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An Update :US Dollar Index ,USDJPY ,AUDUSD ,USDINR ,EURO ,YEN ,GOLD ,SILVER ,PALLADIUM ,WTI ,BRENT ,SPX 500 -Anirudh Sethi

  
  Analysis
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The dollar rallied strongly from March 9 through March 20 or the start of last week on March 23.  It has subsequently sold off and done so in dramatic fashion.  It is not clear the trigger of the stunning reversal.  Some observers attribute it to the Fed’s currency swap lines, which were offered daily (seven-day operations) to a handful of large central banks.
Others link it to the better risk appetites reflected in meaningful bounces in equity markets, but nothing as striking as the 17% rally in the Nikkei.  Even with a 915-point tumble in the Dow and a 3.3% drop in the S&P 500 before the weekend, both ended with double-digit gains on the week.  Gold’s 8.6% rally will not sit well with those who view it as a safe haven.  The 30- and 60-day rolling correlations on the percent change of gold and the S&P 500 are positive for the first time since the middle of last year and October 2018, respectively.
The technical indicators that we monitor, the MACD and Slow Stochastic, have turned down for the dollar against all the major currencies.  The poor technical condition suggests the dollar’s weakness is more than a function of month- and quarter- and fiscal year-end flows, but was technically over-extended.  We will use Fibonacci retracement and moving averages to identify potential price targets and relative strength.
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Coronavirus – Japan’s PM Abe on Saturday promises unprecedented economic stimulus

  
  Analysis
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Abe said measures will include fiscal and monetary stimulus alongside tax breaks for companies

  • details have not been finalized
  • package will be rolled out in an extra budget in 10 days
  • size of the package will be greater than that compiled in response to the global financial crisis (total 57 trillion yen) said Abe
Abe spoke during a nationally televised news conference
  • “I want to be straightforward”
  • “We are in a critical stage. We need to be ready for a long-term battle”
  • “The pandemic is inflicting extremely big damage to Japan’s economy”
  • “We’ll deploy a huge, powerful package that will include a full range of fiscal, monetary and tax measures.”
Abe said measures will include fiscal and monetary stimulus alongside tax breaks for companies

3 reasons why USD/JPY is heading back down to 105

  
Analysis, Forex
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A note via ING forecasting lower for USD/JPY, to 105 in three months

(1) Japan’s GPIF probably will not pour money into overseas bonds when $/JPY is above 110
(2) the rally to 112 was largely down to USD funding strains, which should reverse into April
(3) Japan’s large current account surplus will see JPY favoured in a recession.
Its a detailed note, but this snippet on point2:
  • Amongst many fire-fighting measures, the Fed and the US Treasury have since re-introduced schemes to support the CP market directly (CPFF & MMLF) and measures to support investment grade corporate issuance (PMCCF and SMCCF)
  • Along with the promise for unlimited QE, the Fed has managed to introduce some calm into money markets
  • We expect even calmer conditions once the Japanese financial year-end has passed (March 31st) and the Fed starts its CPFF program in April. A turn-around in the basis swap should take some upside pressure off USD/JPY. 

Major indices end the day with solid gains and at the highs

  
Analysis, US Market
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The Dow and S&P rises for the 3rd day in around.

Yesterday both the S&P index and the Dow closed higher for the 2nd day in a row. The NASDAQ did not join them as it fell in trading yesterday. However all 3 indices are closing higher in trading today with solid gains. The indices closed near/at the session highs.
The final numbers are showing:
  • S&P index rose 151.74 points or 6.13% at 2627.30
  • NASDAQ index rose 413.24 points or 5.6% at 7797.53
  • Dow industrial average rose 1351.62 points or 6.38% at 22552.17.
The final hour of trading – which has been very volatile of late – once again saw the major indices rock ‘n’ roll ‘n:
  • S&P index, was at 2594.44 at 3 PM ET. The high in the last hour reached 2637.01. The low reached 2574.92. That is a range of 63 points.
  • NASDAQ index was trading at 7686.41 at 3 PM. The high in the last hour reached 7809.82. The low extended to 7639.95. That is a range of 170 points.
  • Dow industrial average was trading at 22227.47 at 3 PM. The high in the last hour reached 22595. The low reached 21964.24. That is a range of 631 points in the last hour.
The indices are also closing well off there lows for the day (the major indices did not go negative today).  Looking at the % low, % high and % Close, the % lows for the indices reached:
  • S&P index, +1.02%
  • NASDAQ index, +1.06%
  • Dow industrial average, +1.07%
Of the lows from Monday:
  • The Nasdaq is up 17.77%
  • The S&P index is up 20.31%
  • The Dow is up 24.06%
Of course those gains are impressive, but understand the gains are off much lower levels. The major indices are still well off the highs for the year.

US stocks jump in a monster bounce — Dow gains most since 1933

  
Analysis, US Market
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The Fed and Congress inspire an equity rally

Closing changes:
  • S&P 500 +9.4% — biggest since 2008
  • DJIA +11.3%
  • Nasdaq +8.0%
It was a great day to buy stocks as the market bets that Congress will come through with some kind of stimulus. There was also some major bargain hunting and short-covering. The four best performers on the S&P 500 were: L Brands, American Airlines, MGM Resorts, Norwegian Cruise Lines. Energy was the top-performing sector.
Every bottom starts with a bounce but not every bounce is a bottom. That said, bottoms are built on skepticism so my skepticism is only adding fuel to the fire.
The rally today is slightly bigger than the one that led Trump to email out this:
The Fed and Congress inspire an equity rally

Full text: Federal Reserve announces extensive new measures to support the economy

  
  Analysis
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Full text of the Federal Reserve announcement

The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time. The coronavirus pandemic is causing tremendous hardship across the United States and around the world. Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.The Federal Reserve’s role is guided by its mandate from Congress to promote maximum employment and stable prices, along with its responsibilities to promote the stability of the financial system. In support of these goals, the Federal Reserve is using its full range of authorities to provide powerful support for the flow of credit to American families and businesses. These actions include:
  • Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. In addition, theFOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
  • Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
  • Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
  • Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
  • Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
  • Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
In addition to the steps above, the Federal Reserve expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.The PMCCF will allow companies access to credit so that they are better able to maintain business operations and capacity during the period of dislocations related to the pandemic. This facility is open to investment grade companies and will provide bridge financing of four years. Borrowers may elect to defer interest and principal payments during the first six months of the loan, extendable at the Federal Reserve’s discretion, in order to have additional cash on hand that can be used to pay employees and suppliers. The Federal Reserve will finance a special purpose vehicle (SPV) to make loans from the PMCCF to companies. The Treasury, using the ESF, will make an equity investment in the SPV.The SMCCF will purchase in the secondary market corporate bonds issued by investment grade U.S. companies and U.S.-listed exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. investment grade corporate bonds. Treasury, using the ESF, will make an equity investment in the SPV established by the Federal Reserve for this facility.Under the TALF, the Federal Reserve will lend on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The Federal Reserve will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. Treasury, using the ESF, will also make an equity investment in the SPV established by the Federal Reserve for this facility. The TALF, PMCCF and SMCCF are established by the Federal Reserve under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary.These actions augment the measures taken by the Federal Reserve over the past week to support the flow of credit to households and businesses. These include:
  • The establishment of the CPFF, the MMLF, and the Primary Dealer Credit Facility;
  • The expansion of central bank liquidity swap lines;
  • Steps to enhance the availability and ease terms for borrowing at the discount window;
  • The elimination of reserve requirements;
  • Guidance encouraging banks to be flexible with customers experiencing financial challenges related to the coronavirus and to utilize their liquidity and capital buffers in doing so;
  • Statements encouraging the use of daylight credit at the Federal Reserve.
Taken together, these actions will provide support to a wide range of markets and institutions, thereby supporting the flow of credit in the economy.The Federal Reserve will continue to use it full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.Read it here.

US Indicies plunge to end the week but not as bad as some recent days

  
Analysis, US Market
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When you have -10% days, a fall of -4.35% doesn’t sound that bad

The US stocks plunged once again today with the declines led by the Dow.  Although sharply lower, a fall of over 4% does not sound so bad when we’ve endured -10% moves of late.  What we know is the numbers are not pretty today/this week/YTD and over the last year.
A look at the final number for the day are showing:
  • S&P index fell -104.47 points or -4.34% to 2304.92
  • Nasdaq index fell -271.05 points or -3.79% to 6879.52
  • Dow fell -913.21 points or -4.55% to 9173.98
For the week, the numbers were horrible as well:
  • S&P index fell -14.98%
  • NASDAQ index fell -12.64%
  • Dow fell -17.3%
Year to date numbers for the major indices are showing:
  • S&P index, -28.66%
  • Nasdaq index, -23.33%
  • Dow -32.81%
Finally, going back 1 year:
  • S&P index, -18.39%
  • NASDAQ index, -10.99%
  • Dow, -25.53%
No matter how you slice it, the final numbers for the day, the week, the year to date and the year are not pretty….not pretty at all.

This is the biggest jobless claims report in a long time

  
  Analysis
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Initial jobless claims top the economic calendar

Initial jobless claims top the economic calendar
The weekly initial jobless claims report at the bottom of the hour is for the week ending March 14 so it’s before the real coronavirus crunch, which is a week or two away.
Last week was 211K and the ‘consensus’ this week is 220K but that’s far lower than what the market is expecting. State unemployment claims in some places are up 5x to 10x.
Last week I was warning about this and when I wrote that ‘The coming wave of unemployment claims is going to be unprecedented‘ there were comments like this:
Where are you guys coming up with this stuff… I was out last night eating and food places are full stores are full… you are acting like this is the end of the world…this is being blow up to be way way more that what it is… which is nothing more than a cold with a twist on it that has not even gone above last year flu session. This is completely stupid what the news media is doing.
Now it’s conventional wisdom.
What we haven’t figured out is if the bureaucracy can handle and process the level of claims to actually get people the money. That’s more important right now than a $1 trillion piece of legislation the White House is proposing to get people money at the end of April.

France plans to hand out €1,500 to small independent workers

  
  Analysis
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Comments by French finance minister, Bruno Le Maire

  • Calls on workers who can, to keep working
So far, there are a lot of big plans touted by governments across the globe to try and tackle the economic fallout from the virus outbreak but how effective is the execution and transmission of all this remains to be seen.

Italy bans short-selling of stocks for 3 months

  
Analysis, Global Indices
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Market regulator Commissione Nazionale per le Società e la Borsa (CONSOB)

  • The Italian Companies and Exchange Commission
dropping the news. 90 day short sale ban.
Not good news for market functioning but it pales in comparison to the deaths and illnesses being caused by the coronavirus. And the real economy impacts.
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