Tiomarkets Daily Commentary 30 March 2020

A new week is upon us but its safe to say the single theme on everyone’s mind is very much still with us. As cases of Coronavirus continue to spread around the world, many of us wonder what the future holds. A global economy brought to a standstill, with much of the world forced into isolation. Short-term economic projections once thought impossible now commonplace. Millions unemployed overnight with streets and skies deserted. A simple visit to a loved one now all but forbidden. Can we find some light at the end of the tunnel? Sure, there are signs. Little ones. China is beginning to open up with the city of Wuhan allowing people in (as of yet, not out) over the weekend. The number of new cases in the UK is steadying as the effects of social-distancing begin to trickle through. In Italy, the increase in new infections was half what it was yesterday and in Spain the virus's upward curve appears to be flattening out. There are many initiatives around the world working on potential cures and vaccines. And each day our doctors and nurses put themselves on the front line to save lives. It’s a war, but there are small signs of hope with each battle.

So what for financial markets to start the week? Even though we still see volatility, Monday would have some semblance of order to it. Yes, the knee-jerk reaction at the open was for US futures to dip lower. USDJPY would follow. US Oil futures would move below $20 a barrel. Let’s face it, there is little on the immediate horizon to get us excited about the global economy. But the rush to sell in what were already over-bought equity markets, appears to have abated. Today saw a bounce off the future driven lows. The DJ rallied from 21,026 to close at 22,320, reversing much of Friday’s pull back. XAUUSD spent much of the day stable either side of 1,620. The USD was generally firmer with EURUSD ending at 1.1045 having been as low as 1.1010 at one point. USDJPY and GBPUSD ended much where they started at 107.85 and 1.2410 respectively. AUDUSD was restricted to ‘just’ a 70-point range ending the day firmer at 0.6165. Even US Oil would claw its way back above $20 to finish at $20.20 a barrel. I’m not suggesting for a second the worst is over. But markets are functioning with the assistance of the world's central banks and some investors are starting to look beyond the short-term fallout of this pandemic. Even with the volatility we had today, which is still far from normal, there was a certain 'calmness' to the days trading. Let’s see if it continues.

Showing charts is still a particularly hazardous affair and focusing on anything other than the big picture is futile. So I thought I’d show you an hourly S&P chart going back a month or so. What we see isn’t pretty with a dive from the all time high around 3,395 down to a low of 2,190. That’s a cheeky 35% before you go reaching for the calculator. One level that has been mentioned by some of the more institutional commentators is the 2,800 area which represents the 50% retracement of the whole move. We are not there yet, but worth keeping an eye on for all you Fibonacci enthusiasts. As always, how you play it is your call.