Financial market research and analysis

Our analysts have their fingers on the pulse of the world's financial market news.

CFD trading is high risk and may not be suitable for everyone.
“Suffering and death” warning hurts markets

A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves.

Anthony Fauci, a senior member of Trump’s ‘coronavirus taskforce’ has warned that reopening too soon will lead to unnecessary “suffering and death”. US President Trump has ordered the main Federal Pension fund not to invest in Chinese companies, citing risk of future sanctions over China’s handling of coronavirus pandemic. UK GDP just saw its biggest monthly decline on record of -5.8% in March. Fed Chair Jerome Powell gives a speech later today and OPEC releases its monthly oil market report.

Reopening too soon

The warning from Dr Fauci suggests to us that the probable outcome has skewed a bit more negative. We picture three simplistic scenarios

  1. State governors heed Fauci’s advice and reopen later
  2. He’s ignored and there’s a second wave
  3. Fauci’s calculations are wrong and states reopen without a problem.

We’d assume the scientific advice is followed, meaning for now markets should readjust to a slower reopening, rather than a second wave.

Shares: Sage

The S&P 500 snapped 6th day of gains and that set up a lower open in Europe.

The FTSE 100 is stalling at the 6000 level with Sage shares giving up a kneejerk reaction higher to earnings. Sage reported solid numbers for its first half of the year but future uncertainty weighed. Sage reported new customer acquisitions falling by half since April. Software companies, where the deployment of the product is impervious to the pandemic, still need healthy customers and people out on the ground making sales to grow.

Forex: Record decline in UK GDP

UK GDP fell -2% q/q in Q1 and -5.8% m/m in March. The figures are dire but the pound had been trading heavily into this report so now it’s out there is light relief it wasn’t even worse. The current quarter is where the real concern lies. That’s why confusion over the UK’s exit from lockdown matters more than a record contraction in March.

The New Zealand dollar dropped after the RBNZ boosted its asset purchases and left the door open to negative interest rates. It’s a surprising contrast from Australia where the RBA has been winding down asset purchases and dismissed prospects for a NIRP.

Commodities: Monthly Opec Report

Oil prices have slipped from the highest level since early April ahead of OPEC’s monthly oil market report. Oil prices had been on the rise amid hopes that the OPEC+ group of oil producers would extend and possibly deepen existing supply cuts at their meeting in June. Saudi Arabia said it could reduce output by a further 1 million barrels per day, or down 40% from its April peak in production. We expect the OPEC report to show the demand is just not there to justify current production and that opens the door to more supply cuts in June.

Opening calls

Dow Jones to open 100 points lower at 23,664

S&P 500 to open 15 points lower at 2,855

Chart: New Zealand dollar (NZD/USD) over 2-months

Source: LCG / TradingView, May 13, 2020-05-13

The New Zealand dollar is testing the key 0.60 level as support and the bottom of its rising 6-week old price channel.

18-5-2020

Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more

14-5-2020

Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more

13-5-2020

“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more

12-5-2020

Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more

20-4-2020

US oil lowest since 1999, European shares diverge from Wall St
Another oil crash US crude prices have plummeted over 15% to the lowest since 1999. The 21-year low came as sellers were trying to get ahead of the expiry of the May contract tomorrow. Open interest was five times the average. A condition of Super Contango in… Read more

14-4-2020

Lifting restrictions, Softbank & Gold 7-year high
Stocks rising Markets are restarting after a long Easter weekend with a positive tone. Things have moved on from when there was so much bad virus news that the weekend was to be avoided at all cost. European shares look set for a positive open as more nations… Read more

9-4-2020

S&P 500 enters bull market, lockdowns to extend
The mood in markets continues to improve but it’s patchy. Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we’re close to a peak.    Asian and European markets are playing catch-up to the rally on Wall St… Read more

8-4-2020

Rally fizzles out, Tesco pandemic costs, Sterling & Boris
Optimism is fizzling out as doubts grow about how and when exactly quarantine and lockdown restrictions will end. The failure of Eurozone finance ministers to agree joint action underscores the limited capacity of governments to cushion the coming economic fal… Read more