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04.05.2020 – Special Report. Now things are getting uncomfortable: The Australian “Saturday Telegraph” has published an explosive corona dossier. It was obtained from the “Five Eyes” – the secret services of the USA, Great Britain, Australia, Canada and New Zealand. In it China is criticised – Beijing has endangered the countries of the world and tens of thousands of lives on its conscience. This increases the danger of a new trade war. Not only America could demand reparations from the Middle Kingdom or impose new sanctions. In the worst case, investors should prepare themselves for a wild ride on the stock market.

China did not care about the world

The report’s main accusations are that the Communist leadership knowingly destroyed evidence of the Corona outbreak, knew about the disease much earlier than it publicly admitted, and silenced critical scientists. The virus did escape from a Chinese laboratory in Wuhan. And ultimately, there is a possibility that the virus was altered by humans.
US Secretary of State Mike Pompeo told ABC that there was “overwhelming evidence” that the novel pathogen came from a laboratory in the Chinese city of Wuhan. And the Associated Press news agency reported that China had covered up the early extent of the virus to hoard protective equipment.

All traces lead to Wuhan’s laboratory

Already last week, analogous theses to the “Washington Times” were punctured. According to these, the US government assumes that either the Wuhan Institute of Virology (WIV) or the Center for Disease Control (CDC) in Wuhan is the epicenter of the outbreak. But in no case is the Huanan animal market, from which, according to the official Chinese version, the virus is said to have jumped from animal to human. By the way, the CDC is only a stone’s throw away from this “wet market”. Although there is no clear proof, there are some solid clues – see for yourself.

„Bat Woman“ and „Patient Zero“

On the one hand, Peng Zhou, the head of the Department of Bat Infection and Infection at WIV, conducted research on Ebola and SARS. His colleague Shi Zhengli worked on the bio-engineering of corona viruses and became known as “Bat Woman” because she set off to see bats in caves. The Wall Street Journal added that WIV researchers had captured infected bats in 2013. Their samples would have been forgotten in the laboratory until early this year. Already in 2015, “Nature” warned against this research on the bats, in the same year the USA stopped funding the laboratory. US diplomats had warned in several dispatches about the poor safety standards in the WIV, the “Washington Post” reported.
On 01 January 2020, both laboratories imposed an absolute communication ban on all employees. A few weeks ago, the vita of a laboratory employee named Huang Yanling was removed from the WIV website – maybe she was “Patient Zero”.
Incidentally, in a television discussion, the scientist Luc Montagnier suspected that the corona virus had been altered in the laboratory for research into AIDS and had escaped. Indian experts had also drawn such conclusions, but their research paper had been withdrawn under pressure from China. This did not work for him. The man is not just anybody – he is a Nobel Prize winner and discoverer of the HIV virus.

Anger in Washington

Last week US President Donald Trump had already rattled his saber. Firstly, Bloomberg reported that Trump was considering banning state pension funds from investing in Chinese companies that were a risk to national security. Specifically, the Trump administration is planning an executive order against The Thrift Savings Plan. This pension fund is allowed to invest 50 billion dollars in a fund that replicates the MSCI All-Country World Index. This would stop a lot of money going to the Chinese stock market.

Reparations or tariffs

Asked about reparations and a comment in the “Bild” newspaper, Trump said that America could demand far more money than the equivalent of 160 billion dollars. Asked whether it was about punitive tariffs or simply the default on paying back debts to China, Trump told journalists, “there are many things I can do. We are curious to see whether US government bonds will soon become a weapon in the trade war.
In an interview with Reuters, Trump said that China wants to see him lose in November. China denied. But what we can very well imagine for example, Hunter Biden, son of challenger Joe Biden, co-headed BHR Partners, an investment firm founded in 2013. With the blessing of the Communists and financial support from the Bank of China and China Development Bank, BHR brought Chinese companies to stock exchanges in the West – a pretty license to print money. At the time, Dad Biden was the Vice President of the USA. It looks very much like the Biden clan was bought to allow China to flood America undisturbed with cheap exports, unfortunately, unfortunately, many US jobs were destroyed.

What did Beijing know when?

Whether the Chinese leadership actually hid the Corona outbreak to save face, or whether the Communists even wanted the virus to travel around the world to weaken other countries as well, is unclear. The fact is that the hardliners have already moved on to verbal retaliation. According to the state-run “Global Times”, an American soldier carried the virus to Wuhan. “Patient Zero” is said to be a chauffeur who participated as a cyclist at the Military World Games in Wuhan in October 2019. The actual origin is said to be the US laboratory in Fort Detrick in Maryland, which was closed in July 2019. This raises the question why the virus did not appear on the US East Coast before October.

Away with the dollar

Another Chinese cadre also upgraded verbally. The head of the Shanghai Gold Exchange (SGE), Wang Zhenying, called for an international super-currency to put the dollar down, according to Reuters. The Federal Reserve will sooner or later sink the dollar in its reaction to Covid-19. Meanwhile, some forecasters believe a return to the gold standard is possible.

How the stock market will react

Our conclusion: The above-mentioned secret service reports have not been given to the press without reason – something is brewing here. If things do indeed escalate into an open trade war, the yuan, Chinese stocks, Wall Street, DAX and Co. are likely to find themselves on the short side. Ditto oil – the global economy will then be slowed down further, which will result in a decline in consumption. Just remember how the market trembled whenever the trade talks threatened to fail.

The Australian stock market and the Australian dollar could also run into turbulence. The Chinese ambassador Cheng Jingye threatened Australia once before on Sky News because of the investigations of the “Five Eyes” with consequences for tourism and exports. By the way, the above mentioned scientists Peng Zhou and Shi Zhengli have been working in Australian laboratories, which is now being investigated more closely.

Armaments stocks are likely to react long – the Cold War could soon become hot. Which in this case could also push up the price of oil. In addition, gold should rise, as always the safe haven in times of crisis.

The Bernstein Bank wishes successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

This week will be one of the most important for investors. There are plans to publish a report on employment in the U.S. non-production sector. Analysts predict an unprecedented loss of 21 million jobs. The markets will also watch the progress, as countries leave quarantine and begin to recover.

EUR/USD

On Friday, Donald Trump said he would raise tariffs for China anyway. So far, that’s just words, but we know the American president doesn’t throw words away. The US presidential election is coming in November and Trump will try to make the most of it for the election campaign. No one can say how such actions will affect the markets. Friday ended in a fall for the markets. It’s the end of the week and month. Investors were fixing profits. European markets were closed, but American markets fell by almost 3%. The S&P 500 lost 81 points and the DOW index lost 622 points.

Euro

Coronavirus is still raging in Europe, but the number of cases is falling and countries are in the process of removing quarantine measures. At its meeting, the ECB outlined a new emergency economic support program. Now loans for the organization will be issued at an ultra low rate of minus 1%. During Christine Lagarde’s speech, the euro was losing a lot in price, but closer to closing the markets he managed to recover his position and close at 1.0970. There is a tough week ahead and investors will be watching the actions of all countries, especially Italy, which is in the most difficult situation with the pandemic.

Gold

The precious metal is still unable to overcome the sacred levels and another week the price per ounce fluctuates between $1630 and $1730. Probably, the growth of gold is so obvious that this is why it does not grow. But the strongest will win here. The depreciation of the dollar is in full swing. The M2 has reached $17 trillion, which is the biggest growth since 1980. Although gold production has increased by almost 35% this year, demand is growing much faster.

Oil

Oil showed a spectacular rebound last week. By the end of the week, WTI held its price at $21 per barrel. Finally, countries are starting to reduce production, and some, like Saudi Arabia, are doing so at an accelerated pace. Due to the emergency measures to reduce production, there will probably be less pressure on market quotations and a temporary recovery of the price. But because of very low prices, one should expect strong volatility in the market, as speculators and big players will start entering now.

What’s waiting for us today?

03.00 China Productive Sector Business Activity Index
09.55 Index of business activity in the German manufacturing sector.
16.00 US industrial orders volume
17.00 GDP in Russia since the beginning of the year

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The forecasts are coming true. Due to good corporate reporting of the U.S. economy giants, as well as positive news about the trial of the experimental drug Remdisivir from the company Gilead Science, the main indexes flew up a decent number of points.

BITCOIN

Despite the most horrific data on US GDP for 12 years, which fell 4.8% in the first quarter, the S&P500 rose by more than 3% to reach 3000. All countries are looking forward to the medicine, so any positive news makes investors take risks. Germany entered into recession and the recovery is planned not earlier than 2022. Aviation, trade and car manufacturing are in a serious crisis. Already now, the German government is considering the possibility of resuming car production and opening registration companies to at least mitigate losses.

Euro

After the announcement by the US Federal Reserve that interest rates will be maintained until the US economy is cured after the coronavirus pandemic, the EURO rushed up and stopped again at the level of 1.0870. Of course, before the ECB meeting on Thursday such a level cannot be easily passed. Investors should understand how the central bank will act in the near future, although we probably will not hear any important statements at this meeting. There is an end of the week and the end of the month ahead, investors will be fixing part of the profit, so there may be some sell-offs in the markets.

Oil

On Wednesday, oil reserves in the US turned out to be much better than predicted. They almost halved from 15 mln barrels to 8.9 mln barrels. Excess reserves at the Cushing Hub also declined. Investors are looking forward to the recovery of the US economy and their sentiment clearly improved from this data. The price of WTI oil was traded at $16.9 per barrel and is not going to fall yet.

Bitcoin

On Wednesday, the main cryptocurrency under strong buying pressure shot up more than 10% to $8700 for one BTC. The bulls keep going and really want to see this cryptocurrency at $10000. There are only a few days left before the halving, and it is very hot for investors to get additional profits. The level of $8300-$8500 is a serious resistance. If the price can consolidate higher, the road to growth will be open further.

What’s waiting for us today?

03.00 China Productive Sector Business Activity Index
18.00 Volume of retail sales in Germany since the beginning of the year
16.30 Statement on interest rate and monetary policy of ECB
14.30 ECB press conference

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

This week is quite difficult for all sectors of the economy. In the U.S., corporate reporting is coming out, which will show how bad things are for companies in the current situation. If the giants do not report well, it is likely that the rally in the US market, which lasted several weeks, will stop.

AUD/USD

The market is very fragile right now. Any breaking news or wrong actions by central banks can send stock markets down. Traders are now solving very difficult tasks, and should focus on a very large layer of statistics. In the current situation, investors are encouraged by the loosening of quarantine measures in some leading countries. DAX is growing by 1.27%, American S&P500 and DOW traded mixed. The price remained around the opening values. S&P500 – 2880, DOW – 24200.

AUSTRALIAN DOLLAR

The Australian dollar feels good after China started to recover its industry. The AUD/USD is now approaching the level of 0.66, which started the decline in early March. In the coming days, the Australian dollar will try to consolidate at this level, and further try to pass it higher. All hope is for a stable stock market, as the price of this pair largely depends on it.

Oil

The events of a week ago with the price of the May futures falling in the negative zone may be repeated. On Monday the price of June oil contract WTI fell by 25% to $ 12.7 per barrel, on Tuesday the fall continued by another 14%, to a minimum of $10.66. If the dynamics continues, the price of June futures may turn out to be negative a week before its expiry. And the collapse itself may be even stronger than last time…

Gold

Gold has been at its highs for two weeks now. Rising unemployment, economic turmoil and the lack of a cure for coronavirus are still straining most countries. Demand for physical gold is rising in China and India. Unprecedented cash injections into the largest economies will inevitably lead to the spin-off of inflationary processes, which in turn will affect the value of gold. The level of $1800 per ounce is very close and soon we will see how it will be tested.

What’s waiting for us today?

03.30 Consumer Price Index in Australia
14.30 US GDP for the quarter
16.30 US crude oil reserves
20.00 Fed interest rate decision

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The markets on Monday were very optimistic. The news that countries are starting to get out of quarantine is heating up investors. In the US the Fed is taking serious measures to stimulate the economy and many traders are already full of desire to buy.

Dow Jones

Overall, Monday went very well for the markets. Many are already starting to live in a pandemic and companies are trying to use the current realities to make a profit. So far, only energy prices and uncertainty about future oil production are making any difference. The DAX rose 3% to 10685, with the US indices rising 1.6% on average, which is very good in the current situation. If there are no serious shocks in the future, markets will continue to slowly recover.

Euro

At the moment the Euro does not have a certain direction, but the beginning of the week looks more like a bearish one. Although there is a positive trend in Europe with regard to the pandemic, quarantine and isolation have a very strong impact on the EU economies. No growth is expected in the near future until the impact of the virus on the entire EU is clear. On Monday, the euro is traded at 1.0825.

Oil

The price of oil is still at its lowest. So far, the situation is very complicated. The amount of storage space is at a minimum and the market is very concerned about it. According to analysts’ forecasts, the situation with oil will not change until the end of June, as demand will remain at the same level.

Bitcoin

The cryptomarket opens the week with a moderate positive. Over the last 7 days, Bitcoin has grown by 7% and trading volumes have grown by 17%. There are only a few weeks left until halving of bitcoin, which will bring certain innovations to the cryptocurrency. Cryptocurrencies are more likely to be just as vulnerable as other assets. But the prospects are good. In the current situation, cryptocurrency will be in great demand because of the distance and digitalization of the economy. On Monday, Bitcoin was trading at $7700.

What’s waiting for us today?

09.00 Press conference of the Bank of Japan
14.30 Foreign trade balance in the United States
16.00 US consumer confidence index

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

27.04.2020 – Special Report. A new price massacre is looming on the oil market: In mid-May, the oil tanks in the USA are full, and the situation on the globe is no different. But in America a wave of bankruptcies of oil companies is underway, many boreholes are closed. Some of them will probably stay closed forever. The market shakeout could be the basis for a new beginning. Especially since OPEC+ is now cutting back on production. This could push the oil price up again strongly within a few months.

Pipelines as a last resort

The American oil companies are throwing their last troops into the fray. In an unusual move, pipeline giant Energy Transfer asked the Texas Railroad Commission for permission to use its pipes as a tank. This could be used to store 2 million barrels, as reported by Oilprice.com with reference to Argus Media. Earlier this month, Enterprise Products Partners had already asked the U.S. Federal Energy Regulatory Commission to allow it to use its northbound Seaway pipeline as a storage facility, according to Reuters. We wonder: How much oil can be stored in pipelines in the USA? 10 million barrels? 20?

Global Oil Flood

We also ask ourselves: How much oil fits into pipelines in Russia or the Persian Gulf? How much on tankers, in oil tanks and on trains? Dozens of bulging oil tankers are anchored off the coast of California and Texas, hundreds off Singapore. Meanwhile, the U.S. Department of Energy is helping the oil producers, and the Ministry is negotiating with nine producers to store 23 million barrels in the Strategic Petroleum Reserve (SPR), the gigantic salt domes on the coasts of Texas and Louisiana.

Endgame mid May

Meanwhile, in the Gulf of Mexico, refineries are reducing capacity due to falling demand. According to Goldman Sachs, in about three weeks there will be nowhere left to store oil. “We are moving into the endgame,” was the verdict of Torbjorn Tornqvist, head of the commodity trading giant Gunvor Group. “Early-to-mid May could be the peak. We are weeks, not months, away from it.”

Tension in June contract

Interestingly enough, trading in the June Future for West Texas Intermediate expires on 19 May.
We are curious to see if we are facing another price massacre. At the end of April, the May contract had plummeted to minus 40 dollars. For June, a drastic improvement in demand and inventory capacities must be seen as soon as possible. Perhaps the crash in the May contract had also marked the low.

The market shakeout is underway

What is clear is that only an end to the oversupply will resolve the crisis. And in the US, the eradication of companies is in full swing. Diamond Offshore Drilling from Houston has just filed for bankruptcy; the company, always considered a jewel among oil producers, is sitting on debts of 2.6 billion dollars. Since deep-sea drilling is particularly expensive, the company needs an oil price of 30 dollars per barrel to operate profitably. Diamond Offshore is only one of about 200 North American oil companies that have been turned over since the beginning of 2015, according to the law firm Haynes & Boone.

US oil sources could dry up forever

Meanwhile, Baker Hughes reported that only 378 US wells produced oil last Friday. In the high of 2014 it had been around 1,600. An interesting development, because it is enormously expensive to seal a well. Moreover, especially in the USA, there is a danger that oil wells that have been developed with fracking and cross drilling can no longer be salvaged, as they will silt up at the end of production and become saturated as soon as the pumping in of water and thus the pressure in the fractured rock subsides.

Global turnaround

The same picture is evident all over the world – from Chad to Brazil and Vietnam, emissions are being capped. And on 1 May, the OPEC+ production cut of 9.7 million barrels or 23 percent of output will come into effect. If we now process all this information, we get the impression that we are facing a massive turnaround in oil prices. Production is falling drastically, and some US states, China and several countries in Europe are gradually easing corona restrictions. As a result, demand for gasoline and kerosene should slowly increase again. However, new tensions in the Persian Gulf could also drive up prices. Ergo, new opportunities could arise on the long side.

The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Another trading week of April ended in mixed sentiment. There were quite a lot of macroeconomic statistics released on Friday in different countries. In most cases these figures turned out to be in negative values and below forecasts.

DAX

With different statistics and continuing uncertainty about oil production and OPEC’s decision, the markets split up on different sides. DAX dropped 1.69% to 10336, S&P500 rose 1.39% to 2836. For the S&P500 index, the level of 2800 is like a conspiracy. For the second week the index can’t break through it in any way and consolidate higher. Positive news for the U.S. market is that the number of sick people in the world is not increasing at least. In some American states, some institutions and schools are starting to open. Obviously, the recovery from the crisis will not be fast for all countries.

Euro

The European Union is trying to come together to fight the coronavirus and the economic crisis, although this is not going well. European leaders are calling on each other to form pan-European funds to fight the epidemic and help businesses. Europe still has a long and painstaking process of economic recovery from the crisis ahead of it. So far, the European currency does not have enough strength to rise from current levels. The coming weeks will show whether Europe can show that it is an alliance. The Euro traded higher on Friday and closed at 1.0824 .

Oil

As far as oil is concerned, it is not clear what direction the market is looking at. Of course, after the sharp fall there was a certain growth and recovery of the price, but the current catastrophic drop in demand, provoked by coronavirus infection does not give a chance to restore the price to its previous levels for a long time. The aggravation of the situation in the Middle East due to Donald Trump’s statements does not add optimism to traders. WTI oil was traded at $17.19 per barrel on Friday.

Gold

The quantitative stimulation of the economy by all the largest central banks only help gold. Due to the growth in money supply, the price of precious metal will only rise. Already now gold is targeted at $1800 per ounce, and when the metal reaches this price, it is only a matter of time.

What’s waiting for us today?

12.00 Total number of unemployed in France
15.00 Unemployment rate in Russia
16.30 US Manufacturing Activity Index

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Thursday was another day when world markets continued to recover. Although Donald Trump said that he would not hurt the U.S. energy market and could save jobs, American oil companies are beginning to cut oil production. In the current situation, it is clear that those who can quickly curtail, and these are shale oil rigs in the U.S., will curtail and survive the current crisis. They will be able to resume production as quickly as they can curtail it.

EUR/USD

Initial US unemployment claims came out on Thursday and were slightly below expectations. From these data we can say that the situation in the USA is beginning to level off. The stock market is full of positive data and continues to grow. Everything will depend on the number of infections in the US and how much the economy will suffer. After the pandemic, the USA will be the first to recover, followed by all other world countries.

Euro

On Thursday, the Euro continued its decline. After ECB Chairman Christine Lagarde announced that the euro zone economy may decline by 15% in the future, the Euro continued its decline. Once again, there were problems with the adoption of the EU economic stimulus plan, which also affected the euro rate. The EUR/USD pair is falling on Friday. Investors start taking profits on the Euro, which may affect the value of the currency.

Oil

Somehow the price per barrel of WTI oil is starting to recover. It’s strange to see major oil-exporting countries suffering because they don’t know where to put their oil. The main vaults are busy and tankers are floating around the world like vaults. The economy doesn’t know how it ends in the future. So far the price of WTI oil has stabilized above 17$ per barrel and this is a very good result.

Gold

Gold trades almost at peaks on Thursday. It rose sharply to $1740 an ounce. Gold has the potential to strengthen further and this desire will continue in the near future. We expect gold to rise to $1800 per ounce.

What’s waiting for us today?

01.30 Basic consumer price index in Japan
08.00 UK retail sales volume
19:30 Total number of rigs in USA

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

23.04.2020 – Special Report. Unemployment in the USA continues to rise unstoppably. Sales of new homes in the USA are collapsing as never before in a March. In Europe, the PMI plummets dramatically. An end to the Corona crisis is not in sight. And yet stock market prices remain surprisingly robust. Above all, faith in the Fed is providing support. And the increased investment in the top five stocks in the US. This tight market fixation may yet come to a bad end.

Ten years of recovery wiped out

It can happen that fast: The corona crisis destroyed more jobs in the USA within a few weeks than were created in around ten years of the boom. Only last week, 4.427 million Americans made an initial application for unemployment benefits, according to the Ministry of Labor. This puts the number of applications from the past five weeks at 26 million. After the financial crisis, around 22 million jobs had been created since autumn 2010. The Federal Reserve added in the Beige Book that economic activity had slumped “sharply and abruptly in all regions”. And yet stock prices are holding up surprisingly well.

Soviet economy instead of market

The most important factor for this: The Fed is pumping $2.3 trillion into the market. Through bonds, banks and the general promise not to allow increased volatility, it is supporting the market. This is the situation all over the world: Japan just announced unlimited quantitative easing and the European Central Bank announced that it will also buy corporate bonds from “Fallen Angels”. So government support everywhere. The blog “Global Macro Monitor” commented for the US that the Fed has effectively nationalized the financial markets. Kremlinologists on Wall Street are trying to find out in advance what the Politburo will buy.

BlackRock follows the Fed

In fact, asset manager BlackRock, which manages around $7 trillion, recently announced that it would do everything the Fed does. Specifically, Rick Rieder, head of the Global Allocation Team, wrote „will follow the Fed and other DM (Developed Markets – die Redaktion) central banks by purchasing what they’re purchasing, and assets that rhyme with those.” BlackRock wants also „pick away at some sectors of the equity market that have had valuations destroyed beyond even worst-case scenarios such as healthcare, biotech, technology, defense, home builders, and others.” In the long term, BlackRock will reduce its cash position and will „rotate down the credit spectrum, swapping investment-grade credit for higher quality high-yield or loans”, which the Fed is also buying.

Even the Fed could fail

Rabobank recently commented similarly, the Fed “carved central planning into the bedrock of the US financial system”. Its purchases are a part of the investment process, or what is left of it, that is priced in all over the market. With the $2.3 trillion liquidity program adopted at Easter, the Fed is supporting banks, small businesses, states, cities and municipalities, buying ETFs (Exchange Traded Funds – index funds) that contain junk bonds. Unfortunately, even this money will not be enough if a second wave of corona strikes in the USA. Not to mention the rather small economic support in Europe or China. This would give us the first doubts about the Fed’s omnipotence.

„In Fed we trust“

“In Fed We Trust is all the buyers have,” Jeffrey Edward Gundlach, American star investor and founder of DoubleLine Capital, recently twittered accordingly. Already at the beginning of April he warned of a newly emerging panic later this month. Gundlach expects the total volume of US economic stimulus packages and monetary policy support measures to reach USD 10 trillion. The unemployment rate in the USA will rise to 10 percent, and the US dollar will lose value with the escalating national debt behind it, he said in a webcast according to “InstitutionalMoney.com”.

Supported by the Top 5

In fact, the current upswing on the stock market is built on a thin foundation. The already mentioned “Global Macro Monitor” sent out a corresponding warning: At the close of trading last Friday, the Big Five – Microsoft, Amazon, Google, Apple, Facebook – together accounted for around 18 percent of market capitalization, measured by the Wilshire 5000. See the chart below. Many investors were still holding out across the board, waiting for the shorts to capitulate.

Shorties get into position

Then the blog quoted an article in the “Wall Street Journal”: The short bets against the SPDR S&P 500 Trust, which is the largest index fund that tracks the broad market, would have reached 68.1 billion dollars last week, the highest level since January 2016, as the financial analysts of S3 Partners had calculated. By the way, at the beginning of 2020, the total was 41.7 billion. Again, many investors do not believe that the Fed can or will fix everything.
Our conclusion from all this is that if the investors invested in the top 5 cash in after the interim recovery, things look bad for the market. Moreover, if the corona crisis picks up speed again after a relaxation of the quarantine in the West, or if new outbreaks break out in China, then we would have another push factor. And when doubts about the Fed’s omnipotence or its speed of reaction spread like wildfire across the trading floor, then we would see the next bear market. Especially since the S&P 500 has just reached its 50-day line, which could act as a resistance.

But if, on the other hand, the euphoria overflows, for example because an effective corona drug is discovered, then all the doubts expressed here are waste paper. Then we will experience a nice short squeeze. And a new market breadth on the way to the top.
The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

On Wednesday, optimism returns to the world’s trading platforms, although there are virtually no reasons for such growth. Even a small pause in the negative news line had a positive impact on traders. All the more so as the cost of energy resources started to recover.

Gold

In the U.S., the reporting season begins. These reports will start to show corporate damage from the coronavirus pandemic. As long as markets grow optimistic that the government won’t give up on them. An agreement has been reached between the White House and the Senate on another package of assistance to companies to counter the economic crisis. The DAX index closed at 10415, 1.6% above the previous day, while the S&P500 index rose by more than 2.5%.

Euro

The Euro has been sideways for the eighth consecutive month and the last four trading days the trading range has not exceeded 100 points. Market sentiment is generally improving, but it is still very far from returning to a “normal” state. In the current case, the good dynamics of shares is against the US dollar, so probably in the coming days the Euro will try to get out of the range and break through the level of 1.09. At the end of Wednesday, the EUR/USD pair is trading at 1.0815.

Oil

Millions of barrels of oil are now in tankers, on the high seas, and with great effort continue to look for their buyers. There is a very ambiguous energy situation in the world and it is not yet clear where it will lead. The June futures for WTI oil on Wednesday fell to $10 per barrel, but by the end of the day managed to recover to $14 per barrel. In many respects, the price will depend on the actions of exporting countries. The place in ground storages is almost all occupied, and 1 out of 10 supertankers in the world is already a floating oil storage. So far, we are satisfied that the market has not collapsed entirely and this is very good.

Gold

Gold recovered all its Tuesday losses on Wednesday and confidently overcame the $1700 per ounce level. Investors buy gold much better than other precious metals such as silver or palladium. This indicates that the metal is believed and given a rather important place in saving money during the coronavirus pandemic and difficult economic situation. With this kind of mood, gold is soon above $1800 an ounce.

What’s waiting for us today?

02.30 PMI service sector index in Japan
08.00 UK retail sales volume
14.30 Number of initial unemployment applications USA

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.