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Tuesday turned out to be negative for most markets due to a serious drop in energy prices. In some cases, the news of oil fall overshadowed the news of coronavirus pandemic. Many investors switched to the analysis of a completely different situation.

GBP/USD

Due to a sharp drop in oil markets on Tuesday are in red. Sales are moderate and there is no serious panic. We should not expect the situation to improve yet, and the sale of assets is likely to continue in the coming days. European markets on Tuesday also failed to hold out due to the collapse of the oil market and fell throughout the trading session. DAX closed at 10249, which is 3.99% below the opening. S&P500 dropped 2.8%.

Pound Sterling

The pound remains under pressure due to fears of weak inflationary data as well as frustrations over Brexit. No matter how hard Britain tries, quarantine and the spread of coronavirus will affect the kingdom’s economy. If the inflation data comes out lower than predicted, the pound is likely to continue falling against the US dollar. GBP loses more than 1% against the US dollar on Tuesday and trades at 1.2280.

Oil

As might be expected, the oil crisis continues. The reason for the short-term decline in oil is logistical problems. Due to quarantine, there are big problems in transport hubs and lack of free tankers, as the contractor is obliged to take this oil on board of a ship after purchasing a contract in May and pump it into storage. In the current situation to find a free tanker, as well as the storage was a very difficult task. Against the background of a major decline in the May contract, the June futures for WTI oil on Tuesday lost 35% of its value. The situation is critical and the decline is likely to continue unless the countries take critical measures.

Gold

Due to the shock in the energy market on Tuesday gold does not feel very well and falls on investors’ worries. Although gold is a metal shelter, but still in critical situations investors prefer to go to the dollar, which is also in its time a currency shelter, which is always liquid in the market. By the end of the trading session in the U.S. there is a good buyback of gold, which indicates a good interest in the precious metal. We still expect the gold to exit above $1700 per ounce and conquer new highs.

What’s waiting for us today?

00.45 UK consumer price index
11.00 Consumer Price Index Baseline in Canada
16.30 US crude oil reserves

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.

21.04.2020 – Special Report. History is being made in these days: Yesterday the barrel of West Texas Intermediate for delivery in May temporarily traded at minus 40.32 dollars, before the contract hanged back to just over 0 after several panicky hours. Besides the oversupply, there is an explanation from the financial market for the phenomenon. We explain the background.

Negative price for oil contract for the first time

Even hardened traders rubbed their eyes yesterday: For the first time since the launch of futures trading in 1983, the price of the expiring futures contract for US crude oil of the reference grade West Texas Intermediate for delivery in May has fallen below zero. The May contract was settled yesterday for a negative $37.63. On Friday the closing price was still at plus 18.27 dollars.

Massive tearing of stop-losses

In fact, yesterday’s situation in reverse is comparable to the historical short squeeze on Volkswagen shares – because the liquidity for the oil contract dried up completely yesterday. Nobody bought when everyone was selling at the same time. Yesterday around noon US time, countless stop losses were activated when the contract touched the 10 dollar mark. So you see: never set stops at round marks, but always just before them.

Clueless speculators

Roger Diwan, Vice President for Energy at IHSMarkit, explained the situation. IHSMarkit is a listed information service based in London. The crash is related to the expiration of the May contract today. Whoever holds the contract at maturity will also have to purchase the oil in May at the pipeline node in Cushing, Oklahoma. However, since speculators have no storage capacity and since it is hardly possible to buy it there at the moment anyway, financial players would have had to get rid of the futures under all circumstances. It is possible that some players did not understand the aspect of physical purchase.
Diwan added that yesterday’s situation did not necessarily indicate the future market situation, as the June futures contract on NYMEX closed yesterday at plus $21.13. However, the June contract was by no means safe – the Cushing market was not in good shape and inventories were gradually running out.

Mom-and-Pop-Crash

Goldman Sachs took the same line and told its customers exactly who had sold in a panic yesterday. Because of the difficulties and costs of storing oil – even in normal times – experienced investors never held a contract until it expired. As a result, long positions had shrunk as large ETFs (Exchange Traded Funds) had already rolled in their money. In recent weeks, however, more retail traders have entered the market, Goldman continued. This is shown by the increase in retail exposure, for example in the USO ETF.
We add: By Friday, April 17th, there were still over 100,000 open positions in the May contract, which is well above the five-year average of 60,000. This indicates that yesterday an above-average number of amateurs were still holding the expiring contracts. Our conclusion: Mom-and-pop day traders threw themselves the hot potato, i.e. a contract in which they did not understand that in the worst case, tons of oil would be delivered here.

New fireworks threaten May and June contract

Goldman Sachs also warned of new disasters. Commodity strategist Damien Courvalin first pointed to “potential further distress ahead of the settlement window” at the end of the May contract today.
And this should not be the end of the pain for the bulls; now the focus is shifting to the June contract, which expires on May 19. According to Goldman, there are three reasons for its collapse: First, the massive move yesterday may have driven some long retail investors out of the market. Second, there is likely to be a negative effect when many investors roll their positions from the June to the July contract in early May. Third, the question of oversupply and storage capacity remains unresolved.

The lagers overflow

In recent weeks, US oil inventories have risen by almost 20 percent, the highest level in about three years. And this in the middle of a severe recession. At the same time, tankers are increasingly being used as floating storage facilities. Experts estimate that the volume in tankers doubled within two weeks to a record 160 million barrels.

At last it had looked like a relaxation: As announced by US President Donald Trump, Russia and Saudi Arabia had agreed on cuts in production. De facto, Moscow has caved in. This came as a surprise to many market participants. Trump also briefly provided support yesterday evening when he reiterated his intention to buy 75 million barrels of crude oil for the Strategic Oil Reserve.
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To get oil in USA for 40 dollars cash

Nevertheless: The US market is drowning in oil. Producers are currently paying premiums to have their barrels taken away. At the bottom of the page is a list of offers from the trading house Plains Marketing: all prices for regional oil types are negative. If you currently have a demand, for example, you will receive 54 dollars cash on hand when you buy a barrel of South Texas Sour or around 39 dollars when you buy a barrel of Oklahoma Condensate Light.

It gets exciting once again

Our conclusion: Today at 14.30 US East Coast time, the May contract may become explosive again, as normally only about 2,000 contracts are delivered. We wonder if all investors have gotten rid of their unwanted May contract for physical delivery. Also for the June contract and for the following months, the only certainty is that nothing is certain. A veritable oil tsunami is rolling towards the market. As a result, other, later oil futures could also soon suffer from consumption.
The Bernstein Bank stays on the ball for you!

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.

Monday turned out to be a shock for the world markets due to falling to zero prices for WTI oil in May. The sharp decline explains that things are not so good in the economy and recession can only gain momentum. The coronavirus incidence curve in major regions seems to have entered the plateau stage, which in turn inspires some optimism among investors.

WTI

Many analysts believe that we will feel the result of quarantine, production stoppage and economic recovery only in a few months. This has never happened in the world before, so no one knows what consequences the current situation will have. On Monday, markets are traded in mixed motion due to the great uncertainty in the oil market. DAX is up 0.3%, S&P500 is down 2%. The main data this week will be the initial claims for unemployment benefits in the USA, as well as orders for durable goods. The positive data will give investors an impulse to buy assets from the current levels.

Euro

The EU, like the debt markets of the European Union, pursues a fear of sovereign debt crisis. Italy is currently one of the most volatile countries, which is already closely supported by the ECB. The focus will be on the EU Leaders Summit, to be held on Thursday. It will once again discuss methods to save Europe’s economy. Depending on whether the leaders of European countries will be able to agree and join forces, the future fate of the Euro depends. Italy’s refusal to adopt stabilization policy may affect its credit rating on Friday, which in turn will negatively affect the price of the European currency. While the pair EUR/USD trades in a narrow range near the level of 1.0860 and is likely to stay there until the announcement of the summit results.

Oil

The May futures for WTI oil was traded at $0 per barrel. Markets have made it clear that nobody needs oil now. Storages are overflowing, production is declining slowly, and the US government plans to take a number of measures in the near future, which are already being discussed in the administration. The future of oil is still very bad and it is likely that the June contract, which is already considered the main one on the stock exchanges, will also slide down in the near future.

Gold

On Monday, gold keeps trying to go above $1700. The oil market supports the precious metal, so in the near future we expect gold to try to reach $1750 per ounce. Paralyzed economic processes around the world will not be able to resume in the shortest possible time, even if a cure for coronavirus is found, so the demand for gold will be just as high in the near future.

What’s waiting for us today?

00.45 Changes in the number of initial UK unemployment applications for March
11.00 ZEW Economic Sentiment Index in Germany
16.00 Aftermarket housing sales in the US

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.

Last week, the most expected statistics was on the Chinese economy. China was the first to be infected with coronavirus, the first to block the disease and the first to leave quarantine. Of course, most investors are looking at the second largest economy in the world and predict how difficult it will be for other countries to recover from the crisis.

GOLD

The figures for China came out better than predictions, but still the government has something to work on. Investors will now see how quickly China can rebuild its production capacity. Microrallies in stock markets that started on Thursday continued on Friday. The world markets were actively growing on expectations of economic recovery and increasing chances to find a vaccine against coronavirus. On Friday, the DAX index rose 3% to 10615, the S&P500 index rose 2.6% to 2874.66.

Euro

At the end of the week, the euro continued to trade in a very narrow range. Now investors are waiting for how difficult it will be for Europe to overcome the coronavirus pandemic. According to preliminary data, the number of cases is decreasing in some countries. Countries are starting to partially lift quarantine measures and start production. So far, there are no strong signals on the growth of EUR/USD pair and it is likely that the price will remain further in a narrow range. The quarantine effect will appear only in one or two months, so everything is ahead.

Oil

The oil market is still stagnating. Country agreements to reduce oil production practically do not support the market, and countries’ inventories are beginning to be filled. The main task now is to prevent further price reductions so as not to lead the energy market to complete decline. Over the last week, the price of WTI oil fell to record lows and traded at $18 per barrel.

Gold

It was quite logical to assume a correction in gold by the end of the week. The metal has been actively growing for several weeks in a row, so investors fixed part of the profit, given that now the price is on the upper limits, near the historic high. In the long term, bullish sentiment on gold is preserved. We expect the output of gold above $1700 per ounce, where we will watch the further development of the situation.

What’s waiting for us today?

03.30 NBK base credit rate
08.00 German producer price index
11.00 Trade balance in the European Union

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.

17.04.2020 – Special Report. The People’s Republic of China has introduced a network for its own cyber currency. And immediately afterwards, it established the first digital currency on the globe – the CBDC. This raises the question of whether this will boost the use of cyber-currencies worldwide and give them the long-awaited official accolade. Or whether China will one day turn off the tap on Bitcoin, Ethereum and co.

World premiere: Network for electronic central bank money

On Wednesday, April 15, 2020, the People’s Republic of China launched the Blockchain Service Network (BSN). Initially, the network is to operate only in China, but later it will also provide international access. In this way, Beijing wants to make it easier for companies and software developers to develop blockchain-based applications under state leadership. The step supports payment options via the Messenger WeChat, cloud payments, but also enterprise online banking and offline bank transfers. Coindesk.com explained that the network is to go global on April 25. The “BTC-Echo” commented that Beijing is thus expanding its position – after all, China is the country with the most blockchain patents worldwide. “IEEE.Spectrum” added that by the end of 2020, nodes are to be built in 200 Chinese cities.

Starting signal for the Digital Yuan / CBDC

Yesterday, April 16, the first cybercurrency was launched: The “BTC Echo” reported, citing “Chinastarmarket”, that China had initially implemented the CBDC (central bank digital currency) on a small scale via Alipay. The digital central bank digital currency is to be used in the Xiangcheng district in the city of Suzhou, west of Shanghai, for the payroll of government officials. From May onwards, the government then plans to further expand the payouts. The Bank of China, the China Construction Bank, the Industrial and Commerical Bank of China and the Agricultural Bank of China worked together on this pilot project. Referring to Exchange Binance, Coinkurier.de wrote that there are already official apps for testing the cryptocurrency, also known as “Digital Yuan” or “DC/EP” (Digital Currency/Electronic Payment).

You shall have no other currency beside mine

Investors apparently saw the development as positive for the digital currency universe – Bitcoin, for example, rose by around 10 percent since Wednesday night. If that isn’t a misconception. Cryptocurrencies like Bitcoin continue to be used in China, although they are officially banned, explained “IEEE.Spectrum”. We think: Not for long. Because the Chinese will not allow the crypto-miner, which is kept under state custody, to cheat, meaning that they will be allowed to produce other digital currencies in addition to Chinese central bank money.
The fact that the Communist Party will, if need be, go over dead bodies is proven by the Corona crisis – Beijing has long concealed the outbreak and, according to reports in the “Washington Post”, the “Epoch Times” and Fox News, apparently actually let the virus escape from the laboratory of the Wuhan Institute of Virology. In addition, China has also put the World Health Organization (WHO) on the alert – its head Tedros Adhanom Ghebreyesus always praised the Chinese approach, suppressed warnings from Taiwan in December 2019, criticized the early border closures in the US, Israel and Poland. No wonder: He is a communist and has made a career as a cadre of the Tigray People’s Liberation Front. What we do not read on the German Wikipedia, but we do read on the American.
The bridge to the market for cryptos: The world must prepare itself for the merciless eradication of competing e-foreign currencies – for the Chinese CP it is a matter of a lot of money and imperial interests.

China wants the leading role

One reason for China’s blockchain rush is the pursuit of global leadership in cyber foreign exchange. One motivation for the new cryptonetwork is probably that China wants to learn quickly. With its low costs of probably the equivalent of $300 per year at minimum, the BSN network is likely to absorb an enormous amount of knowledge, as it will attract many hard-working students. This in order to prevent a monopoly by Facebook, for example. And to become the world’s number one in cryptos in the long term. “China has the ambition to be the technology leader in the world. And I think they might have enough technology chops to pull this off, at least within the blockchain industry,” Edith Yeung continued on Coindesk.

Attack on the dollar

Another reason is the power behind a global reserve currency. If the digital yuan grows and prospers, China may at some point try to switch its international trade to the yuan – Beijing will simply dictate this to smaller neighboring countries or, as in the case of the WHO, use infiltrated international organizations to its advantage. If the Chinese have so many blockchain patents that they would have a monopoly on cryptos, the other digital currencies will dry up. The advantages: A strong yuan would support the Chinese middle class because of its greater purchasing power. This would also weaken the dollar as a global trading currency. And this simply means a loss of power for the US – which would then have a problem with high arms expenditure financed on credit and the protection of Taiwan.

Fight against corruption

However, the most important reason for the introduction of the digital yuan is the horrendous corruption in the Middle Kingdom. Of course, accurate figures are difficult to obtain. But in June 2011, Time magazine reported on a sensational report by the People’s Bank of China. The central bank, in turn, referred to the Chinese Academy of Social Sciences: According to this report, since 1990, around 18,000 cadres of the Communist Party, state authorities, the judiciary, or higher management had fled the country. And they took about 120 billion dollars with them.

In October 2014, a case in China caused a sensation: According to the BBC, around 200 million yuan – at that time the equivalent of 33 million dollars – were found in Wei Pengyuan’s apartment. The man was the deputy head of the coal department at the National Energy Agency. In the first nine months of 2014 alone, according to the report, 13,000 officials were convicted of corruption in China. Another pretty case is that of Zhang Qi, a former Communist party leader in Haikou, Hainan province. According to the “Daily Mail” he was arrested for corruption in September 2019. At his home he found about half a ton of gold; and in the bank, another 35 million dollars in cash.

Total control

Well, too bad: If these big boys didn’t have to hide their money at home or in a state-controlled bank, they probably wouldn’t have been caught. And that’s where the cryptos come in. Edith Yeung, Managing Partner at Proof of Capital, a venture capital firm focused on block chaining, drew this conclusion in an interview with Coindesk: “If the government has access to everything via handpicked nodes, everything is developed and maintained by the government, no more cash. It’s hard to have any fraud if all telco, banks, transportation, Alipay or WeChat is part of the government network.

Long or short?

Our conclusion: competing cryptos are likely to disappear from China sooner or later. Which cuts off a large chunk of the demand. If other countries follow the Chinese example, things are likely to look bleak for cybercurrencies globally as well. Turkey has plans for a digital lira, in the US Libra is being looked at critically by Facebook, and in Germany the discussions about abolishing cash are not silenced.

However, it may take some time to implement all these plans. The question is whether China is at all capable of building a completely controlled network. Another long factor would be the fact that the world’s central banks, especially in the wake of the Corona crisis, are once again merrily gutting the domestic currencies with a flood of freshly printed money. But many investors are longing for a currency that cannot be inflated by (monetary) policy – for electronic gold, so to speak. And then there is the issue of halving at Bitcoin.

The Bernstein Bank wishes you successful trades and many good 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.

On Thursday we see a moderate correction in financial markets. Reporting and hopes that the pandemic will soon be defeated are encouraging for investors, although it is very fragile. According to experts, the markets will no longer have a second “bottom”, and they will begin to recover soon. The forecast is ambiguous, because nobody knows if the second wave of infection will occur and if so, how strong it will be.

USD/CAD

European countries are beginning to slowly mitigate quarantine measures, which has a positive impact on the economic climate. The main news on Thursday was data on initial unemployment claims in the USA. It turned out to be 5.245 mln, which is less than last week. A decline is a good sign that indicates the recovery of some sectors of the economy, but still unemployment in the USA is almost at the historical records. The DAX closed at 10301, which is 0.2% more than the previous day. The S&P500 index traded with a slight increase at 2790. On Friday, macroeconomic data on China will be released, which will indicate how one of the largest producers in the world suffered. These data will give information on how deep the economy has fallen and how quickly it will recover.

Euro

Even the positive news that European countries are beginning to weaken quarantine, does not give any impulses for the EUR/USD pair growth. The morbidity statistics is still high, and some experts expect the second wave. Therefore, at this stage, investors prefer to keep their money in the assets and wait for the best moment. On Thursday, EUR was trading at the level of 1.0840.

Canadian Dollar

Canada will have to mobilize substantial resources to stimulate the economy to avoid a construction crisis, as well as to cope with a collapse in energy prices. So far, the USD/CAD pair is growing to 1.45, where there will be another resistance test. Canada has one hope that the US Federal Reserve will pull out its economy. In this case, the US dollar is going to decline.

Bitcoin

Bitcoin still has its own peculiarity – volatility. After dropping to $6500, Bitcoin showed a sharp jump to $7100. Strengthening of the first cryptocurrency is accompanied by an increase in trading volumes. Investors are coming back, probably soon the bitcoin will try to go above $7000 and try to break the support at $7400.

What’s waiting for us today?

04.00 Chinese GDP
04.00 Volume of industrial production in China
11.00 Consumer Price Index in Europe

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.

Wednesday turned out to be very ambiguous for all market participants. On the one hand, everyone is already used to living during quarantine, movement restrictions, closed production, although the global problems are still ahead, when the current quarantine will directly affect the income and economic performance of all countries in the world. Many developing countries are approaching a default line, which could start a chain of defaults in small developing countries.

EUR/USD

The risk and appetite of investors died out on Wednesday. The S&P500 index is losing 2% and trades at 2780. DAX loses almost 4% and trades at 10280. Although now it’s time for corporate reporting in the U.S., when markets tend to grow on reports, we will probably see the opposite picture, as the data is not at all comforting. In the near future, investors will be making decisions after evaluating the real situation of companies. Growth is unlikely unless the government reports some kind of drastic measures to combat the pandemic.

Euro

EUR/USD pair is moving around the level of 1.09 and is not attempting to try any new levels. In Europe, there is a disagreement, the leaders of the countries differ in their vision of the current situation and re-insure themselves in statements. Disagreements on the latest Eurogroup agreements are becoming more and more common. From the technical point of view, the euro is more inclined to the level of 1.0800, which opens at 1.0650.

Oil

Looks like there’s a big failure in the oil market. Negotiations of OPEC+ turned out to be so vague and not specific in terms of volumes and deadlines that investors simply ran out of patience. All the more so because Donald Trump decided not to reduce oil production in the US unless the markets want it. The driver for oil movement was the data on oil reserves. The final statistics of the US Department of Energy finally broke the markets with the actual value of 19.24 million barrels, when the forecast was for a decline of 11.939 million barrels. WTI oil went down and on Wednesday traded at a low of $20 per barrel. This is bad news for the oil and the decline is likely to continue.

Gold

Gold is stable and at its peak for the last few years. Many investors are looking at the USA and at the economic recovery. The U.S. President’s announcement of a halt to support for the WHO at such a serious moment for the world is very mixed, exposing America to the world. So far, there are no serious signals of economic recovery in the US. Therefore, in the near future gold will try to rise to the level of $1800 per ounce.

What’s waiting for us today?

03.30 Changes in Australia’s employment rate
10.00 IFO Business Climate Index in Germany
14.30 Number of initial applications for unemployment in the United States

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 Tuesday, we see that markets are tired of being negative and grabbing any positive data to grow. The global picture of the pandemic is more gentle and countries are optimistic about the future. Import and export data show that China is beginning to recover from a severe quarantine and is launching production. Chinese business activity is returning to normal and that is a very good sign.

AUD/USD

Due to good news on the fight against the pandemic and data from China, American markets are growing by more than 2% on Tuesday. Investors are tired of selling and the desire to buy wins. If the tendency to fight the coronavirus is improving and countries get positive statistics on diseases, investors will be more willing to take risks and buy further.

Euro

The European currency has no strength at all to go up, although on Tuesday we see growth, but it is very small. After taking stimulus measures, investors did not react at all. On Tuesday, the euro is growing more due to the weakness of the US dollar. Investors believe that the dollar is overvalued in the current situation. The Fed’s balance jumped up to a record 6.13 trillion dollars and it should certainly put pressure on the rate.
If the disease statistics in the US improves, it will strongly affect the US currency, which is not a very good sign for the Euro. The current rise to 1.10 is probably a correction before the decline, which might start very soon.

Australian Dollar

China showed good trade balance dynamics, and there are all signs that the economy is recovering. Australia is very much dependent on China, as it supplies enough different raw materials. On the background of positive data investors expect the Australian economy to improve. The Australian dollar keeps growing for the second trading week and trades at 0.6420 on Tuesday. In the medium term, AUD/USD will rise to SMA 200, which is at 0.6700, but only if China and the rest of the economy are stable in the near future.

Gold

At the moment, it is already clear that gold sales should not be considered. There was a lot of debate about whether the metal could pass the mark of $1700 per ounce, but after the beginning of the epidemic in China it was already clear that gold would be there very soon. Next, we will look at the volume of liquidity that will appear in the market in the near future and it is quite possible that some part will go to buy the precious metal. So maybe this year gold will try to conquer historical highs. The road for this is open and there is not much left.

What’s waiting for us today?

09.00 Consumer price index in Spain for March
14.30 Basic US Retail Sales Index
16.30 US crude oil reserves

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.

14.04.2020 – Special Report. Wall Street has put on a nice bear market rally for Easter. Bold stimulus from the US government and fresh money from the Fed had supported the prices. Much will now depend on the reporting season, which begins today with JPMorgan Chase: The question is whether the probably horrendous figures and the probably clouded outlook will support the more optimistic stock market valuation. Unfortunately, however, things will be particularly difficult this time: Uncertainty is likely to bring about a new provisioning rule in banks’ accounting.

Bear-Market-Rally

What a rebound: At Easter, the Dow Jones, with just under 24,000 points, almost exactly marked a 50-percent recovery from its fall from Olympus at around 29,600 points to Hades at around 18,600 points. Yesterday’s setback on Easter Monday was also due to the question of whether the company figures justify this catch-up. As of today we will get the answer. The blog ZeroHedge warned that stocks in the S&P 500 have been more overvalued recently than at the February high. The NTM in the chart stands for “next twelve months”.

Horrible company figures expected

Much will now depend on the start of the reporting season. The fact that the figures and outlook are poor is considered to be a foregone conclusion. Not only in the USA, but also in Germany. Analysts at DZ Bank, for example, suspect that the profits of the 30 DAX-listed companies could collapse by 50 percent or more this year – and in some cases they could fall by up to 80 percent. This would be far more than in previous recessions, “when profits fell by an average of 35 percent.” This means that lower prices than today are always possible.
But exactly how bad will the year be? And how bad the coming year? Is the future valuation of the stock market justified in view of the horrendous figures to be expected? We will get an initial answer today before the start of trading on Wall Street with JP Morgan Chase. Shortly afterwards, heavyweights such as Wells Fargo, Johnson&Johnson, Goldman Sachs, Bank of America and Citigroup will follow.

Puzzling with new balance sheets

The corona scare is compounded by another uncertainty factor for the stock market: according to Reuters, banks must form provisions for the future as a precautionary measure in accordance with the new accounting rules in force since January 1. This rule is now being applied in the first corona quarter of all quarters. So look out for the term CECL, which stands for Current Expected Credit Losses, in regular market updates – some brokers will also speak of “Cecil”.
Unfortunately, with this arbitrary rule it is completely unclear whether a credit institution is sitting on nothing but bad loans or whether it is just being particularly careful. The question of all questions is: How many loans will burst at which bank because of Corona? Gerard Cassidy, an analyst at RBC, said investors wanted reassurance that “this downturn for the banks will only be an earnings issue and not a balance sheet issue similar to the 2008-2009 financial crisis. Last week, Goldman took the precaution of lowering all banks’ earnings estimates for 2020 by 40 percent. This could be the benchmark for shock or relief in the market.
And so the guesswork will begin about how deep the recession has dug its way into the mortgage market, into companies’ businesses and into the property market – with potential consequences for the stock market.

Goldman is now bullish

Nevertheless, Goldman Sachs made an interesting bullish reversal. Analyst David Kostin just wrote that the combination of unprecedented political support and the flattening of the virus curve has dramatically reduced the downside risk to the US economy and financial markets. The earlier short-term target of 2,000 points in the S&P 500 is no longer likely, the year-end target remains 3,000 points. For Goldman, the figures from the first quarter will hardly have any impact on the stock market – most customers would have already ticked off in 2020 anyway. The focus is on the outlook for 2021, but there is a risk: a second wave of infection in the US as soon as the economy starts to recover.

Don‘t fight the Fed

There is, of course, one stabilizing factor: the Fed is standing by. Last week it pushed the market up with the announcement of further emergency aid worth $2.3 trillion. The new package of measures is designed to support local governments and small and medium-sized businesses. Among other things, four-year loans will be made available through commercial banks for companies with up to 10,000 employees. In addition, the Fed wants to buy bonds from states and populous counties and cities to help them with fresh cash. On the trading floor in New York it is a foregone conclusion that the Fed will not allow another stock market crash.
Eric Peters, Chief Investment Officer of One River Asset Management, agrees: “Without the aid programs of the Fed and the US Treasury, which were implemented at breathtaking speed, share prices would probably be 50 to 80 percent lower. But then he warned that unemployment of 15 to 25 percent, deficits and debts as in the Second World War – and, according to doctors, perhaps 100,000 to 240,000 dead in the USA – are now threatening.

„Do or Die“ in the matter of medicine

In general, the question of all questions for the stock market is a medical one: Will there soon be a vaccine? Or will people develop resistance? These would be the bullish scenarios with which we could soon put the corona crisis behind us. Or will people who have once fallen ill be so weakened by the raging corona virus that their health is severely damaged? Even worse: is it possible that after Covid-19 has healed, a new illness is possible, as currently seems to be the case in South Korea with 91 officially recovered patients? That would be the bearish cases that could send the market to the wall once again.

One note remains as a conclusion from our side: If medicine defeats the virus, not only shares should gain in value in this gigantic inflation of the financial market. Not only the USA, but also Europe and China have launched economic and credit programmes. The main beneficiary should be gold, which most recently started out at over $ 1,700 an ounce and reached an all-time high of around $ 1,900 an ounce.
The Bernstein Bank wishes us all a quick return to normality – and you 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.

The G20 Group plans to offer a debt freeze to the world’s poorest countries. The World Bank last month requested urgent debt relief for poor countries to avoid a series of defaults in emerging economies. More than half of the world’s countries have recently requested IMF assistance. This organization works very hard to meet all requests. In the near future, the pressure on the global economy will not fall.

GOLD

European markets were closed on Monday due to Easter. American indices were traded mixed. In the US there is hope that some areas will soon be out of quarantine and production will start to recover. There are signs that the infection curve in the U.S. is beginning to level off, everyone is hoping that soon medics will be able to control the situation. While investors are waiting. The government is trying to level the situation and the Fed is helping everybody, further market dynamics will depend on how the government will fight the spread of infection. There is a certain upward trend, but it is very weak and can change at any time.

British Pound

After the UK’s exit from the EU, it still feels like the pound is moving its own way. After the positive news about Boris Johnson’s discharge from the hospital, investors started buying the pound on optimism, although now the country itself is preparing for an outbreak of the disease and is not going to stop quarantine activities. The pound is rising 0.5% on Monday to 1.2515.

Oil

On Monday, oil is traded mixed, the OPEC meeting that decided to cut oil production had little impact on the price. All production has been halted in many countries due to coronavirus spread. Economic development is blocked, so we will be able to see the oil price rise only after the main countries recover. WTI oil is traded at $27 per barrel.

Gold

Gold can continue to grow at any time. Probably the most stable metal in the current time, which shows excellent positive dynamics. Gold has broken through the level of $1700 per ounce and is not going to stop there. Always after a strong growth, a small correction may appear. At the moment, we consider the growth of gold to new highs.

What’s waiting for us today?

14.30 US Export Price Index
22.30 Weekly crude oil reserves in the USA
23.30 Export volume in China

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.