News

On Thursday the markets were shaken by the statement of the US Federal Reserve that they are ready to take additional measures to stimulate the economy in the amount of $2.3 trillion. The Fed’s leaders are very persistent in their resistance to the crisis. Together with the president they will stand to the last until the economy recovers.

DAX

In general, on the optimistic statements of the U.S. Federal Reserve and Christine Lagarde, heads of the International Monetary Fund, markets are growing, not paying attention to the spread of coronavirus. Investors believe that the business will be saved by any means, because huge amounts of money are being injected, so it is worth buying this business while it is at the bottom. The DAX index rises by 2.2% to 10564. The S&P500 index rises by about 1%.

Euro

The euro is strengthening due to increased unemployment claims in the USA. Serious macroeconomic data from the U.S. makes you wonder if the help offered by the Fed will be enough. On the other hand, in Europe it is again difficult to work out a common strategy. There is no way the Eurogroup can agree on the problem of debt distribution. Such long discussions have a negative impact on the Euro, and at the same time the countries suffer financial losses.

Oil

On Thursday, oil did not move much in price and practically remains at the same levels. The OPEC+ meeting is very complicated, countries have to deal with serious issues, and first of all, determine who will have to reduce production. This is always painful for the budget, and underproduction leads to other costs in countries’ development. At the moment, it is expected that countries will decide to reduce production, as there is simply no one to sell oil to. On Thursday, WTI tried to reach the level above $30 per barrel, but could not stay there. The current price is $28.2 per barrel.

Gold

There is not much to write about gold, because the movement of this metal was fully described in previous reviews. The forecast does not change. The attempts to break through the level of $1700 are repeated. Probably, it will not be very good on Friday, because it will close the week, and investors will take profits. It is very possible that next week’s start will be great for gold and for breaking new highs.

What’s waiting for us today?

03.30 Consumer price index in China
14.30 US Consumer Price Index Baseline

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.

How ambiguous the markets behave in times of general uncertainty. The US registered the highest number of coronavirus deaths on Tuesday, but the markets continue to grow in a consecutive session. Investors are probably full of optimism and believe that the government will soon win the pandemic.

S&P500

The situation in the markets is such that investors no longer have to follow official statements about the pandemic and the general economic situation. Markets no longer respond to statistics, to various intermediate data, but listen only to people. On such statements in the U.S., the S&P500 and DOW indices are growing by more than 3% on Wednesday. Europe’s economy, which has experienced the worst downturn in the last 20 years, cannot grow so fast on hearing. The DAX closed at minus 0.23%, but futures show that the index is pulling up.

Euro

The European Group failed to agree on measures to support the EU economy. The disagreements between the Netherlands and Italy were in the focus of negotiations and in 19 hours of online meeting the countries could not reach an agreement. All this does not have a good effect on the euro, because in the current situation every hour and day is very important for European business. During quarantine, countries lose up to 10% of GDP, which is a very significant amount that will have to be recovered for more than a year. So far, the only support for the Euro remains the ECB, which is trying with all its might to hold rates and the economy. So far the Euro is at 1.0860 against the dollar. No growth can be expected without positive decisions from the European Commission.

Oil

The OPEC+ meeting is today. It will take place in a new format online. The parties will once again discuss the reduction of oil production in the conditions of collapsed prices. It is already clear that the decision to reduce production will have to be taken by all the negotiators. Although the U.S. has already announced that it will act in its own way and will not participate in the meeting, this time about 12 other exporting countries were invited to the meeting. So far WTI oil is traded at $29 per barrel. Today will show where the movement will be until the end of the trading week.

Gold

Gold is practically not affected by macroeconomic data. The precious metal corrected slightly on Wednesday, but it was worth waiting for after the futures on Tuesday broke through the level of $1700 per ounce. On the whole, the gold is not bad. As a safe haven, it is behaving very well and in the near future it is likely to go again to the level of $1700 per ounce. There are no signals for falling at all, so only growth.

What’s waiting for us today?

08.00 UK GDP
13.30 ECB monetary policy minutes
14.30 Net initial US unemployment claims
14.30 Changes in employment in Canada

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.

For the second day in a row, investors are on the positive side due to positive signals in the fight against the coronavirus pandemic. Many countries have said they have already overcome the peak of the disease and are seeing a decline in the number of people entering the intensive care units.

EUR/USD

Most stock markets are growing on increasing investor appetite for risk. Once again, we see that the current quotes of the major indices are underestimated, and as soon as the opportunity arose, investors began to buy back shares very well. The DAX index rose by 2.79% and the S&P500 index tried to take the level of 2700, but failed to overcome it, trading at 2690 by the end of the trading session.

Euro

Yesterday’s meeting of the Eurogroup brought quite optimism to investors. Expectations of agreements between financial leaders of European countries showed that EUR/USD has grown to the level of 1.09. The nearest days will show how the epidemic is developing in the European Union, whether the countries are at the peak of diseases or it is just a break from the virus. The economy is beginning to adapt to this situation, and some countries are thinking about weakening the quarantine for the cured. The ECB is doing what it can to redeem the crisis and give the markets the liquidity they need. If we continue to see positive trends in the epidemic in Europe, we will see the Euro currency strengthening.

British Pound

The UK is still struggling with the disease, as is Prime Minister Boris Johnson himself. Interestingly, many analysts believe that the pound rate depends on the health of the Prime Minister. The news is that Johnson is in a stable state, the pound is rising. It’s increasingly dependent on completely random factors. In any case, the UK has much more room for maneuver with their currency. In the near future, we can see a good strengthening of the pound as soon as positive news on the fight against the coronavirus. The GBP/USD pair remains at 1.23 and is trying to break through the level of 1.24.

What’s waiting for us today?

16.30 US crude oil reserves
20.00 Publication of FOMC minutes 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.

07.04.2020 – Special Report. The question of all questions, which is currently preoccupying all stock market participants: Has the floor moved in now? For many investors the worst seems to be over. Or was the recent rapid recovery just a countermovement in the bear market? It depends on who you ask.

Is that it for the Corona crisis now?

The sudden turnaround from the previous low on Wall Street after March 20 has been extremely rapid. Perhaps prematurely. We have therefore taken a look at the decisions of some players in the financial market and extracted the most interesting arguments for bulls and bears. We hope that you will make the right decisions when trading CFDs or online stocks.

In search of the ground

The arguments of the bulls sound plausible: With enormous speed, the USA in particular has launched gigantic aid programmes – 2 trillion dollars, including helicopter money for every American. The Fed is already working on a new program to support small businesses. The governor of New York, Andrew Cuomo, suspects that a plateau has been reached in the US virus hotspot in the matter of Covid-19. Italy reports a small increase in new cases. In Europe and Asia, too, massive economic stimulus programs have been launched.

Imminent depression

But also the bears have some facts on their side: The impact of the deflation shock on corporate earnings worldwide is still impossible to assess. Many smaller companies in particular are likely to collapse soon if reserves run out and government loans are not sufficient. The former head of the Federal Reserve, Janet Yellen, suspects that unemployment in the USA is currently at 12 to 13 percent. In her opinion, the US economy will probably shrink by around 30 percent. So the truth is in the eye of the beholder.

Morgan Stanley’s turning into a bull.

One of the biggest bears on the market has just mutated into a bull: Michael Wilson of Morgan Stanley confessed to being the “buyer of dips” because the region of “2400-2600 on the S&P 500 will prove to be very good entry points for those with a time horizon of 6-12 months.” Recently, he explained to his clients in his weekly outlook “Sunday Start” why he switched sides. The essence: “Bear Markets END with Recessions”. The question remains for us what happens in a depression. In the end, the Great Depression of 1929 lasted a bitter 43 months. How long will this deflation last? Or will it really remain “only” a recession because of the countermeasures, quickly washed away by masses of freshly printed money?
This is exactly what Wilson of Morgan Stanley was aiming for. He wrote:
„To summarize, with the forced liquidation of assets in the past month largely behind us, unprecedented and unbridled monetary and fiscal intervention led by the US, and the most attractive valuation we have seen since 2011, we stick to our recent view that the worst is behind us for this cyclical bear market that began two years ago, not last month.“ And then he referred to a currently almost unthinkable bullish factor: inflation could return.

Bear remains bear

And so to the opposition. Hedge fund manager Dan Niles continued to come out as a bear in an interview with “Yahoo Finance”. He had already warned his clients in February that the market had not yet considered the consequences of Corona. Accordingly, he had positioned his Satori Fund and made profits in the worst quarter of the Dow Jones.
Now he warned according to Marketwatch: “If you go back and look at history, there are nine times that the market has sold off about 30% or so since the 1920s, so it’s pretty normal.” “You get one of these every 10 years or so and if you look at every one of them, you always get these bear market rallies.” Accordingly, Niles warned that even after the painful pullback, valuations were still far above historical norms. It could well go down another 30 percent. He did not believe in a V-shaped recovery because of the unemployment rate of around 10 percent; he even suspected that unemployment in the USA would be more likely to be 20 percent. And on the globe the situation is no different. That’s why he has further expanded short positions. However, he has bought into sectors that should prove resistant to new bear markets. Specifically: Activision, Take-Two Interactive and Amazon.

Goldman warns of lack of share buybacks

For Goldman Sachs customers, too, everything revolves around the question of whether the market will test its low again. One factor that could answer this question is the issue of share buybacks. The investment bank warned that around 50 US corporations have now put their payback programs on hold. This would correspond to a sum of 190 billion dollars, or a quarter of the total amount in 2019. Further caps are likely to be imposed. This means that an important bullish factor is missing on the stock market. Chief equity strategist David Kostin said: “higher volatility and lower equity valuations are among the likely consequences of reduced buybacks. His forecast for 2020: Dividends in the S&P 500 will fall by 25 percent this year and buybacks by 50 percent compared to 2019.

1987 or 1929?

And this brings us back to Morgan Stanley’s initial analysis and the answer to the question of whether the low has now been reached. Here is the unsatisfactory answer: It depends on the nature of the setback and whether history repeats itself. If we are dealing with a crisis along the lines of the 1987 crisis, then in the short term – i.e. in the two to three months following the low – a retest should be imminent, but then a rapid V-shaped recovery. But if we are dealing with 1929, then no retest is to be expected in the short term. After the crash in the fall of 1929, the Dow ran up until the spring of 1930.

And now the evil trap: Everything depends on the time horizon. The blog “ZeroHedge” marked the spoilsport here and looked at the performance of the Dow Jones during the Great Depression of 1929 on a three-year horizon. And then it really gets uncomfortable for the bulls.
The Bernstein-Bank wishes you good luck with your trades on this one hand and on the other hand!

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.

It is already April, and the situation in the world economy and financial markets looks very alarming and not very predictable. Markets are highly dependent on many factors, so Monday’s bullish growth is probably the result of news of a slight improvement in the Coronavirus pandemic.

Gold

This is not the first or the last crisis in the world economy, but what is most alarming is that in the movement of stock indices and commodity prices there is less real economy, but more random factors. On Monday, major indices rose quite well, but it was more like a technical correction before another wave of decline. The DAX rose 5.7% and closed at 10072, while the S&P500 rose more than 6%. Although the S&P500 rose impressively, the rally looks weak. The bulls are facing tough resistance at the current level.

Euro

The Euro stays under pressure. The fight against the virus is very slow and the economy and especially small and medium sized businesses are severely affected. A meeting of the Eurogroup will take place today at which we would like to hear a strong solidarity on fiscal policy for the near future. If the results of this meeting are similar to the previous one, where there was a complete lack of agreement among the leaders of financial markets, then the euro could suffer very badly. On Monday, EUR/USD traded at 1.0780.

Oil

The oil market is now very much dependent on political decisions. The OPEC meeting has been postponed to April 8-9. The US has made it clear that it is not going to reduce its oil production and in this situation it has a much greater margin of safety than small players in the market. The meeting will be the key one for prices, but even if the decision to cut is made, the demand for oil will remain squeezed due to the virus spread. The maximum we can see in the near future is the WTI oil price reaching above $30 per barrel.

Gold

The first trading day of the week showed the current investors’ sentiment. A strong rise in price per ounce indicates that the appetite for risk is completely lost, and investors are trying to wait out the volatility and uncertainty in the markets. Some technical correction is possible in the coming days, but the level of $1700 is already very close and we think that gold will try to break it this week.

What’s waiting for us today?

06.30 Decision on interest rate in Australia
08.00 Volume of industrial production in Germany
12.00 Eurogroup meeting
16.00 Canadian Business 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.

Markets survived the first week of April, but so far the main topic is the spread of COVID-19 virus in the world. Mortality is rising in the United States, as well as in Europe. In the next few months we expect the economic reporting of countries to be catastrophic. Although in many respects all the pessimistic sentiments of investors are already in the markets, no one knows how long this epidemic will last, but everyone understands that nothing good will happen.

EUR/USD

Markets are acting on their own right now. The spread of infection in the US is gaining momentum and it is likely to have a very strong impact on the first economy in the world. Even Donald Trump himself says there will be a lot of victims, how many he can’t say for sure. The U.S. Federal Reserve is working at its limit. The balance is growing at an astronomical rate, and no one knows what to do next in the current situation. Probably, in the near future there will be some algorithm in the work and cooperation of all world banks to resolve the crisis.

Euro

It is very difficult to assess the state of the currency, when all the news converge on how to fight the coronavirus in Europe. The situation is complicated when people are sitting in quarantine and the economy is not working at all. Euro, as predicted, has rolled back to the level of 1.08 due to the EU government’s weakness for specific measures. This week we will have to observe how Europe will cope with the epidemic. No economic data worries investors anymore. Everybody understands that this data will come out with very negative indicators and is unlikely to have a strong impact on the current situation.

Oil

There is a very interesting situation on the oil market. The leaders of the USA, Russia and Saudi Arabia held several telephone conversations with each other and agreed to reduce oil production. The market reacted instantly and prices went up. In the near future, we are waiting for concrete decisions between the main oil-producing countries and are monitoring the situation. It is possible that oil will rise in price this week on the optimism of these negotiations.

Gold

The gold stays on the trend. Our forecast for precious metal remains unchanged. It is very close to the level of 1700, and the situation in the world does not change for the better. Therefore, gold is expected to rise and the highs will be updated.

What’s waiting for us today?

08.00 Volume of production orders in Germany
10.30 UK Construction Business 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.

03.04.2020 – Special Report. Fasten your seat belts: After hopeful signals from Donald Trump and from Texas, oil prices are through the roof. Oil stocks are also rising sharply. Allegedly, OPEC+ production is soon to be reduced by 10 to 15 million barrels of oil per day. Moscow waves them off, the Saudis sail. But the supposed news is enough to force shorties to close their position and catapult them out of the market.

Largest daily profit ever

Yesterday, Brent was up 47 per cent and WTI posted a gain of almost 25 per cent. According to Oilprice.com, Brent posted the biggest daily gain ever yesterday. The reason was a news story that was too good to be true for the battered oil bulls.

Hope to cap 15 million barrels

Trump reported yesterday on Twitter that he had spoken with Crown Prince Mohammad bin Salman in Saudi Arabia and the Saudis in turn with Russia’s President Vladimir Putin – Trump hopes and expects that production will soon be capped at ten million barrels a day. In front of journalists Trump concretised that it could even be 15 million barrels. Bloomberg reported, citing insiders, that the statement was based on a telephone call from Trump to bin Salman, who hoped to win other countries over to the cut. A second source said Trump’s statement was purely “aspirational” – based only on hope.

Texas pours gasoline on the fire

But Ryan Sitton, the head of the Texas Railroad Commission (TCR), also shot up prices. He reported on Twitter that he had talked to Russian Energy Minister Alexander Novak about “10 MBPD out of global supply”. He said he would shortly be talking about this with Saudi oil minister Prince Abdulaziz bin Salman. The TCR is the regulatory authority for the suffering oil industry in Texas. In fact, there are considerations in Texas for a cut in production, which the Saudis would like to hear.

Money for US oil industry

The White House also provided relaxation. Treasury Secretary Steven Mnukhin said yesterday that the US oil industry, which is on the verge of collapse, could receive loans from the Federal Reserve. The Fed may grant loans of 4 trillion dollars as part of the aid program recently passed by Congress. The US administration also discussed import duties for foreign oil. China also supported the prices: Beijing wants to use the low oil prices to build up its reserves.

Moscow denies

However, Moscow immediately killed yesterday’s news: Kremlin spokesman Dmitry Peskov announced that Putin had not spoken with Mohammad bin Salman, there was no agreement to cut subsidies to support prices. He further told the news agency TASS that the situation in the oil market was unsatisfactory for all sides, but nobody had started to talk about any deals. Russia’s oil minister Novak said he hoped global demand would pick up in a few months.

Saudis want to force others to cut

Meanwhile, according to Oilprice.com, the Saudis called for an emergency meeting of OPEC+, which could lead to an agreement “with another group of countries” outside the expanded cartel. That means the USA, Norway, Brazil. Which also means that there is ultimately no agreement at all. Most recently, the Dow Jones news agency reported that the Saudis would only cut about 2 million of their production – but only if other countries follow. The rest of the 15 million barrels would have to be contributed by others.

Bears released for shooting

Oilprice.com analyzed that the Saudis had scored points by calling an emergency meeting in Washington. However, a massive cut in production by the Saudis on their own or a joint big step with Russia was highly unlikely. Ole Hansen of Saxo Bank commented on Twitter that yesterday’s news had sucked a lot of fresh money from the retail business into the market. And then he commented quite drastically: “Trump just created a show in the oil market which many will lose from.”

It’s on the Kremlin

The ball in the oil price is now in Moscow – Texas and the Saudis have signalled their agility with yesterday’s action. So far, however, there has been no sign of Igor Sechin, head of Rosneft, giving in – he wants to destroy US oil producers by keeping oil prices low.
However, the group of pragmatic economic liberals in the Kremlin could possibly change President Vladimir Putin’s mind. Russia is at a standstill; Putin has just extended the paid break until the end of April. According to the “Moscow Times”, former finance minister Alexei Kudrin, currently economic advisor in the Kremlin, warned the president that even with moderate setbacks from Corona, the Russian economy will shrink between 3 and 5 percent this year. This means that millions of Russians are likely to lose their jobs – the unemployment rate could skyrocket from the current 4.6 percent to 15 percent, according to Igor Nikolayev, an analyst at management consultant Grant Thornton.

It is quite possible that this is why Putin is putting the nationalist Siloviki – the hardliners from the secret service, the military and the energy industry – out of action under Sechin and still manages to get a deal with the Saudis. So you see: politics is swirling the markets around. The only thing that is clear is that nothing is clear – only that volatility will remain with us.
The Bernstein Bank wishes successful trades despite all this!

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.

Markets are not recovering from the growing pandemic in the world, and are under great pressure. Due to the growing number of diseases, the forecast of mortality is growing, in turn, investors are abandoning risky assets and prefer calmer products such as gold. The coming couple of weeks will be very difficult for the whole world, because the epidemic is raging and there is no prediction when the disease will go down.

WTI

American markets have mixed reactions to the current situation. On the one hand we see a huge unemployment problem that has been going on in the last few months, on the other hand we see an Fed that wants to keep any, even the smallest, business in the US. It is not yet clear how this struggle will end. The S&P on Thursday is practically standing still. DAX is up 0.3% to 9570.

Euro

The European currency is going through a difficult time. In the Eurozone, no decisions have yet been made to stabilize the economy. Complicated situation with the pandemic, lack of coordinated decisions between the leaders of European countries lead to problems in the European currency. The Euro has been falling for the fourth consecutive day and until we see some serious action from the EU, the decline will continue.

Oil

How important it is when world leaders announce certain arrangements for oil production. On Thursday, negotiations between the leaders of the USA, Russia and Saudi Arabia to reduce oil production added optimism to investors. The price of WTI oil rose by 20% in a very short time. Reduced supplies are a very good sign for the markets in the current situation. If the leaders keep their promises, we will see a correlation between supply and demand, which will have a positive impact on the oil price.

Gold

Gold continues to move to its highs, and there is no reason to stop. Maybe today we will see a certain correction in price due to weekly profit taking. If that happens, the price decline will be a good level for buying gold for the next few weeks. This metal is in the favorites and will add to the price.

What’s waiting for us today?

10.30 UK Service Business Index
14.30 US Change in Non-farm Payrolls
14.30 US unemployment rate

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.

A new quarter begins and a new turmoil in the markets is likely. Huge losses among the population of Europe and the U.S. are gradually beginning to erase the positive of investors, as well as all the growth in the U.S. markets last week. Investors are likely to be obsessed with the COVID-19 pandemic data at this difficult time, because almost all the statistics that will be released soon will be very poor and unlikely to contribute to market growth.

DAX

European markets closed at minus on Wednesday. DAX lost almost 4% and closed at 9544. However, investors are not ready to take any risks in the middle of the epidemic. Indexes of business activity in Spain and Germany came out below expectations, while in Italy the index fell to a record low of 40.3 points. In spite of negative news from all sides, we do not see such sharp movements as in early March. Apparently, the market has come to terms with the current situation and is waiting. The next two weeks will be key for assessing the global economy, whether we have reached the bottom and whether the recovery will begin.

US Dollar

For several weeks now, the US dollar has been bought on all fronts of the market. Investors believe that in the current situation the U.S. economy will still recover the fastest, as it has always been a driver for other markets. Today’s data on primary US unemployment claims will be indicative. With these values it will be possible to see how bad the situation in the US is. In the nearest future the Fed is obliged to take actions to weaken the dollar and limit the possibility to buy it. We wait for the beginning of the bearish trend for the dollar in the next week.

Japanese Yen

The yen is the only currency other than the US dollar that has resisted the pandemic and is in great demand among investors. USD/JPY has been fluctuating at the average level of 106 for several weeks. In general, there are all chances that the Yen will strengthen to 105 and then 104. Investors are buying this currency more and more to save their funds.

Gold

Our projections are beginning to come true. Already on Tuesday gold finished its downward correction and on Wednesday it was restoring its positions. In the coming days, gold will try to go above $1600 per ounce again. There are all the prerequisites for that. In the current situation with the pandemic, investors are ready to buy the shelter assets.

What’s waiting for us today?

09.00 Change in the number of unemployed in Spain
10.30 UK Construction Business Index
14.30 USD Initial Jobless Claims for March

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.

01.04.2020 – Special Report. From the bulls’ point of view, the oil market has had its worst quarter ever. But the downward slide could continue. Because of the global deflation shock in the corona crash and the price war between Saudi Arabia and Russia. And above all because of Igor Sechin, head of Rosneft – he wants to destroy the American oil industry. Now the incredible has happened: The first US trader pays money to have his oil taken away.

A horrible quarter

Brent futures have just fallen to their lowest level in 18 years. In the first three months of this year, the price for the North Sea variety fell by around 65 percent – the worst quarter since 1990 according to CNBC. WTI lost 67 percent in value, the worst performance since contract trading began in 1983. The situation is unlikely to improve any time soon.

Full warehouses everywhere

Fatih Birol, head of the International Energy Agency, warned at an Atlantic Council event: “The effects of the glut will be felt for years to come”. Demand for oil is dropping by 20 million barrels a day. The trading house Vitol Group also quoted this figure. This would mean that both Russia and Saudi Arabia would have to stop production completely in order to bring the market back into balance. The Eurasia Group saw the limit in the world’s tanks reached in the middle of the year. Standard Chartered sees even less time: the oil tanks on the globe would be full in six weeks.

The industry is cutting capacity in the refineries. Exxon has just announced a reduction in processing at its Baton Rouge refinery, the second largest in the US. Royal Dutch Shell announced expense cuts of 20 percent or $5 billion, according to Oilprice.com. This means that the flood of oil is back to the producers.

Brent at $10

Goldman Sachs judged that Brent was more likely to be hedged against the fall in prices and could keep at 20 dollars because the supply chain was short – tankers could always drop anchor on the high seas. We think: If there are enough empty tankers. The research house JBC Energy was more skeptical about Brent: “In such an environment, it is as possible for Brent prices to briefly go to $10 per barrel as it was back in 1986 or 1998”.

Goldman saw negative US prices

Goldman Sachs painted the devil on the wall for the US sponsors because of the logistics costs. Chief commodity strategist Jeffrey Currie saw negative prices coming. A rural producer would pay customers to buy oil. The entire logistics chain has a relatively small storage capacity – pipelines, terminals, oil tanks, refineries, etc. can hardly take up any crude. In view of the cost of closing a borehole, however, producers would prefer to pay a premium for the offtake.

19 cents donated for a barrel of heavy oil

And that’s exactly how it happened. According to Bloomberg, the large trading house Mercuria offered 19 cents to buy the Wyoming Asphalt Sour, a dense heavy oil used for the production of tar. Prices in other niche markets are also sliding rapidly towards zero: Oklahoma Sour was offered for 5.75 dollars, Nebraska Intermediate for 8, and Wyoming Sweet slid to 3 dollars a barrel. And Texas Midland WTI recently traded at just $10 a barrel, according to Goldman. Oil from Canada, represented in the Canada Western Selected Index, even traded at just over $4 a barrel.

KO of the US oil industry

The industry is therefore well prepared for this. The investment bank Raymond James judged that the US oil industry will collapse at prices well below 30 dollars for WTI. Oilprice.com reported with reference to Reuters that the break-even for the US oil industry is between 39 and 48 dollars per barrel.

And this is the plan of Igor Sechin, head of the Russian oil company Rosneft. The manager with the charming nickname “Darth Vader” is the grey eminence in the Kremlin and the strongest “silovik” – a representative of the nationalist power apparatus. He is also the driving force in the price war between Russia and Saudi Arabia. About two weeks ago, Sechin said on Russian state television, according to Radio Liberty, that as soon as the American oil industry was knocked out, the price of oil would rise sharply again. He predicted 50 to 60 dollars per barrel by the end of the year. The USA had previously ousted Russia from many traditional markets in Europe and Asia.

Rosneft and Russia with staying power

Sechin added that Rosneft could keep its production at the current level for another 22 years without tapping new sources. The American sanctions had hit the US banks harder than Russia, as they were now no longer collecting interest from Russian oil producers. By the way, according to Statista, Russia is sitting on gigantic gold and currency reserves of 570 billion dollars, so the Kremlin can cope with lower energy prices for quite some time. We add: Of course, even in the gigantic Russia the oil has to be transported over long distances via pipelines or trains to the ports. But if Sechin decides to do so, then it will be done for free for a short time.

Communist trauma

Setschin’s thinking thus revolves around America – a typical trauma in Russia’s elite. Together with the Saudis, the USA caused oil prices to collapse during the Cold War, leading to the national bankruptcy of the USSR. From 1988 onwards, Sechin experienced this as an employee in the foreign department of the State University of Leningrad, a cadre forge of the KGB. From 1991 to 1996 he was Vladimir Putin’s chief of staff in the city administration of the now renamed Saint-Petersburg. Chaos raged there: the economy had collapsed, the Tambovskaya mafia was spreading. An unprecedented humiliation for the communist cadres.

The revenge of the siloviki

In 1996, Sechin moved to Moscow together with Putin in the presidential administration under Boris Yeltsin. Under Putin, the mafia went to the dogs, Moscow drastically increased its arms expenditure, oligarchs were eliminated, the oil company Yukos was destroyed and sold to Rosneft. The siloviki stabilized Russia – at the same time the oil price rose because China became a world power. And today the siloviki are paying it back to the Americans. So you should consider putting shorts on oil for a while longer – but also on the ruble. The Bernstein Bank wishes successful 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.