Australian dollar tumbles as virus surge shakes markets

See the latest Australian dollar analysis here:

Macro Afternoon

DXY suddenly rebounded last night:

The Australian dollar was weak:

Gold held above the breakout line but if this gets moving it won’t:

Oil was smashed:

Dirt fell:

And miners:

Plus EM stocks:

Junk is hilariously high

Bonds were bid:

Ass stocks were hit:

It’s all pretty straight forward. The virus is back in the US:

As it surges, the economy retreats. The borders close:

The governors of New York, New Jersey and Connecticut said Wednesday they will implement a mandatory quarantine on visitors to their states from viral hotspots, part of a coordinated effort to sustain low local infection rates as coronavirus cases surge to two-month highs across nearly half of the country.

The order, which goes into effect at 11:59 p.m. ET Wednesday, does not block people from traveling. But it does make clear that if you’ve been in a state that meets the guidelines — like taking a vacation to Florida and then coming home, or visiting New York from Texas on business — you will have to quarantine for 14 days on arriving. Airports and highways will have reminder signs, and hotels will be asked to inform guests as well.

The stores shut:

Apple Inc. AAPL, -1.76% is temporarily re-closing seven stores in the Houston area amid a resurgence of COVID-19 cases in Texas. The company confirmed Wednesday that it would be temporarily shutting its Highland Village, First Colony Mall, Houston Galleria, Memorial City, Willowbrook Mall, Baybrook, and Woodlands locations “with an abundance of caution” given “current COVID-19 conditions in some of the communities we serve.”

Punters stop going out:

Then hours worked star to fall more broadly:

It does not require official lockdowns, which may still be coming. The virus does it all by itself. A fact overlooked by anti-government dunces.

Aside from the virus, the number one risk to “recovery”, whatever that means, is the stock market itself, which is priced for a super-boom in profits.

If this gets worse a few more days, and the death rate starts to climb, we are back to March with a bullet.

Australian dollar to follow:

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

    • The Traveling Wilbur

      It will be capitalism’s perfect moment: government owns all corporate debt.

      Welcome to the Party pal.

      • History will say Commucapitalist or capitacommunist society emerged due to virus outbreak 2 centuries back, and since we’ve been paying the debt to our own central banks

      • DominicMEMBER

        Actually, the real hidden treat here will be the end of the debt-based money system as we become Zimbabwe.

        Central banks will end up owning pretty much everything using (drum-roll) fresh minted digital money

        (But I’m sure it’ll all be fine and there’ll be no inflation whatsoever. Wheee….)

        • Jim's Central Banking

          As long as it keeps going into assets we’re unlikely to see the CPI blow out. There’s a risk it will bump after this round of stimulus, but that’s only because some money made it into the hands of the plebs.

          • In the days of QE most of the MS expansion did find its way into assets but now that Govts have been forced into handouts to the plebs, the game has changed as the handouts are being funded by central banks. Throw in supply-chain disruptions and you have an interesting scenario developing.

    • happy valleyMEMBER

      Jerome Powell had a minor shocker today – couldn’t even prop up the markets for a measly 3% drop – lift your game, mate.

    • It’s going to end in tears. They will buying the dips all the way down…..
      Some things do change over time but not that lesson.
      It’s painful, I learned it many years ago, there be lots of tears shed when the home deposit is gone
      That’s where jobkeeper is probably going too

      Gone you link has an error but don’t even need to read the article to know what it says

      The other thing inexperienced traders don’t know when to exit, they keep holding in HOPE for too long

      • It’s how I learned the concept of a stop loss and to trade what the market is actually doing rather than what you want it to do, or it should do. But that urge to hope is still there it doesn’t go away you just get more conscious of it I guess. I think one of the best things that can happen is lose money in stocks, money you can afford, certainly learn more that way than getting lucky.

        • DominicMEMBER

          99% of retail traders trade that way – they rationalise the world in their own minds and rely on ‘hope’ and ‘belief’.

          Look at the AUD shorts recently – cut to shreds.

      • sorry for the bad link must have stuffed it in the process of copy/paste or they literally deleted the article!!!!

      • Great Victoria Gold Mines NL – 1987.
        Trading at 65 cents and I thought “if it ever gets back to 40, its a buy!” So I had an order (a huge 20 grand’s worth, which was a lot for me back then) in with a stop loss (yes, sensible!) at….25 cents.
        Come one sad Monday Morning, “I’d been filled” – and stopped out! But not at 25 cents; at the first tradable price – 6 cents! That…was a lesson in illiquidity I’ve always remembered.

        • It’s the GAP down
          What happened everyone was doing the same as you so you were caught long with every stop loss at the same level
          There weren’t any buyers left until 6c

          I will not buy any asset that’s illiquid, property share ETF what ever. I always look at liquidity depth in price action
          I don’t care if it’s going to double LIQUIDITY LIQUIDITY

  1. @Divya
    I replied late last night to your confusion you had with what I said about gold. In the blog ASX HUE yesterday
    Not sure if you received
    Anyway that might clear up

    • Yes thankyou!
      What I have noticed though is that gold always drops first in a wobbly situation, so I was interested in knowing why it is a buy now and what situation.
      But I agree, not betting against USD!! And it was gold in AUD you were talling about.

      I have always looked into PMGOLD for exposure to gold directly. Never bought. Anyone got any other ideas on how to buy? Not interested in miners. Bit lazy for physical gold.

        • Don’t forget risk of government confiscation of gold – it has happened in Australia!

          • desmodromicMEMBER

            “The Perth Mint is currently not required to apply any withholding taxes on capital gains made on precious metals held with it. Australian income or capital gains tax is generally payable by Australian residents on their precious metal and the specific treatment will depend on whether you are deemed a trader or investor. International customers not deemed residents for tax purposes will generally not have Australian income or capital gains tax applied.”

  2. Hmmmm…

    Risk off often means stronger DXY – can gold hold up?

    Thinking about taking some gold and gold miner profits …

    Thinking about picking up a little more USD.

    What do others think?

    • Yes this is my thoughts. Gold generally doesnt hold up when things look wobbly. E.g. it dropped in with everything else when wuflu hit.. but it does bounce back too so I am not sure really if this is the right time to be in it or a slightly better time is just around the corner.

      • Thanks. Hopefully things rally in gold today so we might sell into a rally?

        I’m considering keeping – and maybe increasing – some PMGOLD as it’s denominated in USD, and might hedge against both AUD and USD…

    • Goldstandard1MEMBER

      It’s a toss of a coin, that’s the problem with these irrational markets. That’s why I’m staying out, and as Bnich says – Liquid.
      Until some reality comes back. Left is right, up is down (sometimes) at the moment.
      Therefore, it’s a punt.

      • ErmingtonPlumbingMEMBER

        Whenever I get a win on the pokies I always try and double it up.
        I religiously choose red and never pick black.
        Ive found This strategy to work for me about 49% of the time.
        I know it should be 50% of the time but I’m pretty sure those machines are rigged.
        That’s the best investment advice I’ve got to offer

          • No GS It’s not the sharemarket at the moment

            You have more chance at the roulette table at this point

            True at this stage now, your chances of winning now are better at the casino

            If they were smart take profits in ASX close your online commsec nabtrade and open an online casino account

            It’s not 50/50 anymore in ASX

      • Maybe MB Tim Damien could write a post on liquidity
        Do not be in anything you can’t get out of
        Liquidity is paramount at this point
        It’s a very serious risk being trapped

        I’ve heard so many stories of SMSF property investors with no tenants – they have borrowings no tenant outgoings, fckn disaster when you can’t get out
        I was at an office in the city in Melb cbd that is all small individual office, 25% of tenants have moved out, landlords will never find a tenant again nor find a buyer……property is less than $0, you are stuck paying land tax bank loan rates body Corp

        • Goldstandard1MEMBER

          As we know, the conundrum is we are liquid, but with central banks potentially raising inflation it’s risky even being liquid. I guess for now at least we can pay for basics and see what happens. Gold is not even liquid!

    • Very hard at the moment
      I think equities are overpriced medium term so using DLS chart above weaker equities might hold Aussie down
      Think GOLD in USD may be over done too, look at price action overnight 1780/90s type area strong rejection, think we might be able to buy gold lower
      Other than that oil iron ore etc no idea

      THINK HOME LOAN INTEREST RATES ARE GOING TO START RISING H2 2020, over next 6 months into next year and that’s going to frighten the fck out over everyone who has not even considered the possibility of higher rates which honestly surprises me when we are artificially at the lows of decades

      We couldn’t have more credit risk = banks told to lend to anyone don’t worry about getting the principal back, just worry about next 3 months….

      I tell you The Australian banking circus is another one that’s going to end in tears

      The Q you all ask is when because interest rates are so low ……

      Wait until interest rates rise, all their Ponzi cheating can kicking is going to blow up in their face

      • I still hold about $60k of NASDAQ stocks. Come July 1st I can sell at half CGT discount. I’m thinking of liquidating the funds to pay down the mortgage further. I have some tax bills to pay, so I think best I can do is get my mortgage down close to $110k. This should reduce my risk of any increase in rates, but I was also contemplating taking out Super early $10k this year and 10k next financial year and using that $20k to reduce the mortgage further. To $90k or use $10k to install solar power to help reduce energy bills.

        I know you’re not me, but if things are gonna get as bad as you say, I wonder if this is prudent action to take? I originally planned to keep money in NASDAQ for at least 10+ years and Super obviously long term for retirement. But now I’m not so sure… There may be no retirement.

        • ChristopherMEMBER

          We are taking $40k between us out of super, we do not need the cash today (have no mortgage) but really do not know the outlook over the next 12 to 24 months and I work in a highly affected industry.

          A couple of things the drove us to decision:

          – Outlook unknown at this point (see above)
          – Might not make it to retirement age (always a possibility!)
          – We are not stupid with our cash
          – Can always put the money back in to the super fund if we wish

          • Thanks for your thoughts. I have about $200k in Super. I’m 38. I have been contributing extra each year for a while. My thought is if I take 10% out now and pay down Mortgage it may not be the worst idea right now.

            When if things improve in future, I will go back to putting extra in there and with less mortgage debt or debt paid off I’ll have extra money to put into investments like stocks/shares/super.

          • SoMPLSBoyMEMBER

            Covid super withdrawal of $10k this fin year and $10k next fin year is ‘income tax free’ and you’ll also avoid paying the 15% tax on the ‘earnings’ while the monies are within the super account

            I’m still wondering if SFM worked out the reduced ATO tax take~ estimated to be $300mil from this program alone.

        • I always think getting out from under the banks control is a good thing to do. More money to be earned later. This money is already due whether today or tomorrow.
          But that is my personal beliefs really based on the fvckers banks were to homeowners in u.s. after gfc. Went after those with lower LVRs because their losses would be lower in a fire sale. Was just a way to steal owners equity.

  3. Told my clients in mid-May we’d see a tsunami of cases come out of the US. This is just the beginning.

    It’s simple maths; a large cohort of infected people now, no social distancing or protection so r-nought goes above 1x and away we go.

    Humans are not well designed to understand non-linearities and most people are backward looking and linearly extrapolate. In this instance that thinking only leads to one outcome; disaster.

    Strap yourselves in, gonna get MUCH worse.

    • Goldstandard1MEMBER

      The battle of policy health vs wealth. I’ve always been one to take the pain early but people’s debt and risk levels can’t allow that. Therefore something must break not be managed as I’d prefer.

      • Yes, just like in a classic prisoners dilemma the US is going to get the worst of the lockdown costs and the virus