services were also uber-weak at 15.9. This follows some hideous PMIs overnight as Japan’s services PMI sank to its weakest since 2007. It’s notable that the severe lockdown measures that we have across Europe are not in place in Japan. Australia’s services survey down to a record low 19.6, but Australian exports climbed 29% in March thanks to a bounce back in iron ore shipments to China after a sharp decline in Jan and Feb.

When an economy has been effectively shut down it’s no surprise the PMIs will reflect it. It’s like looking in the rear-view mirror at a horrible accident – better to focus on the road ahead. France’s finance minister Bruno Le Maire says the government wants all retail outlets to open by May 11th. However, this excludes bars and restaurants – what’s the point? Germany has just announced a new €10bn package of support and is already lifting some lockdown restrictions. Test, test, test.

Meanwhile, the European Central Bank is loosening its rules on asset purchases to enable it buy so-called ‘fallen angel’ bonds – paper issued by companies not rated investment grade. Credit ratings agencies are expected to downgrade a slew of corporates from investment to junk, so this merely lets the ECB to operate how it wants – it doesn’t want to narrow the pool of available bonds and only prop up the ones who need it the least.

After the stramash of the last few days, oil has regained some stability, but I would be cautious about reading too much into any gains until we see the supply shut-ins and OPEC cuts start to reduce the flow, and the demand picks up again. Brent futures for June touched a low under $16 yesterday but rallied through to $22 and are last trading around $21.50. WTI for June also rallied from yesterday’s lows at $6.50 but twice failed to recover $16 and were last trading under $15.

European markets tried to sketch out gains in early trade as oil prices recovered some ground but the PMIs started to weigh. Shell and BP – big FTSE weightings – led the way higher before the economic hit dragged on sentiment. The FTSE 100 put on a good show yesterday, rallying 2.3% and closing near the highs at 5,770. Wall Street rallied 2% yesterday as the Senate passed a relief bill and oil recovered its footing, but stocks finished off the highs and the S&P 500 failed to close above 2800. Futures indicate mild gains.

The DAX was also firmer by 1.6% yesterday but failed to recover the trend line and has turned weaker again this morning. Daily momentum indicators have turned across indices and suggest a period of weakness.

In FX, the dollar is a tad softer at the start of the session but the dollar index remains firmly above the 100 level at 100.480. GBPUSD is flirting with the trend resistance having backed away from this yesterday following the crossover on the 1hr MACD. Bias remains to the downside, support at 1.2250 may be looked at.

EURUSD also maintains a bearish bias and took fright at the PMI horror show to dip under 1.08. Support at the early Apr lows around 1.07750 may be tested, which could open up a move back to 1.0640.

Week Ahead: Covid-19 earnings season, Amazon & Netflix to report

Amazon surged to a record high last week as markets bet that the company is well positioned to weather the coronavirus pandemic. Lockdown has forced even more consumers to switch to online shopping, and the surge in demand has seen Amazon go on a huge hiring spree, adding 100,000 new workers in March and announcing plans for another 75,000 hires. Cowen Analyst John Blackledge believes Amazon may have witnessed a surge in demand during March equivalent to its annual Prime Day members sale.

The tedium of lockdown is likely to have driven up subscription rates for its video and music streaming services and its Kindle library as well. Guidance will show how sticky Amazon expects these new customers to be once lockdown measures are lifted.

Remember, you can follow the biggest earnings season stories with our daily coverage on XRay.

Netflix earnings

Streaming service Netflix is expected to reveal a huge surge in subscriber numbers when it reports earnings this week. Expectations that Netflix will continue to see its popularity surge over the coming months drove the stock to a new record high last week. Even after lockdown is over, the consumer shift towards streaming services is likely to remain, as social distancing and fear over a resurgence in COVID-19 cases keeps people away from cinemas – and going outdoors in general.

UK and US jobless data

There are plenty of predictions for the impact of the coronavirus pandemic upon the world’s leading economies, but markets continue to be hounded by fears that these might not be pessimistic enough. More labour market data from the UK and US this week could heighten or assuage those concerns.

In the UK, thanks to the government’s pledge to pay the wages of furloughed workers, the unemployment rate isn’t expected to climb more than a percentage point during 2020. In the US, economists believe 20 million Americans will file new jobless claims during April. A sharper or softer rise than expected in either of these metrics will cause markets to reprice their expectations that these forecasts will be met or exceeded.

Will markets focus on shape of recovery as PMIs slump?

Business activity across the Eurozone and the UK plunged to record lows last month, and we know there’s more bad news to come. The Eurozone composite could drop as low as 20 during April, with the UK reading predicted to slump to 21. The real question is whether markets believe the recovery from this downturn will be a rapid one – confidence in a sharp pullback could soften any negative reaction to another round of gloomy PMIs, assuming markets are in an optimistic mood.

Stocks weaker as manufacturing PMIs weaken

Global stocks got off to a soggy start in April as economic damage wrought by the coronavirus was laid bare and investors felt there was not yet enough to show the virus was at or near its peak in Europe or the US. Donald Trump reflected the mood as he warned of weeks of pain still ahead, a stark change from his rather casual approach thus far. He also called for another $2tn for infrastructure spending. A bit of a gloomy start to April, like a sharp frost killing off the buds that appeared too soon.

Economic surveys are not surprisingly pointing to sharp contraction in activity because of the coronavirus. The Bank of Japan’s Tankan survey showed sentiment among the country’s large manufacturers soured in the Jan-Mar quarter, plunging from zero to –8, a 7-year low. South Korean factory activity declined at its fastest pace in 11 years in March.

European final PMI readings highlight declining activity, but the real damage will be done in April. Italy’s March manufacturing PMI fell to 40.3 vs 40.5 expected, the lowest level since 2009. It’s bad, a substantial drop. The output index in particular highlights the damage being done – down to 27.8 from 46.9 in Feb. To be honest it could be even worse. Spain’s final PMI reading for manufacturing slipped to 45.7, vs 44.0 expected. France printed 43.2 vs 42.9 expected, while Germany came in on the nose at 45.4.

Asian equities lead the way lower overnight. Tokyo finished –4.5%, while Hong Kong was more than 2.5% lower. US stocks yesterday finished on a weak footing with a decline into the close leaving the Dow nursing its worst quarterly loss since – no surprise – 1987. Only Microsoft finished the quarter higher, and only by a whisker.

Today, European equity markets opened weaker with declines of more than 3% registered in London and Frankfurt. HSBC, AstraZeneca, Diageo and BP were the biggest drags on the FTSE 100 this morning. The 5400 is looking like the defensive line near term and bulls will need to defend this. If this goes we have a 5330 as the last line. 5700 offers the near-term resistance, breakout potentially north of 5800.

Markets.com

UK 100 Cash, 1-Hour Chart, Marketsx – 09.01 UTC, April 1st, 2020

US futures are pointing to a soft start on Wall Street. E-minis didn’t retest the Sunday night lows with the 2480 holding. Near term resistance at 2640, the 38.2% retracement. Despite the pullback, we’re still 15% off the lows. Today’s ADP report in the US will be watched closely after that weekly jobless number last week hit 3.3m. The –150k expected looks a touch light.

Markets.com

USA 500 Futures, 4-Hour Chart, Marketsx – 08.12 UTC, April 1st, 2020

Oil remains on its knees despite Trump calling Putin to try to stop the price rout. WTI has faded back to $20. WTI fell 67% in the first three months of 2020, its worst quarter on record. Trump’s efforts to sweet talk Putin may offer some hope of a way out of the supply war raging with OPEC, but it won’t do anything to boost demand, which could fall by around 20% over the next few weeks. Oil inventories later today expected to show a build of around 4m barrels.

Gold has come back after weak session yesterday to trade around the 50-day SMA after the 50% retracement offered support.

Markets.com

Gold, 1-Day Chart, Marketsx – 08.31 UTC, April 1st, 2020

Equities

UK banks were down after they acquiesced to the Bank of England’s arm-twisting to scrap dividends and buybacks. Lloyds, Barclays, HSBC, RBS, Standard Chartered and Santander all announced last night that they would cancel last year’s planned pay outs and not pay any dividends this year. Shares were lower on the open but ultimately shareholder returns are not the main priority right now. Barclays says today that Stoxx 600 dividends will decline by 40% this year. Shareholders are at the back of the queue.

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