Mid-Day Update: Stimulus rally continues, Critical G20 call for OPEC and Texas, Gold stumbles

Wall Street has put back on their rally caps, US equities are surging for a second consecutive day as Congress begins to wrap-up a massive $2 trillion stimulus package, while the Germans finally delivered a EU750 billion crisis spending package.  The coronavirus spread is intensifying in the US, but some optimism is growing that it could peak in a few weeks and right now traders are primarily focused on all this stimulus.  The cumulative central bank balance sheet is rising to fresh record highs and will do wonders in supporting risky assets. 

It is a complete risk-on day as the Japanese yen is the worst performing currency.  The dollar is also falling to its European trading partners.  The euro seems to have found a strong bottom against the dollar with the 1.0650 level.   

Congress Process

The Senate is redrafting the language and should have the stimulus bill passed early afternoon.  Then it goes to the House and as long as no one asks for a recorded vote, it should get signed off by the President later tonight. 

German Response Disappoints

The bar was set high by the Fed and Congress stimulus measures.  The German fiscal response finally happened but seemed to disappoint financial markets in its size and coordination with the ECB.  Insiders were expecting something similar to Fed, possibly the initiation of the OMT program (unlimited front end buying). 

Oil

It has been a while, but oil is struggling for direction.  Energy traders shrugged off the latest EIA weekly crude oil inventory and are focusing on tomorrow’s G20 call which could possibly see the US deliver a breakthrough in bringing back the Saudis and Russians to the crude production cut negotiating table. 

The EIA report highlighted that consumption is falling, Saudi exports to the US are rising, and demand destruction from the coronavirus is noticeable.  US exports fell half a million barrels and that will get much worse as Brent becomes much cheaper.  

While US stocks are surging higher following the breakthrough over the fiscal stimulus package, oil is not benefitting much because the $3 billion of funding that was supposed to be used to purchase crude for the SPR was not included. 

WTI crude seems destined to test the $20 a barrel level, but right now no one wants to get caught being short if we see a Texan/OPEC+ production cut surprise. 

Gold

Gold got beat today as investors scramble back into global equities.  Europe had the best two-day rise since 2008, while the Dow Jones Industrial Average seems poised for a whopping 15% back-to-back gain, the first time it was able to do that during the coronavirus crisis. 

Gold will ultimately benefit from the all this stimulus and the softer dollar, but today it is all about stocks. 

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