Gold Jumps, Crude Dumps As Nasdaq Squeezes To Best Run In 5 Months

The only thing driving stock markets right now…

Markets right now: pic.twitter.com/uj8Bpj3fMd

— Masa Capital (@MasaSonCap) April 13, 2020

Because fun-durr-mentals aren’t…

Top-down macro…

Source: Bloomberg

Bottom-up micro…

Source: Bloomberg

…and neither is virus optimism?

Source: Bloomberg

And, as Steve Liesman noted:

“The Fed is starting to weigh in (a bit of out school) with its view on how to bring the economy back. Evans (chicago fed) just joined Bullard (st. louis fed) in calling for massive national testing. Evans also called for a “Manhattan Project” to find a vaccine.”

Which also helped spark some more optimism in stocks – because now The Fed members are all expert epidemiologists too… NOTE – The European close marked the reverse of the downtrend… Small Caps and Trannies remain red on the week however….

This is the NASDAQ’s longest winning streak since December (QQQ up 6 days in a row, best run since Dec 26th) and pushed it back above its 50- and 200-day moving-average…

Banks were clubbed like a baby seal after a positive initial reaction…

Source: Bloomberg

AMZN hit a new record high today, back above the $1 trillion market cap…

Source: Bloomberg

Helping to send FANG Stocks soaring back near record highs… this is the biggest 2-day surge in FANGs since the massive short-squeeze meltup at the start of January 2019…

Source: Bloomberg

Despite stock gains, bonds were bid (though a late-day selloff took the shine off)…(2Y -1bp, 30Y +6bps on the week)

Source: Bloomberg

10Y Yields remain rangebound…

Source: Bloomberg

Spot Gold rallied on the day to almost $1750…

Source: Bloomberg

,,,but the Spot-Futures spread compressed…

Source: Bloomberg

And oil prices plunged… Brent below $30…

Source: Bloomberg

And WTI below $20…

A key gauge of the oil market’s health is at its weakest in more than a decade as supplies build and futures contracts roll over. West Texas Intermediate crude for May delivery traded at more than $7 a barrel below its June contract on Tuesday, the deepest contango since 2009. The May contract is nearing expiration and exchange-traded funds, including the United States Oil Fund, have been selling front-month contracts and buying second-month futures.

Source: Bloomberg

Who’s drinking OPEC+’s milkshake?

As the dollar drops to one-month lows…

Source: Bloomberg

Finally, we let Shard Capital’s Bill Blain sum things up… Work out why the market is fooling itself. Markets are scared of change, with a default position things will revert to “as-they-were.” This time they will not. There are a number of dangerous narratives playing out in markets at present – all of which expect things to revert to “same-as”. 

1) C-19 is going to go away because of “curve flattening”, and we will have a vaccine in a few months time. No. We might have a vaccine in a year or so, and Might is not a winning market strategy. C-19 might not go away any time soon.

2) This is not a real war. No means of production like factories, ships, infrastructure have been destroyed. Everyone can start working again when the all clear sounds. No. As the old adage goes – 40% of American’s are one pay-check away from bankruptcy. A recent survey says nearly 40% have seen family members lose jobs, and 30% of Americans think their jobs are at risk.

3) Global trade will swiftly fill any supply gaps.  No. Protectionism is going to play front and centre as countries seek to ensure they are not caught again.

The World had changed!

And nowhere is that “change” more evident in the correlation between stocks and gold as debasement/hyperinflation fears begin to leak into markets…

Source: Bloomberg

As Bloomberg notes, Gold and global equities don’t usually move in tandem, but these are not usual times. The two assets — one a traditional haven and the other a classic risk-on bet – had an inverse correlation for most of last year, but as investors navigate the fallout from the coronavirus, they’ve started to move more in sync. Both nosedived in mid-March amid panic selling and forced margin calls; each then recovered by about 20% as central banks and governments kicked in more stimulus.

Source: Bloomberg

That official support has aided stocks, while also fanning concerns about currency debasement and rising debt levels, supporting bullion.

As seen in the surge in USA sovereign risk…

Source: Bloomberg

And it can never stop… “There is no escape for Central Banks and Governments from the consequences of their actions – they can’t pull fiscal spending without crushing the economy, and they can’t pull back monetary market support for fear of crushing confidence. They have “crossed the diamond with the pearl” to create the ultimate market drug high, and markets can’t face cold-turkey. The merest hint of a taper tantrum today – and we’re talking massive market reset. Negative rates look inevitable.”