Australian dollar roars into global bear market rally

See the latest Australian dollar analysis here:

Macro Afternoon

DXY took a belting last night:

The Australian dollar roared everywhere:

Gold still couldn’t break out:

Oil was crushed again:

Dirt bounced a bit:

Same with miners:

EM stocks launched:

Gimme some dat junk:

Bonds were well bid:

Stocks to the moon!

Westpac has the wrap:

Event Wrap

Coronavirus update: Latest WHO data, via the Situation Reports, indicates 40,700 new cases on 25 March, slightly higher than the previous day. Unofficial source Worldometer indicates 39.678 new cases on 26 March.

The U.S. Senate approved a historic $2 trillion rescue plan to respond to the economic and health crisis caused by the coronavirus pandemic, in a 96-0 vote. The House is scheduled to vote on the bill on Friday, through a remote voice vote so members need not travel to Washington.

US initial jobless claims surged 3.001m to 3.283m in the week ending 21 March, setting new records for the increase and level, following the 71k climb to 282k in the prior week. For historical context, claims data starts in 1967, and the previous record increase was in July 1992 (+172k), with the all-time high level in 1982 at 695k.

Media reports indicated the ECB favours activating its OMT program – a powerful bond-purchase tool created in 2012 to support the euro, but has never been used. It allows the ECB to buy unlimited amounts of a country’s sovereign debt.

BoE left its benchmark policy rate unchanged at 0.10%, as expected, in a unanimous vote. The asset purchase program was also left unchanged. The BoE had already moved in an emergency meeting last week, to cut rates and add additional asset purchases, but the central bank stressed that it can still expand purchases as needed.

Event Outlook

In New Zealand we have the March ANZ consumer confidence survey, expected to fall sharply in response to COVID-19 concerns.

In China, February industrial profits are due. Profits had already stabilised at a weak base before the advent of the contagion, so another soft print can be expected. The final read for the Q4 current account balance is also scheduled for release, including the full detail on trade and financial flows.

US February personal income is expected to have grown by 0.4% ahead of the impact of COVID-19. Likewise, personal spending will be subdued going forward, but is expected to have risen by 0.2% in the February read. Finally, the February core PCE deflator is expected to print at 1.7%, still below the Federal Reserve’s inflation target. The finalised Michigan Univ. consumer confidence survey should be lower.

Not that any of that matters much. We’re far beyond data now. Still here’s the DOL:

In the week ending March 21, the advance figure for seasonally adjusted initial claims was 3,283,000, an increase of 3,001,000 from the previous week’s revised level. This marks the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series. The previous high was 695,000 in October of 1982. The previous week’s level was revised up by 1,000 from 281,000 to 282,000. The 4-week moving average was 998,250, an increase of 765,750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 232,250 to 232,500.

This is a classic bear market rally. Way overbid following being way oversold. It’ll run until it’s over. My best bet is not very long given the US is headed directly into virus disaster:

At terrifying speed:

While the bear market rally runs the Australian dollar runs with it.

David Llewellyn-Smith
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Comments

  1. darklydrawlMEMBER

    Trading advice. I currently own BBUS and BBOZ so it’s highly likely the market will keep BOOMING for a while yet. That seems to be how it works when I buy shares 😉

  2. im using this as a chance to sell off my last VGS. holding only currency/gold ETFs and cash.

    surely US is going to grind to a halt, and they’ll be looking to cause China as much retaliatory pain as they can over the longer term.

    • Wrinkled Sachs

      US will face systemic health collapse, this will force their systems to engage in mandatory lock downs and possibly engage the national guard / military.

      Already local sheriffs are closing gun stores and identifying hot points for when trouble starts.

      A lock down of the US – something which looking at every other country is totally unavoidable – will unleash total pandemonium. The powers that be have known the response as the American psyche / dream / economy / wizards green curtain is so entirely predicated on maintaining this illusion.

      Lock downs to save the health system / society / economy are a 100% certainty – and the public response at first will be fine – but after a few weeks there will be insurrection.

      Anyone who has looked back and investigated Hurricane Katrina and the fallout in New Orleans in the days / weeks / months after the event would come to no other conclusion.

      The gossamar veneer of normality requires only the faintest scratch for the US to unleash its seething debauched underbelly.

      They are in real trouble I think.

      • it’s hard to discount that possibility – which would make reactionary war against a foreign enemy an option to restore order/unite people.

        oh well enough end of the world fantasy conjecture – i’m betting on stonks dropping much further from here.

      • Is that true, re: sheriffs?

        Lots of Americans will be armed already, yes?

        Was at my local on Monday and the amount of ammo they were unloading from their weekly (?) shipment was mind boggling.

        Brother tells me his mate up Townsville way just added 500 rounds. What for, I’m not sure.

  3. happy valleyMEMBER

    Each day, I comfort myself by remembering those words of Malcolmthat “there has never been a better time to be alive” and the likewise immortal words of Scotty as to “how good is Straya” and by knowing that we have Abbottolypse’s Grocery Code of Conduct to protect us shoppers in our of need.

    • Apparently so, unless you are referring to the oil market. Don’t fight the fed is back. Even made people forget about the perennially on US – China trade deal.

    • While we all face a depression, the Fed injected $2B into the top end of town. So yes Fed did fix thing for those who matter. For the rest of us. Thing is still broken.

  4. Government is deficit spending

    That’s increase in broad money because concomitant bonds are being bought with reserves (not deposits)

    That broad money has to go somewhere

    It’s going to consumers first , but it’s then going to end up in the hands of asset holders who can’t in turn spend it all

    It has to go to the sharemarket as they fight each other to get stocks for lower and lower yields

        • Well some might be, but a lot isn’t

          Small business subsidies, payroll reduction etc. 700M to Virgin/Qantas in reduced charges. List goes on

          Still no cash to the people, at scale, yet.

      • Wrinkled Sachs

        Yeah – Australia are doing roughly $24 Billion in direct consumer stimulus. US are waaay ahead and doing a massive consumer stimulus, US has gone full Bernie Sanders / Boris Jonson – think you missed the news on these.

          • Wrinkled Sachs

            The liquidity that went to markets is no different to the tax rebates, loans, stimulus, debt holidays that went to consumers, small business and sole traders.

            There hasn’t been any stimulus spending by the government into the markets yet. Credit lines and QE are not stimulus – they are potential stimulus.

  5. On Tuesday Morning, Trump and Pence had a private conference call with billionaire hedge fund captains Ken Griffin, Stephen Schwarzman and Paul Tudor Jones.

    Something is telling me that this is a composed rally for the big boys to finally sell off any positions before the real losses come. I also have a small opinion that the falls in the US stock markets have not even reached a third of what it will eventually be and prices are about to drop off an almighty cliff face.

  6. Hydroxychloroquine Azithromycin

    The bear market was over on Monday guys – the lows are well and truly in as an effective medical treatment is finally starting to gain widespread acceptance. Problem now is supply of the anti viral malaria drugs is scarce but these are generic drugs so production should ramp up quickly. But the market is looking ahead and it sees people getting back to work in a month or two in a staggered approach (young and healthy first). Yes you have now missed the first 20-odd percent of the new bull market but that doesn’t mean u should miss the rest. The difference between 3 months from now and 2 months ago will be you have an extra few trillion of central bank and fiscal stimulus world wide. Asset price inflation is going to be a doozy.

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