CFD Markets News and Forecasts — 20-04-2020

FXStreet reports that economists at TD Securities note that, while appreciating the bold and rapid deployment of stimulus measures to backstop the market an economy and earnings outlook is still needed to discount risk associated with an outlook.

“What stocks reflect now is not exactly informative or clean. At some point, the economy/growth will need to matter and earnings will be needed to discount the outlook. Looking at the S&P 500 and forward earnings estimates, the two have diverged in a spectacular and uncharacteristic fashion.”

“Calling a top in equities - even if temporary - has been tough for the bears (ourselves included). But we remain comfortable with the view that risk has overshot and a reality check will need to sink in.”

“Markets may view 2792 in the S&P 500 as a notable pivot, this represents the 50% retracement of the all-time highs and March lows. Failure to hold above this level might instill some bearish momentum in risk, just as earnings season continues to unfold.”

FXStreet notes that there is yet another wedge forming in the yellow metal. The market may be bullish on gold, but positioning certainly doesn't reflect it, as analysts at TD Securities note.

“Dry-powder analysis suggests a modest bullish tilt in trader positioning, but no outsized length given the number of traders long.” 

“The unprecedented scale of QE, the clean positioning lens, and the shrunk left tail (with little risk of further CTA deleveraging) all suggest that the outlook for gold prices remains particularly strong.”

“The wedge between gold's outlook and positioning is creating a powerful set-up for a sharp rise in prices.”

FXStreet notes that the U.S. Administration will release Initial Jobless Claims data on Thursday at 12:30 GMT. Economists at TD Securities shared their forecast.

“Google search activity suggests that jobless claims will fall again, with the level still extraordinarily high. We forecast a drop to 4.2 million from 5.2 million last week and as high as 6.9 million in the last week of March.” 

“We estimate an extra 19.3 million claims relative to the previous trend over the last four weeks, equivalent to 11.7% of the labor force. That number will rise to 23.2mn, or 14.1% of the labor force if our forecast for the upcoming week is realized.”

• We shouldn't move too quickly easing lockdown
• Germany must not move too quickly with next easing step
• We will only know impact of easing measures in 14 days
• We're looking into further steps to help economy such as measures to help restaurants and extending the short-term work scheme
• Germany to increase resources to track infections

• Says fallout from virus will mean that 170 countries will have negative economic growth in 2020
  
  

Statistics Canada reported on Monday the wholesale sales rose 0.7 percent m-o-m to CAD65.65 million in February, following an unrevised 1.8 percent m-o-m gain in January.

Economists had forecast a 0.5 m-o-m decrease for February.

According to the report, higher sales were recorded in three of seven subsectors, accounting for 51 percent of total wholesale sales. The motor vehicle and motor vehicle parts and accessories subsector led the increase with a 4.2 percent m-o-m climb, driven by the motor vehicle industry (+6.5 percent m-o-m) due to gains in manufactured motor vehicles and exports of passenger cars and light trucks, following extended temporary shutdowns of certain automotive assembly plants in January.

In y-o-y terms, wholesale sales jumped 3.8 percent in February.

Meanwhile, wholesale inventories declined 0.3 percent m-o-m in February. Inventories were down in four of seven subsectors. The inventory-to-sales ratio edged down to 1.40 in February from 1.44 in January.

FXStreet reports that according to analysts at Rabobank, Thursday is shaping up to be a crucial day for the outlook on the EUR with the preliminary April PMI data due for release and EU leaders holding a video summit.

“The stakes are particularly high going into the EU summit on Thursday. Given the difficulties associated with finding an agreement coupled with the rising economic headwinds, we expect the EUR to come under further pressure.”

“We have frequently argued that for the SNB, its holy grail of a weaker CHF is likely to be found in a strong and politically coherent Eurozone economy which would draw FX flows into the EUR and away from the CHF.”

“We see scope for EUR/CHF edging to 1.04.”

U.S. stock-index futures fell on Monday as market participants weighed the latest coronavirus news along with a plunge in oil prices.

Global Stocks:

FXStreet reports that in the opinion of analysts at HSBC the loonie is likely to remain weak. The USD/CAD pair is trading at 1.4106.

“According to our analysis based on Bloomberg data, correlations between USD/CAD against the S&P500 Index are somewhat higher than against oil prices over the last month and last quarter, but not materially so. In other words, the CAD is slightly more fixated on risk appetite than oil prices.”

“With G10 policy rates stuck at zero or below for the time being and most central banks engaging in asset purchases and balance sheet expansion of some kind, it is hard for individual cyclical stories to come to the fore for any currency, in our view.”

“We expect the weakness in the CAD to persist in the RORO world, alongside low oil prices.”

(company / ticker / price / change ($/%) / volume)

The Chicago Federal Reserve announced on Monday the Chicago Fed national activity index (CFNAI), a weighted average of 85 different economic indicators, came in at -4.19 in March, down from a revised +0.06 in February (originally +0.16), pointing to a substantial decrease in economic growth. That was the lowest level since January 2009.

At the same time, the index's three-month moving average fell to -1.47 in March from -0.20 in February.

According to the report, All four broad categories of indicators used to construct the index made negative contributions in March, and three of the four categories declined from February

Production-related indicators made a negative contribution of -2.72 to the CFNAI in March, down from -+0.06 in February. Employment-related indicators contributed -1.23 to the CFNAI in March, down from +0.07 in February. The contribution of the personal consumption and housing category to the CFNAI fell to -0.19 in March from -0.02 in February. Meanwhile, the contribution of the sales, orders, and inventories category to the CFNAI ticked up to -0.05 in March from -0.06 in February.

Walt Disney (DIS) downgraded to Neutral from Buy at UBS; target lowered to $114

Walt Disney (DIS) downgraded to Neutral from Outperform at Credit Suisse

Boeing (BA) downgraded to Neutral from Buy at Citigroup

DuPont (DD) upgraded to Overweight from Neutral at JP Morgan; target $55

Citigroup (C) upgraded to Buy from Hold at Argus; target $60

GBP dropped against most major rivals in the European session on Monday amid lingering coronavirus concerns.

The UK recorded 596 new coronavirus-related hospital deaths on Sunday, taking the total number to 16,060. That was lower than the 888 deaths announced on Saturday and the lowest single-day death toll since 6 April, but the overall situation is still of concern, as the UK is one of five countries that has registered more than 10,000 deaths. Meanwhile, the number of confirmed COVID-19 cases in the UK reached 120,067.

Cabinet Office Minister Michael Gove said that the British government is not considering easing lockdown measures just yet.

Market participants also assessed the UK government's latest move to support the businesses driving innovation and development in the country. Chancellor Rishi Sunak announced a new £1.25 billion support package, which includes a £500 million investment fund for high-growth companies impacted by the crisis and £750 million of grants and loans for companies focusing on research and development.

FXStreet reports that according to Westpac Institutional Bank, the Australian market will increasingly refocus on the outlooks for its main commodities, posing downside risks over the medium-term.

“Iron ore prices have help up well, but that’s mainly due to supply bottlenecks (Vale dam disaster, weather damage to ports, COVID-related shipping constraints). Once those have been cleared, there’s potential for iron to more closely reflect the deterioration in demand. So too for coal, and with a perhaps longer lag, agricultural commodities.” 

“Multi-month, we hold a negative bias for AUD/USD, targeting as low as 0.59.”

FXStreet reports that analysts at TD Securities have revised their FX forecasts for substantially weaker currencies vs USD until at least the end of Q2. 

“CNY should be the outperformer, stabilizing around 7.15/7.20 vs USD by the end of Q3.” 

“The worst-hit over Q2 is likely to be PLN (-8%), followed by ZAR (-6.7 and above 20 vs USD) and HUF (-6.6%).” 

“By the end of the year, we expect MXN (-11.7%) and TRY (-9.3%) to be the worst performers. On the contrary, RUB is the likely outperformer (+6.4%).”

FXStreet reports that according to JP Morgan Asset Management, the 1Q20 earnings season will provide an important first look at how the ongoing pause in global activity is impacting corporate earnings and what investors should expect over the remainder of the year.

“We expect 1Q20 S&P 500 operating earnings to be down -14.6% from a year prior.”

“S&P’s expects 2020 operating earnings per share to come in at a level of $146.57, representing a -6.7% contraction from a year prior. This stands in contrast to pro forma estimates, which suggest 2020 earnings will decline -11.9% in 2020 to a level of $146.57. We are less optimistic, and believe earnings will contract -20% this year; in our opinion, consensus has some catching up to do.”

“We continue to advocate for a focus on quality with a dash of cyclicality. This means embracing sectors like health care, technology and consumer staples, and taking advantage of underweights in highly-levered sectors like energy and REITs to maintain benchmark exposure to sectors like financials.”

FXStreet reports that economist Ho Woei Chen, CFA at UOB Group assessed the recently published GDP figures in the Chinese economy.

“China’s 1Q2020 GDP came in worse than expected at -6.8%y/y… with contractions registered across the primary (-3.2%), secondary (-9.6%) and tertiary (-5.2%) industries. This is China’s first GDP contraction ever recorded.”

“While the secondary industry’s contraction was the worst at -9.6% y/y amongst the industries in 1Q2020, manufacturing nonetheless showed the potential for the fastest recovery as factories restart. March data shows uneven recovery in the Chinese economy with manufacturing registering stronger rebound but consumption and investment remained in double-digit contraction and were also below consensus expectations. As such, we expect the government to target efforts at boosting consumption and investment ahead.”

“We now expect China’s economy to expand by just 1.8% in 2020, down from our earlier projection of 4.1% (2019: 6.1%). This assumes sub-par growth in the next two quarters at 3.5% y/y in 2Q2020 and 4.9% y/y in 3Q2020 and recovery to pre COVID-19 trend growth of 5.7% y/y in 4Q2020.”

Oil: Prices could be higher next year – Morgan Stanley

FXStreet reports that Andrew Sheets, a Chief Cross Asset Strategist at Morgan Stanley, says that the steep decline in oil prices could reverse next year.

“Oil prices could remain very low in the second quarter, but it also means that prices could be higher next year and the years after, as the global economic recovery and the supply cuts of this year once again balance demand.”

“While the price of a barrel of oil in the US is about $20 today, our analysts think it could average about $40/barrel next year, or about twice the current price.”

April 20

After the Close:

IBM (IBM). Consensus EPS $1.80, Consensus Revenues $17620.14 mln

April 21

Before the Open:

Coca-Cola (KO). Consensus EPS $0.45, Consensus Revenues $8332.86 mln

Travelers (TRV). Consensus EPS $2.83, Consensus Revenues $7305.17 mln

After the Close:

Netflix (NFLX). Consensus EPS $1.64, Consensus Revenues $5746.09 mln

Snap (SNAP). Consensus EPS -$0.08, Consensus Revenues $415.84 mln

April 22

Before the Open:

AT&T (T). Consensus EPS $0.87, Consensus Revenues $44750.33 mln

Delta Air Lines (DAL). Consensus EPS -$0.87, Consensus Revenues $9464.93 mln

After the Close:

Alcoa (AA). Consensus EPS -$0.18, Consensus Revenues $2368.78 mln

April 23

Before the Open:

Freeport-McMoRan (FCX). Consensus EPS -$0.17, Consensus Revenues $2975.31 mln

After the Close:

Intel (INTC). Consensus EPS $1.26, Consensus Revenues $18606.02 mln

April 24

Before the Open:

American Airlines (AAL). Consensus EPS -$2.22, Consensus Revenues $8923.88 mln

American Express (AXP). Consensus EPS $1.64, Consensus Revenues $10601.46 mln

Verizon (VZ). Consensus EPS $1.23, Consensus Revenues $32434.71 mln

• Says "rapid and strong economic recovery" unlikely as many coronavirus restrictions can remain "until a medical solution such as vaccination is available"

• Projects economy to grow between 5.5% and 8.5% in 2021
  
  

CNBC reports that major U.S. stock indexes may have recovered from their recent lows, but Citi Private Bank warned that the worst may not be over.

"In the event that we have a very significant second wave of disease in the United States that cause a further shutdown of the economy ... that clearly is not priced into the market," David Bailin, the bank's chief investment officer, told CNBC.

"The other thing that may not be priced into the market is the fact that this virus may take another 18 to 24 months to really cycle through the globe, and ultimately have a vaccine," he added.

With the pandemic potentially dragging out a lot longer, Bailin said he has "significantly" lower expectations for company earnings compared to most analysts. He explained that the degree to which the coronavirus pandemic hit businesses in March would "hint" at what will happen in the coming quarters.

"In the second quarter we expect earnings to literally fall by 40% or more across the board, and we don't expect earnings in the United States to get back to their first quarter levels for nine quarters from now," he said.

That doesn't mean that investors should stay out of U.S. financial markets. Instead, Bailin said there are some good opportunities in the markets stateside.

FXStreet reports that USD/JPY remains in a short and broader medium term range, with 106.92 and 108.00/08 the key short-term levels, per Credit Suisse.

"USD/JPY was capped on Friday by the 13-day average and recent highs at 108.00/08 as expected to keep the market in its tight recent range."

"We remain biased towards a move back lower, with support seen at 107.45/43 initially, then 107.17, below which should see a retest of 106.92."

"Above 108.00/08 would turn the short risks mildly higher within the range, with the next resistance seen at the 200-day average at 108.32. More important resistance is at 109.32/39."

According to the report from Eurostat, the first estimate for euro area (EA19) exports of goods to the rest of the world in February 2020 was €189.3 billion, an increase of 1.6% compared with February 2019 (€186.3 bn). Imports from the rest of the world stood at €166.3 bn, a fall of 1.0% compared with February 2019 (€167.9 bn). As a result, the euro area recorded a €23.0 bn surplus in trade in goods with the rest of the world in February 2020, compared with +€18.5 bn in February 2019. Intra-euro area trade fell to €161.5 bn in February 2020, down by 0.6% compared with February 2019.

In January to February 2020, euro area exports of goods to the rest of the world rose to €373.2 bn (an increase of 0.9% compared with January-February 2019), and imports fell to €348.4 bn (a decrease of 0.7% compared with January-February 2019). As a result the euro area recorded a surplus of €24.8 bn, compared with +€19.1 bn in January-February 2019. Intra-euro area trade fell to €326.4 bn in January-February 2020, down by 0.9% compared with January February 2019.

Bloomberg reports that according to Goldman Sachs Group Inc., the biggest U.S. companies will slash their cash spending this year amid the uncertainty of the coronavirus pandemic.

"We forecast S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment," strategists led by David Kostin wrote in a note. He continues to expect a big decline in earnings per share for the first and second quarters. He noted that "most investors are already looking ahead to 2021 EPS."

The impact of the coronavirus pandemic fueled a drop of as much as 34% on the S&P 500 from its record high Feb. 19 through March 23. But it has rallied 28% since then, as governments and central banks globally have been rolling out measures to try to keep the financial system operating and provide support to businesses and citizens.

Kostin is still bullish on U.S. stocks. In a report last week he scrapped a prediction that the S&P 500 might fall further, saying the gauge had likely bottomed due to fiscal and monetary policy support. He maintains a year-end target of 3,000 on the benchmark, which closed Friday at 2,875. That doesn't mean it'll be all smooth sailing, though -- late last month, he estimated that dividends on the S&P 500 could fall by a quarter in 2020, and he projects buybacks will drop by half.

According to the report from European Central Bank, the current account of the euro area recorded a surplus of €40 billion in February 2020, increasing by €8 billion from the previous month. Surpluses were recorded for goods (€33 billion), primary income (€10 billion) and services (€5 billion). These were partly offset by a deficit for secondary income (€8 billion).

In the 12-month period to February 2020, the current account recorded a surplus of €339 billion (2.8% of euro area GDP), compared with a surplus of €361 billion (3.1% of euro area GDP) in the 12 months to February 2019.

In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €482 billion in the 12-month period to February 2020 (up from €87 billion in the 12 months to February 2019). Over the same period, non-residents made net acquisitions of euro area portfolio investment securities amounting to €508 billion (up from €23 billion).

FXStreet reports that strategists at TD Securities expect the yellow metal to settle around a near support before recovering.

"Money managers aggressively increased their long gold exposure, as volatility moderated, the interest in the yellow metal grew despite the fact that risk appetite was on the increase as well."

"Markets also positioned in gold in response to waning USD upward momentum, sending gold prices toward multiyear highs."

"Traders also increased shorts, as prices moved toward resistance levels."

"Given the growing risk appetite and profit taking, we would expect prices to settle near support at around $1,667 with net long exposure moderating, before a move into $1,800/oz territory."

FXStreet reports that in opinion of FX Strategists at UOB Group, USD/JPY could attempt a move higher although it is seen within the broader 107.00-109.00 range.

24-hour view: "Our view for USD to 'advance to 108.20 first before a pullback can be expected' did not materialize as it traded between 107.29 and 108.07 last Friday. The underlying tone still appears to be firm and USD could still move up to 108.20. That said, the next resistance at 108.50 is unlikely to come into the picture. Support is at 107.50 followed by 107.25."

Next 1-3 weeks: "There is not much to add to our view from last Thursday (16 Apr, spot at 107.70). As highlighted, the current recovery in USD could extend higher but any advance is viewed as part of a 107.00/109.00 range. In other words, a sustained advance above 109.00 is unlikely."

The US dollar rose against the euro and the yen and rose slightly against the yuan on the back of a base rate cut by the People's Bank of China (PBOC).

Traders are evaluating plans by some States to gradually ease measures taken to curb the spread of the coronavirus. US President Trump said on Saturday that a number of States will begin to gradually return to normal life this week. Texas and Vermont are planning to open some stores first.

Earlier, Trump said that a plan for economic recovery has been developed. The first stage of the plan provides that state authorities can move to ease restrictions after they have recorded a" downward trajectory "of cases of COVID-19 detection within a 14-day period, or a" downward trajectory " of positive tests during the same time period.

Meanwhile, Japanese exports in March 2020 declined at the highest rate since July 2016 - by 11.7% - amid weakening economic activity around the world due to the COVID-19 coronavirus pandemic. Japan's foreign trade surplus fell to 4.95 billion yen in March from 522.7 billion a year earlier.

The People's Bank of China has lowered its benchmark interest rate to help revive an economy that has been hit hard by the crisis caused by the coronavirus pandemic. The rate on loans for the year was reduced by 20 basis points to 3.85% from 4.05%. The rate on loans for five years or more has been lowered to 4.65% from 4.75%.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, rose 0.20% from the previous day.

eFXdata reports that Credit Agricole CIB Research discusses CAD outlook and notes that the currency is particularly vulnerable ahead of the Canadian retail sales and CPI inflation for March and given the still gloomy outlook for oil prices.

"The BoC has recently updated its economic outlook for the Canadian economy and highlighted the unprecedented nature and severity of the current downturn as well as the significant downside risks to inflation prospects from here. The economy will remain buffeted by the combined headwinds of very weak oil prices, slowing global energy demand and subdued domestic demand ravaged by the Covid-19 outbreak," CACIB notes.

"Next week's inflation and retail sales data could corroborate the central bank's dire predictions. Indeed, we expect CPI inflation to decelerate significantly. In addition, domestic demand should weaken considerably in part given the sharp deterioration we saw in the Canadian labour market of late. Next to the domestic economy, the outlook for oil prices will remain a drag for the beleaguered CAD," CACIB adds.

According to the report from Federal Statistical Office, in March 2020 the index of producer prices for industrial products decreased by 0.8% compared with the corresponding month of the preceding year. In February the annual rate of change all over had been -0.1%. Compared with the preceding month February the overall index also fell by 0.8% in March 2020 (-0.4% in February). Economists had expected a 0.7% decrease.

Energy prices as a whole decreased by 4.7% (-3.1% compared to February 2020). On an annual basis, prices of natural gas (distribution) decreased by 11.9% whereas prices of petroleum products were down 11.5% and prices of electricity fell by 0.7%. The overall index disregarding energy was 0.5% up on March 2019 and remained unchanged compared to February 2020.

Prices of intermediate goods decreased by 2.1% compared to March 2019 (-0.3% on February 2020). Prices decreased especially regarding non-metallic secondary raw materials such as paper and paperboard (-49.4%). Prices of non-durable consumer goods increased by 4.2% compared to March 2019 (+0.3% on February 2020). Food prices were up 6.0% on March 2019. Pork prices increased by 32.9%, the price of sugar by 17.7%. By contrast, prices of butter fell by 17.8% compared to March 2019 and prices for processed and preserved potatoes were 8.5 % down on March 2019.

• There is no widespread community transmission in NZ

• We have tested over 85,000 people for the coronavirus, one of the highest rates per capita in the world

• Virus transmission rate is now 0.48

• We have done what few countries have been able to

• Elimination doesn't mean zero cases, it means zero tolerance

• Will hold at alert level 3 for two weeks before reviewing further

• Alert level 3 means people should still stay at home

• CNBC reports that the total number of infections worldwide has risen to 2,394,291 and at least 164,938 people have died from the disease, according to the latest figures from Johns Hopkins University.

• The number of coronavirus infections in Southeast Asia has risen quickly in recent weeks, with mounting worries among experts that the region could turn into a hot spot for the fast-spreading disease.

• Singapore reported 596 new cases of Covid-19, the disease caused by the coronavirus, as of noon local time on April 19.

• Global cases: More than 2.39 million

• Global deaths: More than 164,900

• Most cases reported: United States (755,533), Spain (196,664), Italy (178,972), France (154,097), and Germany (145,184).

EUR/USD

Resistance levels (open interest**, contracts)

$1.1002 (770)

$1.0973 (682)

$1.0951 (322)

Price at time of writing this review: $1.0870

Support levels (open interest**, contracts):

$1.0832 (1180)

$1.0810 (1725)

$1.0783 (1855)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 8 is 68032 contracts (according to data from April, 17) with the maximum number of contracts with strike price $1,1200 (3494);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2739 (1656)

$1.2671 (955)

$1.2599 (545)

Price at time of writing this review: $1.2479

Support levels (open interest**, contracts):

$1.2374 (344)

$1.2311 (681)

$1.2236 (589)

Comments:

- Overall open interest on the CALL options with the expiration date May, 8 is 16370 contracts, with the maximum number of contracts with strike price $1,2700 (1656);

- Overall open interest on the PUT options with the expiration date May, 8 is 16732 contracts, with the maximum number of contracts with strike price $1,2850 (1073);

- The ratio of PUT/CALL was 1.02 versus 1.02 from the previous trading day according to data from April, 17

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.