US Open: A defensive tilt into the NY open

Market Analysis / 3 Min Read
Stephen Innes / 14 Apr 2020

Stock Markets

Bit of a mixed tape since Europe walked as energy has lagged as the market remains underwhelmed by the OPEC + deal. Still, miners have picked up with the bounce in gold, and some relative outperformance in industrial metal prices helped by better-than-expected Chinese trade data. But I doubt this will stick due to the backlogged export data, which likely skewed the export component higher.
Again, I can't help but think we're going to have a slightly defensive tilt into the NY open as investors weigh the recent sharp rally on signs of peak covid-19  ahead of what could be a series of poor corporate  Q1 numbers.
Equities have been boosted by the stabilization of financial conditions in early March, led by global monetary and fiscal as well as an evident flattening of the infection curves in most developed countries. But given the expected cuts to earnings, it's difficult to envision much positive follow-through over the next 24-48 hours but do welcome a surprise.
The currency market merry go round.

Asia currency markets are a mixed bag after the China trade balance narrowed, although both export and import were better than expected in percentage terms. And when factoring in the backlogged export data, it's not that significant of a local FX driver, although the data is better than expected.
The USDCAD has been trading within a 20 pips range most of the day, and action has been driven by the OPEC+ oil output deal. While the overall outcome was on the lower end of market expectations, it still showed that the oil-producing countries are willing and able to work together to reach a consensus that is being viewed positively in currency land. But that narrative will likely give way the instant oil prices wobble.
Australia March NAB business confidence index -66, after -2 in February Despite the horrendous print, AUDUSD punched higher as market discounting the accuracy of survey data. But it starting to feel like 2009 all over again where bad news is met with increased policy support expectations and the markets continue to rally. But the Aussie is paring intraday longs as currency trader think the S &P 500 could be in for a bit of risk wobble in the NY session.
The oil market bid is thin.

Traders are not looking to build any length in the oil market right now. Or at least until they get a quantifiable picture of Aprils absolute demand devastation. So given the laws of supply and demand dynamics, it suggests it suggest the path of least resistance should be lower over the short term, which could be a thorn in the side of risk sentiment.

The gold market bid is robust.

After an Asia session dotted with profit-taking in Asia gain,  gold prices have come roaring back on robust demand out of London. The narrative is pretty clear; macro investors are deeply concerned about the underlying global economy, especially ahead of essential data and critical earnings reports that could paint a horrific picture of the economy.
And with central banks, are delivering "whatever it takes" to support equity markets, which is driving Yields on debt instruments to zero, this increases physical demand for precious metals as opportunity costs evaporate.
To be sure, we are currently in the worst type of investment climate, and it isn't likely to change any time soon. The economy is certainly in a recession already, the depth and length of which is impossible to gauge. At some point, though, growth will accelerate, or the Dollar will fall, and a new trend will start

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