April 17, 2020
- Oil below 15 as storage runs out
- Equities, FX flat
- Nikkei -1.15% Dax 0.17%
- UST 10Y 0.63%
- Oil $14/bbl
- Gold $677/oz
- BTC/USD $7161
Asia and the EU
- EUR EZ Trade Balance
North America Open
- CAD Wholesale Sales 8:30
Oil collapsed at the start of the week’s trade dropping below the $15/bbl as the world ran out of storage and crude supplies continued to pile up due to coronavirus lockdowns across much of the world.
Crude has been the prime victim of the collapse of global demand with market dynamics further exacerbated by the price war between Saudi Arabia and Russia. The fresh 20 year lows are sure to take their toll on smaller export-driven petro economies like Mexico and Nigeria and could usher in the complete collapse of social order in Venezuela.
It’s hard to forecast what kind of financial shocks the collapse of the energy complex will bring, but if the bankruptcy of the Singaporean spot oil trading firm Hin Leong Trading is any indication of things to come, investors in the sector are in for a lot more pain.
FX for its part was relatively subdued. With loonie barely reacting to the slide in crude while Aussie and kiwi were both bid on hopes that some of the lockdown restrictions would be lifted. EUR/USD meanwhile crept along the bottom of recent lows as traders awaited Eurogroup meetings this week to see if policymakers could agree on a coordinated effort to help revive the region’s badly battered economy. Although new caseloads in Italy, Spain, and France have are now at three-week lows, they remain stubbornly high for authorities to consider the lockdown restrictions.
The most optimistic assessment of the current COVID-19 mitigation global strategy is that in most of the highly affected countries the curve is starting to flatten but so far shows no signs of dipping. That suggests equity investors may have been much too optimistic in their hopes for a “return to normal” and the runup last week may see some profit-taking this week. For now, equity futures remain relatively strong – only 0.5% off Friday’s highs but unless the market sees some material improvement in data, equity prices could begin to drift lower as the week proceeds.