Morning Minutes 3/20/2020

Morning Minutes

Stocks Rally Between PBOC Decision and Quadruple Witching Hour

March 20, 2020
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

One of the themes we’ve seen play out over the last month is the difference between liquidity and sentiment. Central banks around the world have been slashing interest rates and announcing new stimulus packages over the last month only to see markets plunge. In my opinion, the issue is that central bank moves can mean different things at different points in the cycle. Recent aggressive moves which were apparently intended to calm markets and show decisive monetary support, such as the Fed’s emergency rate cut last weekend, ended up having the opposite effect initially as investors initially saw these decisions as central banks hitting the panic button, raising questions about how much the economic outlook had deteriorated, and increasing fear of the unknown.

Last night’s People’s Bank of China’s decision to hold its benchmark rate steady at 4.05% has had the opposite effect. Asia Pacific markets soared on this news with Seoul soaring 7.4%, Hong Kong rallying 5.0%, Shanghai gaining 1.6% and Sydney picking up 0.7%. Investors seem to be thinking that if China is starting to come out the other side the COVID-19 pandemic, there could eventually be a light at the end of the tunnel and perhaps we could finally find a template for how the coronavirus response could play out in other countries or economies.

The rebound in Asia Pacific investor confidence has rippled through other regions this morning. US index futures are on the rise this morning with gains of 2.0% (for S&P futures) to 3.5% (for NASDAQ futures). Dow futures are currently up about 480 points or 2.4% trading nicely above 20,000 as US markets look to build on yesterday’s 1.0% gain for the Dow and 2.3% gain for the NASDAQ.  European markets are also on the move up with gains of 4.4% for Frankfurt, 5.4% for Paris, 2.0% for London and 2.4% for Milan.

The rush into US Dollars also appears to be easing today with the greenback falling 1.6% against Gold (which has regained $1,500/oz), 1.6% against the Loonie, 2.6% against the Pound, 0.5% against the Yen, and 0.4% against the Euro. Commodities are also on the rebound today. WTI crude oil is up 1.5% and back above $25.00/bbl while copper is up 1.0%. Some cash may be moving into bonds with the US 10-year treasury yield dropping back toward 1.00%.

Canadian retail sales for January increased 0.4% exceeding the 0.3% street estimate but a lot has happened since then, US existing home sales are due at 10:00 am EDT.

The end of trading today could potentially see some volatility as Quadruple Witching Hour approaches, With many index and commodity futures and options are set to expire after the end of trading today, we could see some last minute positioning by traders.

 

New Video: Market Commentary and Portfolio Update – March 18, 2020

With Jeremy Fehr – Founder and CEO, and Paul Vendrinsky Portfolio Manager of SIA Wealth Management

Click Here to watch a new webinar of Jeremy Fehr, founder of SIACharts and SIA Wealth, discussing additional changes in the Asset Class Rankings, what he is seeing in the markets currently, and the impact going forward. SIA Wealth Portfolio Manager Paul Vendrinsky discusses recent changes and performance in the portfolios that SIA Wealth Management sub-advises for BMO Global Asset Management. A PDF version of the presentation is available. We will record another update if there are changes so please watch for future updates.

 

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