Yesterday, we celebrated Cyprus National Day and had a slight pause due to the public holiday. The markets, however, did not. A lot of things have happened since our last briefing.
- FED launched a new facility on Tuesday afternoon, the FIMA (Foreign and International Monetary Authorities), which will allow foreign central banks to exchange holding of US Treasuries for USD liquidity in a REPO (Repurchase agreement) operation. Another sign that USD funding problems off-shore are probably deeper than we are allowed to know. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200331a.htm
- Keeping in the US, Treasury Secretary Steven Mnuchin says he will go to Congress to ask for further small business loan funding if the current $350 billion pool goes quickly; many lawmakers are calling for a fourth coronavirus relief bill after a $2 trillion package passed last week.
- China coronavirus problem is not ‘fixed’ anymore: according to REUTERS, a county in central China’s Henan province, Jia county, had “virtually banned all outbound movement of people, following several cases of coronavirus infection in the area.” Additionally, residents are not allowed to leave their homes for work unless they have clearance to do so. JIA has a population of about 600,000.
- A lot of data was released yesterday, let’s start with OIL: Crude Oil Stocks Change grew up to 13.8 M barrels, up from 1.6 M and against 4 M, showing INVENTORIES are piling up. Warehouses around the world are said to be exhausting their capacity within a few months at current demand/supply rates. Yesterday the 1st SHALE OIL US COMPANY (Whiting Petroleum) FILED FOR BANKRUPTCY (Chapter 11) and CEOs from 8 big energy companies had a meeting with Trump.
- Chinese Caixin Manufacturing confirmed the previous day good data with the economy, apparently showing a V-shape recovery; PMI around the world (EU, US, CANADA) substantially came out with mixed results (considering the period). ADP UNEMPLOYMENT CHANGE surprised to the upside, with only 27k jobs destructed in March.
US Futures dropped > 4% yesterday and are off > 7% from TUE highs. Banks in Europe and this morning in AU taking a hit as they are cutting dividend on pressure from CB. APAC in red this morning, HG50 -2.24%, AUS200 -1.7%, Nikkei -1.2%.
USD back to some bid, DXY has been testing the 100 level these days. GBP still looking good especially ag the EUR, lot of strength in JPY, not really in CHF. AUD taking a breath this week after its previous 10-day rally.
OIL slightly up (2%) from depressed levels, CL now trading at 21.6$ & barrel. GOLD broke 1600$ to the downside and – as for my charts- – now testing the trendline since MAY19.
Stay safe everybody
By: Marco Turatti