US Open – Emotional Selling, Recession to hit US, ECB, Oil crash resumes, Gold and Bitcoin victim of scramble for cash

Global market carnage continues as Wall Street struggles to grasp how long the global pandemic will disrupt travel, trade and daily life.  It is important to understand that the selloff started last night after President Trump’s speech.  US stocks traded limit down after his speech did little to calm Americans and mainly pointed the blame on others.  The Trump administration is scrambling on how to battle the spreading of the coronavirus and instead of preparing Americans that we will see widescale shutdowns of schools or events, he decided to remain focused on the economy.  Trump announced a 30-day European travel ban, excluding the UK, and some extra liquidity and aid to small businesses. 

Emotional selling could see the risk aversion trade get even uglier as last night was a key breaking point for many Americans.  Last night, many traders went to bed knowing that Tom Hanks, one of America’s favorite actors got infected with the coronavirus, the NBA season was suspended, unsure on when schools will get closed, and high frustration that their government still seems to have no real plan in battling the virus and that the US economy is headed for a recession.    

Circuit breakers will do little to calm nerves and the fact that almost a quarter of the S&P 500 stocks didn’t even get to trade before the trading halt kicked in is very concerning. 

ECB

The ECB delivered.  The ECB unleashed an additional 120 billion euros in QE, a new long-term loan, which has created a dual-interest rates, and decided that a rate cut would be ineffective.  The market will focus on the TLTRO announcement and the stimulus package that will try to help the economic impact of the coronavirus. 

S&P Futures stayed at their limit down lows and the euro whipsawed following the ECB announcement.  The ECB response could have been successful if this was part of a coordinated announcement with the G7.  Monetary policy appears to be at its limit and the ball is now in the Germany’s hands.    

The euro sold off after the dust settled as expectations are high the Germans will not be so quick in abandoning its balanced budget.  German Chancellor Merkel seems open to increase spending to fight the impact that coronavirus is having with the domestic economy.  Germany may deliver some spending, but it is unlikely to be immediate. 

Oil

Oil prices are about to getting uglier.  The initial shock of Trump’s EU travel ban will deliver another blow to demand forecasts.  Brent crude seems poised to selloff another 10% here as the demand outlook seems like it will only get worse, oversupply concerns are not going away as the Saudis and Russians ramp up production, and after a key super-contango threshold was reached, suggesting for some another plunge is upon us. 

Gold

Gold prices are in freefall as investors scramble for cash.  Gold investors are scratching their head as the fear trade is only seeing steady flows into Treasuries right now.  Gold should see some technical buying around the $1,550 area, but if that breaks, we could easily see another prices slide another $100 to $1,450. 

Bitcoin

Crypto traders are waking and wondering if the halving event took place today.  Bitcoin is crashing as the scramble for cash has everyone abandoning the crypto trade for now.  Bitcoin is down over 20% and could be headed to the $4,000 level.  Bitcoin broke through the massive support level of $6,300, which is where many miners saw their costs average.  Bitcoin should feel helpless as the lost of confidence for risky assets appears to be firmly in place in the short-term. 

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