CFD Markets News and Forecasts — 25-03-2020

• Says state and local officials are taking a tougher stance because city residents aren't following the state's guidance encouraging people to maintain a distance of at least six feet from each other
• Total number of coronavirus cases in NY stands at 30,811, up from 25,665 a day ago
• 12% of patients hospitalized, or 3,805 people
• Hospitalizations outpacing projections
• Death toll reaches 285

According to WSJ, U.S. Customs and Border Protection (CBP) sent notices to companies in recent days saying it would consider the delays in tariffs during coronavirus crisis.

FXStreet reports that in the opinion of strategists at TD Securities, crude markets appear to be stabilizing in the low-mid $20/bbl range, but further storm clouds loom on the horizon.

“While the potential for a New Global OPEC+ would be very constructive long term, the demand-side impact of Covid would nonetheless vastly outweigh a potential curtailment agreement in the short term.”

“Gasoline crack spreads have fallen into negative territory, prompting many refineries to cut refining run rates, which could quickly see inventory levels of crude begin to surge, bringing another wave of selling into this fragile market.”

FXStreet reports that Jennifer Lee from BMO Economics notes that U.S. durable goods orders is a dated report but it confirms that businesses began to be more cautious mid-Q1 and it is going to be painfully clear how cautious/concerned they are as more data roll in.

“US durable goods orders jumped 1.2% in February, while January's 0.2% decline was erased to reflect a 0.1% gain.”

“The key core orders component, a good indication of future activity, fell 0.8% in February following a slight downward revision to January (from +1.1% to +1.0%). And this is a February report. Plenty has happened since then.”

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories rose by 1.623 million barrels in the week ended March 20. Economists had forecast a build of 2.774 million barrels.

At the same time, gasoline stocks declined by 1.537 million barrels, while analysts had expected a drop of 0.657 million barrels. Distillate stocks fell by 0.679 million barrels, while analysts had forecast a decrease of 1.886 million barrels.

Meanwhile, oil production in the U.S. reduced by 100,000 barrels a day to 13.000 million barrels a day.

U.S. crude oil imports averaged 6.1 million barrels per day last week, down by 422,000 thousand barrels per day from the previous week.

• Perhaps 46 million people will be laid off in U.S. due to virus
• Think of government programs as "relief" not "stimulus"
• Want workers healthy and ready to return to work in second half of the year
• An "unparalleled" disruption in second quarter should not be discouraging

U.S. stock-index futures fell on Wednesday after a surge in the previous session, as optimism about a massive $2 trillion coronavirus relief package eased, with investors still concerned about the extent of the economic hit from the pandemic.

Global Stocks:

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

The U.S. Commerce Department reported on Wednesday that the durable goods orders jumped 1.2 percent m-o-m in February, following a revised 0.1 percent m-o-m increase in January (originally a 0.2 percent m-o-m drop).

Economists had forecast a 0.8 percent m-o-m decline.

According to the report, orders for durable goods excluding transportation fell 0.6 percent m-o-m in February (the biggest drop since February 2016), following a revised 0.6 percent m-o-m increase in January (originally a gain of 0.9 percent m-o-m) and missing market expectations of a 0.4 percent m-o-m drop.

Meanwhile, orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, declined 0.8 percent m-o-m in February after a revised 1.0 percent advance m-o-m in January (originally a 1.1 percent m-o-m surge). Economists had called for a 0.4 percent m-o-m decrease in core capital goods orders in February.

Shipments of these core capital goods fell 0.7 percent m-o-m in February after an upwardly revised 1.1 percent m-o-m advance in the prior month (originally a 1.0 percent m-o-m jump).

Nike (NKE) target raised to $84 from $78 at Pivotal Research Group

Apple (AAPL) upgraded to Buy from Hold at Deutsche Bank; target $270

Coca-Cola (KO) upgraded to Buy from Hold at DZ Bank; target $51

Dow (DOW) upgraded to Buy from Neutral at Citigroup; target $32

USD weakened against most other major currencies on Wednesday as the reports the U.S. Senate finally reached an agreement on a massive stimulus package last night eased money market nerves, prompting investors to buy riskier currencies. The U.S. Dollar Index (DXY) fell 0.57% to 101.46.

Republican Senate Majority Leader Mitch McConnell announced that White House and Senate leaders reached a deal early Wednesday on a $2 trillion relief bill to combat the economic impact of the coronavirus outbreak.

Specifically, the bill includes $500 billion in direct payments to Americans, $367 billion in support for small businesses, $500 billion in support for larger businesses and states, enhanced unemployment benefits, $130 billion for hospitals and other measures. The Fed will also be provided a liquidity facility to lend $4 trillion to businesses.

A full vote on the bill in the Senate is expected later today.

FXStreet notes that 2020 is expected to be the weakest year for economic activity since at least 1982. Analysts at TD Securities look for the Bank of Canada (BoC) to cut rates to 0.25% before their next scheduled meeting in April.

“Media reports stating the more than 900,000 people filed for EI last week should make it clear that more easing is warranted. We look for the BoC to cut by 50 bps any day now.”

“We look for the BoC to announce $50-75bn worth of asset purchases at the April interest rate announcement.”

“We look for the cut to 0 bps in either April or June. A move to 10 bps is also within the realm of possibility.”

“We think that we need to see weakness extend into 2021 for the BoC to actually move rates into negative territory.”

NIKE (NKE) reported Q3 FY 2020 earnings of $0.53 per share (versus $0.68 per share in Q3 FY 2019), missing analysts' consensus estimate of $0.55 per share.

The company's quarterly revenues amounted to $10.104 bln (+5.1% y/y), beating analysts' consensus estimate of $9.559 bln.

The company declined to provide Q4 FY 2020 guidance due to virus; it also noted liquidity would not be an issue.

NKE rose to $78.10 (+7.98%) in pre-market trading.

The Confederation of British Industry (CBI) reported on Wednesday its latest survey of retailers showed retail sales volume balance stood at -3 in the year to March, slightly down from +1 in February. Economist had forecast the reading to decrease to -12.

However, retailers expect sales volumes to drop sharply in the year to April to -26, the weakest expectations since April 2009.

The report also revealed that orders placed on suppliers declined for the eleventh consecutive month in the year to March, and at a slightly faster pace than last month (balance of -19 compared to -13 in February). Orders are also expected to fall further in the year to April to -45, which represents the weakest expectations since April 2009.

In addition, sales were seen as poor for the time of year, but to a lesser extent than last month (balance of -5 compared to -14 in February), but are expected to fall sharply below seasonal norms in the year to April to -42, the greatest extent since February 2009.

In other survey results, wholesaling sales volumes balance rose +24 in the year to March from +7 in February and is expected to show broadly the same growth pace in the year to April (+20).

Ben Jones, CBI Principal Economist, noted: "These are extraordinary times for the retail sector. Grocers are seeing a temporary increase in demand because of coronavirus. But many other retailers are seriously suffering as households put off non-essential purchases and social distancing keeps people away from the High Street."

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. plunged 29.4 percent in the week ended March 20, following an 8.4 percent decline in the previous week. This was the biggest decrease since January 2009.

According to the report, refinance applications tumbled 33.8 percent, while applications to purchase a home decreased 14.6 percent.

Meanwhile, the average fixed 30-year mortgage rate rose to 3.82 percent from 3.74 percent.

"Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges," noted Joel Kan, MBA's associate vice president of economic and industry forecasting. "Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook," he added.

FXStreet reports that there has been a flurry of announcements by governments of measures to support the eurozone economy in the face of the major coronavirus shock. Economists at ABN Amro set out the numbers for the Eurozone as a whole.

"For the Eurozone as a whole the fiscal and liquidity measures total around EUR 2 trillion (around 18% GDP)."

"Given the size of the economic shock, governments and the ECB will likely need to do more going forward, but over the last few days, eurozone policymakers have started to design a much more serious response."

"The contraction in GDP is expected to be even larger in Q2 than in Q1. We have pencilled in around -2% qoq in Q1 and around -3% in Q2, but the risks to these forecasts are clearly tilted to the downside."

eFXdata reports that Nordea Research discusses EUR/GBP outlook and flags a scope for further gains towards 0.96 in 1-3 months.

"The above-mentioned factors led EUR/GBP to peak last week at 0.949 - a level not even seen during recent years of Brexit turmoil. After some stabilisation Friday, however, the EUR/GBP is now trading around 0.92. While it therefore may seem like there is a long way up to 1.00, we would still not rule out that scenario. At least, we do not think we have seen the highs in EUR/GBP yet," Nordea notes.

"We have constructed a fair value model in which we have included relative QE programmes from the ECB and BoE, longer-term swap rates and Composite PMIs. We assume that i) the announced asset purchases are done linearly through 2020, ii) GBP swap rates are depressed around 20-25 bp more than the corresponding EUR rates, and iii) the UK economy takes a slightly harder hit in the next three months than the euro area.

Our model depicts that EUR/GBP could move to levels around 0.96 in the coming 1-3 months before seeing some stabilisation in H2 2020," Nordea adds.

FXStreet reports that the PMI indices published this week give an early insight into the scale of the economic shock from Covid-19, Guillaume Derrien from BNP Paribas informs.

"The composite indices for Japan (35.8), Germany (37.2), France (30.2), the UK (37.1) and the US (40.5) all slumped in March."

"The eurozone composite PMI was the lowest ever recorded at 31.4. The deterioration was particularly marked for the subindices relating to employment and orders for goods and services."

"Figures for April, whilst remaining at historically low levels, are expected to show increasing divergence between the regions."

FXStreet reports that there is no question we are in the middle of a deep recession and the only question is whether it will be a short-lived/technical one or a long-lasting one, analysts at Danske Bank brief.

"We have updated our GDP growth forecasts and now expect GDP to contract by 3.9% q/q in AR in Q1 and by - 18% q/q AR in Q2."

"We expect GDP growth to be 13.0% q/q AR in Q3 and 7.9% q/q AR in Q4. In total, we expect GDP growth in 2020 to be -1.9% rebounding to 3.1% in 2021."

"We think it was a very positive sign that the Fed has scaled-up its easing, in particular by making its new QE programme open-ended."

According to the report from ifo Institute, German business morale tumbled in March, suggesting that Europe's largest economy is heading towards recession due to the impact of the coronavirus.

The IFO Business Climate Index revision came in at 86.1 in March, weaker than the preliminary data of 87.7 while missing the consensus estimates (87.7). Current Economic Assessment arrived at 93.0 points in the reported month as compared to the last reading of 93.8 and 93.6 anticipated. The Expectations Index - indicating firms' projections for the next six months, came in at 79.7 for March, up from the first estimate of 82.0 and missed expectations (81.9).

"This is the steepest fall ever recorded since German reunification and the lowest value since July 2009," Ifo President Clemens Fuest said in a statement.

"The German economy is in shock," Fuest added.

CNBC reports that stocks appear to be finding the bottom but some strategists say it may be over a trap door that could give way to another big decline.

Some credit markets are faring better, the dollar is weakening, and there are positive technical signs pointing to a bottoming in the equities market. But it appears to be driven by hopes for a fiscal stimulus package and the massive Fed programs that have flooded markets with an unprecedented amount of liquidity in a very short time.

The real pivot by markets may come when there are signs the number of new cases of coronavirus have peaked in the U.S., and there is a new level of visibility on the economic impact and earnings hit from the virus. There are currently about 50,000 U.S. cases, ten times higher than week ago.

"The truth is the market is going to bottom when the number of cases starts to peak," said Jonathan Golub, chief U.S. market strategist at Credit Suisse. "Between now and then, you're left with volatility."

The Dow Jones Industrial Average on Tuesday bounced more than 11% in its best day since 1933 as Congress moved closer to adopting a giant stimulus package to fight the economic impact of the virus. The S&P 500 rallied 9.4% to 2,447, in its best day since October 2008.

"This 2,300 to 2,400 level has been an area that is finding some buyers. That's the December 2018 low. Obviously, we broke it for a couple days, but this is where the market is trying to find some traction," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "I think the market has priced in the very short-term bad news. We know the patient counts are going to spike over the next two or three weeks."

Boockvar said the virus impact will remain what drives the stock market, and it will respond when the cases appear to wane.

"We can rally for the next month or two. ... I don't believe at all it is the bottom," he said. "It's a bottom."

FXStreet reports that FX Strategists at UOB Group now see declining likeliness of USD/CNH to reach the 7.17 level.

24-hour view: "We highlighted yesterday that the 'underlying tone has weakened somewhat' and expected USD to 'drift lower to 7.0600'. USD subsequently dropped to 7.0688 but opened on a weak note this morning. Downward pressure has picked up and from here, USD could move below 7.0600. For today, the strong support at 7.0350 is likely 'safe'. Resistance is at 7.0950 followed by 7.1080."

Next 1-3 weeks: "After surging to a high of 7.1652 last Thursday (19 Mar), USD has not been able to make much headway on the upside. The relatively sharp decline of -0.48% yesterday (24 Mar) has dented the upward momentum and the chance for USD to break the strong 7.1700 level has diminished. From here, unless USD moves and stays above 7.1200 within these 1 to 2 days, a break of 7.0350 ('strong support' level previously at 7.0180) would indicate that the recent upward pressure has dissipated."

FXStreet reports that in opinion of FX Strategists at UOB Group, the downside pressure in NZD/USD is expected to lose momentum if 0.5950 is cleared.

24-hour view: "We highlighted yesterday NZD 'could edge higher but any advance is viewed as part of a 0.5670/0.5880 range for now'. While NZD subsequently moved higher, it only touched 0.5840 before drifting off. The short-term underlying tone still appears to be firm and from here, we see chance for NZD to test the 0.5880 level. At this stage, a sustained advance above this level is not expected. Support is at 0.5760 followed by 0.5720."

Next 1-3 weeks: "After plunging to a low of 0.5469 last Thursday (19 Mar), NZD has not been able to make much headway on the downside. Technically, the sharp recent sharp sell-off is still intact and only a break above 0.5950 (no change in 'strong resistance' level) would indicate that the current weakness has stabilized."

• CNBC reports that China's National Health Commission reported 47 new confirmed cases and four more deaths as of March 24. It said all new cases were all imported, meaning they traveled from overseas.

• Malaysia has reported another 172 cases of the coronavirus, taking the country's total confirmed cases to 1,796, Prime Minister Muhyiddin Yassin said in a televised address.

• The White House and Senate leaders reached a deal on a massive $2 trillion coronavirus stimulus bill to combat the economic impact of the outbreak.

• Global cases: At least 375,498, according to the latest figures from the World Health Organization

• Global deaths: At least 16,362, according to the latest figures from the WHO

• Top six countries with the highest number of reported cases: China (81,767), Italy (63,927), U.S. (42,164), Spain (33,089), Germany (29,212), Iran (24,811).

The US dollar fell against the euro on news of an agreement on a new package of measures to support the US economy of about $2 trillion.

As reported by US media, the administration of US President Trump and democratic senators have reached an agreement on a bill on emergency assistance to the American economy and citizens with a total amount of about $2 trillion.

The day before, the dollar moved lower against most major currencies amid growing investor interest in riskier assets following the Federal reserve's announcement of large-scale quantitative easing.

The pound rose against the US dollar ahead of the Bank of England meeting. Last week, the Bank of England lowered the base interest rate by 0.15 percentage points to 0.1% following a special meeting.

The ICE Dollar index, which shows the value of the dollar against six major world currencies, fell by 0.59%.

According to the report from Office for National Statistics, the Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 1.7% in February 2020, down from 1.8% in January 2020.

The largest contribution to the CPIH 12-month inflation rate in February 2020 came from housing, water, electricity, gas and other fuels (0.52 percentage points), which fell by 0.03 percentage points from January.

The contributions to change in the CPIH 12-month inflation rate were relatively small compared with movements in most months. Falls in the price of motor fuels, and games, toys and hobbies resulted in the largest downward contributions to the change in the CPIH 12-month inflation rate between January and February 2020. Price rises for recording media, and for restaurant and hotel services produced the largest, partially offsetting, upward contributions to change.

The Consumer Prices Index (CPI) 12-month rate was 1.7% in February 2020, down from 1.8% in January.

The report adds that the Chinese central bank is in talks with the banks to cut deposit rates to pay the savers.

EUR/USD

Resistance levels (open interest**, contracts)

$1.0957 (1465)

$1.0926 (890)

$1.0899 (257)

Price at time of writing this review: $1.0811

Support levels (open interest**, contracts):

$1.0742 (1622)

$1.0724 (1928)

$1.0700 (3582)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 3 is 85040 contracts (according to data from March, 24) with the maximum number of contracts with strike price $1,1000 (4289);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2278 (117)

$1.2191 (136)

$1.2074 (56)

Price at time of writing this review: $1.1835

Support levels (open interest**, contracts):

$1.1735 (195)

$1.1709 (98)

$1.1616 (107)

Comments:

- Overall open interest on the CALL options with the expiration date April, 3 is 17615 contracts, with the maximum number of contracts with strike price $1,3200 (2380);

- Overall open interest on the PUT options with the expiration date April, 3 is 21870 contracts, with the maximum number of contracts with strike price $1,2900 (2837);

- The ratio of PUT/CALL was 1.24 versus 1.25 from the previous trading day according to data from March, 24

* - 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.