Sell front-month oil at all costs
Oil prices are coming under renewed pressure at the Asia open. The front-month WTI contract, which rolls on Tuesday, and oil-sensitive currencies (e.g., MXN and CAD) are starting the week on the back foot. However, broader cross-asset weakness is not evident, suggesting the link between lower oil prices and weakness in stocks and more widespread commodity prices has broken down.
In Asia, it's not yet clear how quickly regional trade will recover. Still, all eyes will be on Korea's 20-day trade data for April (due on Tuesday) which will provide the first evidence in the region for assessing recovery in this crucial part of the regional economy.
It’s dump-at-all-costs as no one – and I mean no one – wants delivery with Cushing storage facilities filling by the minute. And it's having a knock effect in Brent feeling similar stress on Dated Brent. It hasn't taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets.
Battle of the Bulls and Bears
The early street consensus this morning was that risk had run too far, too quick. This rally has been fueled by very narrow leadership, mainly from 'stay-at-home' winners (+10% YTD) following widespread bearishness. With several "stay-at-home" names trading at or near YTD highs, the risk for a round of profit-taking is probably on the cards ahead of 67% of SPX EPS reporting over the next two weeks.
Still, we could see periods where Friday's violent short squeeze may play, especially if we get another stimulus package from Congress. Nevertheless, we already see Tech names falter and retail take profits in AMZN. With short much cleaner following last week's move into expiry, we could see the big short reestablish ahead of 2900.
This morning's pessimism has given to a market-focused singularly on economies opening up: Germany starts a phased open today, which is being support
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support