Monday, April 06, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Please
note that our upload server (in Singapore) is down and that we could not update
files and pictures as a result.
We
created a Dropbox links for Friday’s snapshot and the Global Chartbook.
Have
a nice week ahead.
Marc
Bentin
Bentinpartner GmbH
Trend
Status Update
After expanding international swap agreements, exchanging USD for
foreign currencies (cross currency swaps now suggest the desired effect was reached), the Fed announced last week a new program
allowing central banks to borrow against Treasuries held in custody at the New
York Fed in a supplementary effort to boost liquidity and prevent further selling
by foreigners of US Treasuries which were reported last week to have dropped by
USD109bn in March (mainly countries dependent on oil exports). This did not prevent the USD to gain further as
concerns remained about EM denominated debt being as high as USD5.8trn and constituting
a so called synthetic short USD position from this part of the world.
The dollar also gained with more speculative interest (from COMEX) being
wrong footed and outright long EUR since a few weeks ago (after being short) and
now taking the proverbial salon door on their positions (as the euro declined).
On Friday, the US job numbers came much worse than expected with a 701k (from
-100k expected) bringing the unemployment rate to 4.4%. Unemployment for April
is expected to jump to 12%.
Over the past week, the S&P500 sold off by -2,1% (-22,9% YTD) while
the Nasdaq100 dropped -1,0% (-13,8% YTD). The US small cap index sold off by
-7,1% (-36,9% YTD). CBOE Volatility Index sold off by -28,6% (239,6% YTD) to
46,8.
Tech traded in disperse order. AAPL dropped by -2,6% (-17,8%). FB
dropped -1,7% (-24,9%). LYFT sold off by -20,3% (-48,9%). AMZN gained 0,3%
(3,2%). NFLX gained 1,3% (11,8%). GOOG dropped -1,2% (-17,9%). MSFT rallied
2,8% (-2,5%). INTC rallied 3,4% (-9,6%).
Banks remained the weakest spot along with real estate. XLF (FINANCIAL
SELECT SECTOR SPDR) sold off by -6,5% (-36,2%). EUFN (ISHARES MSCI EUROPE
FINANCIA) sold off by -10,3% (-40,8%). XHB (SPDR S&P HOMEBUILDERS ETF) sold
off by -13,5% (-41,8%). IYR (ISHARES US REAL ESTATE ETF) sold off by -8,5%
(-31,0%).
Airbnb said that its valuation which was last estimated to be worth
USD40bn at the end of last year is now closer to USD26bn, adding that it had
lost USD400mn in the period “preceding” the corona virus outbreak. Some of
these unicorns will never hit the IPO stage and might be months or weeks from an
existential crisis as well. For what it is worth, last week the FT reported
that “some of the most powerful groups on Wall Street are pressing the Trump
administration to allow private equity-owned companies to access hundreds of
billions of dollars in loan funds earmarked for US small businesses hit by the
coronavirus pandemic… Congress last week authorised the Small Business
Administration to dispense $350bn worth of rescue loans to companies with fewer
than 500 workers that have been affected by the coronavirus pandemic.”
On the other hand of the performance spectrum and for a change, energy
outperformed on the back of late last week’s oil price squeeze. RSX (VANECK
RUSSIA ETF) rallied 9,5% (-28,8%). XLE (ENERGY SELECT SECTOR SPDR) rallied 5,3%
(-50,3%). Health care also outperformed; LV (HEALTH CARE SELECT SECTOR) rallied
2,1% (-14,8%).
The Eurostoxx50 dropped -2,0% (-28,4%), outperforming the S&P500 by
0,1%.
Diversified EM equities (VWO) dropped -0,7% (-26,5%), outperforming the
S&P500 by 1,3%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7
currencies rallied 2,1% (5,1%) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) dropped -0,9% (-6,6%).
EM FX performance was weaker with ZAR trading worst while RUB managed to
gain, supported by a recovery in oil prices on which MXN could not capitalize
however. USDBRL rallied 4,9% (32,9%). USDRUB
sold off by -3,0% (23,6%). USDMXN rallied 7,2% (32,2%). USDINR gained 1,8%
(6,7%). USDCNY dropped -0,1% (1,8%). USDZAR rallied 8,0% (36,0%, Z-score 2,1). EURUSD sold off by
-3,1% (-3,7%).
10Y US Treasuries rallied -8bps (-132bps) to 0,59%. 10Y Bunds climbed
3bps (-26bps) to -0,44%. 10Y Italian BTPs underperformed rising 22bps (14bps)
to 1,55%, underperforming Bunds by 9bps. Morgan Stanley recently estimated the US
deficit will total at least $3.7trn in 2020 and an additional $3trn in 2021, suggesting
a nearly $5trn extra deficit spending in the next two years, financed by the
sale of Treasuries, largely to the Federal Reserve.
US High Yield (HY) Average Spread over Treasuries climbed 21bps (606bps)
to 9,42%. US Investment Grade Average OAS dropped -10bps (173bps) to 2,74% as
intervention pressure intensified. M. El Erian argued
over the week end that Falling Angels (downgrades from investment grade to high
yield) would remain a feature of this crisis as the economy slows and as the
number of credit downgrades has never been that high. This is what the logic of
free markets would dictate but the Fed’s plan to underwrite credit markets has
changed all that and the last thing the Fed wants is to see a further deterioration
in these markets. Recent Flows and the price action on LQD (IG investment grade
ETF) best illustrated the safeguarding efforts of the Fed and the squeeze it enacted on this ETF that was on the verge of failing after trading with
a discount as large as 7% to NAV, with investors trying to hedge or speculate on
the risk that M. El. Erian highlighted.
In European credit markets, EUR 5Y Senior Financial Spread climbed 19bps
(79bps) to 1,31%.
Gold dropped -0,5% (6,8%) while Silver dropped -0,6% (-19,4%). Major
Gold Mines (GDX) rallied 2,4% (-14,8%).
Goldman Sachs Commodity Index rallied 4,8% (-37,9%). WTI Crude rallied
31,8% (-53,6%). DBA (INVESCO DB AGRICULTURE FUND)sold off by -4,8% (-18,8%).
Over the week end…
After rallying more than 30% from their lows late last week, oil retreated
by 6% (also taking MXN down with it) this morning after the planned OPEC+ meeting
was delayed and tentatively scheduled for Thursday. The bone of question must be
the US so far refusal to participate to a global effort to resorb the global oil
savings glut, initially triggered by a spat between Russia and Saudi Arabia to
cut supply but structurally caused by the US relentless grab of market share from
OPEC+ over the past 5 years. If the US is part of the of the problem, it must
be part of the solution…and that is (most likely) why the “done” deal presented
on Friday to have OPEC+ reducing supply by 10mn bd will have to wait until till
Thursday. Specialists also argued over the week end that to avoid “real” prices
to return to where they were in practice (around USD10/barrel), supply should
be curtailed by 15 or even 20mn/d barrel.
Still, US futures rallied 3% overnight, holding a defiant stance. This move
may create an impression to start the week but does not seem totally substantiated.
There was some good news on the corona front with less cases of death reported in
Italy and New York (for the first time) but the news flow was mixed at best.
More cases were found in Singapore (biggest daily increase in new cases) and Japan
after a spike hinted at the possibility of a national state of emergency being declared
as early as tomorrow to impose broader lock downs. UK Prime Minister was admitted
to hospital yesterday which created a small dip in GBP. There are about 48k averred cases in the UK
with more than 4k deaths and an unusually high mortality rate.
Trend Score Card
Click here for technical
annotations.
US
& International Equities
Check out US and International Stocks’ Technical
Trend Status.
Sector
Trend & Momentum
Check equity sectors’ trend and performance …and when
they break out!
Fixed
Income
Check out 10Y US Treasury and Bund yields, their
trend, expected Fed rate moves and speculative positioning in 10-year Treasury
Futures.
US
Recession Risk Radar
A comprehensive list of
economic indicators to compare the current situation with previous recessions.
The
Dollar
Check out where the Dollar stands Trendwise and Breakoutwise vs. G7
and EM counterparts.
Precious Metals
Check out where precious
metals stand Trendwise
and Breakoutwise.
Get a sense of options (cumulative open interests on calls and puts) and futures
traders’ sentiment (non-commercials open positions).
Check out how precious metals, the dollar and the
Stock market correlate with each other and speculative futures positioning
on Gold and the Dollar.
Why Trend Following Matters and How It Can Help
You?
A disciplined and rule-based
trend following investment approach can serve as an effective portfolio
insurance technique.
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