Today’s WSJ. Oil below zero. Parking lots of people waiting for food. Great Depression 2.0.
Archives of “April 21, 2020” day
rssMajor European indices end the day with sharp declines
German DAX down -3.88%. Investors shunning Italian debt
The major European indices are ending the day with sharp declines as coronavirus fears and global slowing weighs on the markets.
The provisional closes are currently showing:
- German DAX, -3.88%
- France’s CAC, -3.56%
- UK’s FTSE 100, -2.85%
- Spain’s Ibex, -3.95%
- Italy’s FTSE MIB -3.0%
Looking at the hourly chart of the German DAX below, t price today fell below the 50 hour moving average and trendline connecting recent lows . Going into the close , the price has also fallen below its 100 hour moving average at 10337.90 (blue line). The next target would be the April 8 low at 10198.22. Below that and traders will be looking toward the rising 200 hour moving average currently at 9856.97 (green line in the chart below)
When do we get back to normal?
Fewer people are expecting a return to normal
Late last week, Deutsche Bank updated its client survey about when we will get back to ‘normal’ and there’s a clear sign of rising pessimism and a feeling that we’re in a new normal.
What’s incredible is that as the reality of the situation has deteriorated, the stock market has rallied.
US hydroxychloroquine study shows no benefit to the drug for COVID-19
Study shows more deaths
The anti-malaria drug hydroxychloroquine wasn’t effective in keeping people with coronavirus from needed mechanical ventilation, according to a study of 368 patients in US veterans hospitals.
This wasn’t a blind test but here are the numbers, via AP:
Researchers analyzed medical records of 368 male veterans hospitalized with confirmed coronavirus infection at Veterans Health Administration medical centers who died or were discharged by April 11.
About 28% who were given hydroxychloroquine plus usual care died, versus 11% of those getting routine care alone. About 22% of those getting the drug plus azithromycin died too, but the difference between that group and usual care was not considered large enough to rule out other factors that could have affected survival.
The upshot here could be that only cases that were particularly bad were given the drug, so the sample is biased. That said, it didn’t work.
Full-scale studies are coming in the days ahead.
Bank of America boosts 18-month gold target to $3000
Bank of America’s note on gold
Gold is down $12 today to $1683 but there has been some persistent buying in the past hour as it recovers from a low of $1659.
One note that’s getting attention is from Bank of America, who raised its 18-month target on gold to $3000 from $2000. That would be nearly double from current levels.
“Our CTA models suggest gold positioning is light, likely because of the spike in volatility and the mechanical drop in the gold Sharpe ratio. But this constraint could change as volatiltiy keeps falling quickly across financial markets,” they write.
Their baseline is that a lot of the risks for central bank moves will be socialized and that fiat currencies could come under pressure. They see an average prices of $1695 this year and $2063 in 2021.
On the downside they warn that slower jewelry demand from China and India could be a headwind for gold but that “financial repression is back on an extraordinary scale.”
Here’s the note:
OPEC debates possible May 10 meeting to discuss further cuts – report
OPEC hits the panic button
Let’s see how the market takes this news from the WSJ:
- OPEC debates possible May 10 meeting to discuss deeper production cuts
- OPEC delegates set to hold conference call today but call not aimed at making any decisions
The market has shrugged off the headlines at lest in June oil.
bookings on US airlines for future periods. oof.
US 5 year note trades to a new record low
Low yield reaches 0.3054%.
The 5 year note yield has moved to a new record low level of 0.3054%. The previous low was at 0.3091% from March 9.
Meanwhile over in the 2 year, the yield is currently trading at 0.1853% and inching closer and closer to the 0.0% level. Before getting there, however,The low yield from 2011 will need to be breached at 0.1431%.
Oil market pandemonium is absolutely speculative, just a trading issue – Kremlin spokesman
Comments by Kremlin spokesman, Dmitry Peskov
The Kremlin is out with some remarks saying that negative oil prices is just a “trading issue” and that “this isn’t a reason for overly negative assessments of the current reality”.
Sure, sure. There’s no doubt they’re feeling the pinch. Even if prices aren’t settled in negative, the plunge yesterday and today won’t give them any comfort whatsoever.
The headline is basically a leaf out of the OPEC playbook. If prices go down, it is purely speculation. If prices go up, it is because the market is agreeing to the “fundamentals”.
Germany April ZEW survey current situation -91.5 vs -77.5 expected
Latest data released by ZEW – 21 April 2020
- Prior -43.1
- Expectations 28.2 vs -42.0 expected
- Prior -49.5
- Eurozone expectations 25.2
- Prior -49.5
Despite the headline reading falling sharply, the thing that stands out is that investor sentiment shows that there is hope as market participants see light at the end of the tunnel.
Both German and Eurozone expectations rebounded strongly, but ZEW is quick to note that those surveyed do not expect positive economic growth until Q3 at least. Adding that economic output is not expected to return to pre-virus levels before 2022.