U.S. Equities slumped for the week and the US Dollar gained after a plunge in hiring last month hinted at the extent of the pandemic’s toll on the world’s largest economy. Oil rallied on expected output curbs. The S&P 500 fell for the third time in four days as investors digested the abysmal jobs report that captured data in the period largely before government-mandated shutdowns went into widespread effect. As with record claims for unemployment, the latest numbers bear little information on the current state of the economy, making it difficult for investors to value financial assets. The S&P 500 fell 2.1% for the week, largely holding a rally that propelled it 18% higher in three days last week. That came after the fastest 30% plunge on record as the pandemic forced the economy into a virtual standstill. While volatility has eased somewhat, stocks are still regularly notching daily moves that until recently would have been considered huge. Oil surged following reports large producers are ready to cut output. Crude jumped another 8% Friday after a record jump on news the OPEC+ coalition will hold a virtual meeting on Monday and that Russia is ready to cut production. In Europe, data showing an unprecedented slump in the region’s economy last month pushed the Stoxx 600 Index lower, though it also trimmed its retreat. Asian Equities saw modest losses in most markets to cap a third weekly decline in four. The Japanese Yen weakened alongside the Euro, Pound and Swiss Franc. Treasuries drifted. With lockdowns for many economies around the world expected to go on for longer, data are showing the severity of the impact. Nearly 10 million people in the U.S. have lost their jobs in the past two weeks, while the virus continues to pressure corporate balance sheets. American Airlines Group Inc. will slash international flying as far out as the end of August as the pandemic batters travel demand through the normally busy summer season. Overnight, U.S. and European Equity Futures jumped along with Asian stocks after the daily reported death tolls in some of the world’s coronavirus epicentres dropped on Sunday. Contracts on the S&P 500 Index and Euro Stoxx 50 climbed as much as 4%, and Japan’s benchmarks also ended about 4% higher even as that country approaches a potential emergency declaration. Shares in Hong Kong also rose. The Japanese Yen dropped along with Treasuries as haven demand receded. Crude oil prices retreated — though pared a decline of as much as 11% — as uncertainty remains over a proposed supplier meeting. Elsewhere, the Pound dipped as U.K. Prime Minister Boris Johnson was admitted to hospital for tests after suffering from the Coronavirus for 10 days. Saudi Arabia, Russia and other large oil producers are racing to negotiate a deal to stem the commodity’s historic price crash.
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Equities
March Payrolls shrunk by 701K, well more than the throw the dart consensus estimate of -100K. Of this, 459K was shed in the leisure and hospitality sector, ‘’mainly in food services and drinking places’’ (417K) according to the BLS. Jobs of note were also lost in health care/social services, professional and business services, retail and construction.
The S&P 500 Index fell 1.5%, closing at a price of 2488.
The Dow Jones Industrial Average closed 1.7% lower at 21,052.
The Stoxx Europe 600 Index dipped 1%.
The MSCI Asia Pacific Index decreased 0.9%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index advanced 0.5%.
The Euro dipped 0.3% to $1.0820.
The British Pound fell 0.9% to $1.2278.
The Japanese Yen decreased 0.4% to 108.30 per dollar.
Bonds
The yield on 10-year Treasuries rose one basis point to 0.61%.
Germany’s 10-year yield decreased one basis point to -0.44%.
Britain’s 10-year yield dipped one basis point to 0.31%.
Commodities
Gold advanced 0.7% to $1,649.80 an ounce.
West Texas Intermediate crude climbed 13% to $28.66 a barrel.
This morning on the Economic Front we already had the release of German Factory Orders which came in at -1.4% versus -2.5% expected. Next, we have UK Markit Construction PMI and Euro-Zone Sentix Investor Confidence at 9.30am. We have no US data of note due this afternoon.
June S&P 500
This is the first Monday since the crisis began that we are seeing the US Futures Market opening higher. The S&P is now trading 110 Handles higher than where we closed in Chicago on Friday night. As we know all ‘’Open Gaps’’ get filled, whether it takes a day or six months. The S&P is rallying this morning on the ‘’Hope’’ that the virus is been contained. No matter restrictions are still going to in place for a few weeks yet before Economies are allowed to function again. My S&P plan worked well on Friday as the market traded higher to my 2518 sell level before selling off to my 2502 T/P level and I am now flat. Frustratingly, the S&P juts missed my 2440 buy level in a late sell-off with a low of 2449 before surging to trade at 2585 this morning. The S&P has strong resistance from 2615/2635 where I will be a small seller with a 2652 stop. On the expectation that some of this large ‘’Open Gap’’ gets filled I will move my buy level higher to 2505/2525 with a 2489 stop.
EUR/USD
No Change as I am still a seller from 1.0910/1.0970 with the same 1.1025 stop. I will now raise my buy level to 1.0610/1.0670 with a 1.0565 stop.
June Dollar Index
I am still flat the Dollar and I will also raise my buy level to 99.80/100.30 with a higher 99.35 stop. I still do not want to be short the Dollar at this time.
June DAX
The DAX fell short of my 9350 buy level before surging to trade at 9940 this morning. The 9200/10100 range that has existed for the last three weeks remains and it will take a break and close outside of this range to get our next direction. Today I will be a small seller from 10095/10220 with a 10305 stop.
June FTSE
Late Friday the FTSE traded to a low of 5345, just missing my 5340 buy level before following the US Indices higher to sit at 5560 this morning. The FTSE is weaker than the other main Indices which is a concern. Today I will move my buy level higher to 5380/5450 with a higher 5325 stop. Despite my concerns I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Friday’s late sell-off saw the FTSE just miss my initial 20750 buy level before rallying overnight to my 21675 average sell level. I know most of you do not trade overnight which is understandable given the volatility over the past six weeks. I was stopped out of this position at 21950 and I am now flat. One clue to this rally has the been the price action in the VIX. The VIX has fallen over the past week despite lower US Markets and closed on Friday at 47.03 for a fall of 7.62%. We are still in Phase 2 of my S&P game plan. It is possible that we can rally as high as 24000 and possibly 25000 before the more long-lasting Phase 3 down move commences. The Dow has initial resistance from 22500/22700 where I will be a small seller with a 22850 stop. I will now raise my buy level to 21250/21450 with a 21095 stop.
June NASDAQ
As the Dow traded the whole of my sell range overnight I did not sell the NASDAQ as I had enough exposure and I am still flat. If you did sell this market then you would also have been stopped out at 7805. The NASDAQ has strong resistance at last week’s 8010 rebound high. Today I will be a small seller from 7980/8100 with an 8180 stop. I still do not want to be long the NASDAQ at this time.
June BUND
On the back of the strong equity markets the Bund is opening lower this morning. I will now lower my sell level to 172.50/173.10 with a lower 173.45 stop. The Bund has support from 170.40/170.90 where I will be a buyer with a 169.80 stop.
Gold Rolling Contract
No Change as I am staying on the sidelines until normal price action resumes.
Silver Rolling Contract
Silver just missed my 14.15 buy level with a 14.18 low print overnight and I am still flat. I am not going to chase the market higher and I will leave my 13.75/14.15 buy level unchanged with the same 13.45 stop.
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