After Monday’s significant risk rebound, it was back to normal yesterday. European stock markets managed a good start, but risk sentiment dwindled afterwards. The US fiscal shot is approved and discounted, but now it’s over to the economy. US stock markets tried to cling to Monday’s momentum as well, but returned most of the intraday gains in the final stages of trading. (LT) US bond yields rose in lockstep with this intraday equity decline, causing a steepening of the US yield curve. Daily changes in the US ranged between -4.3 bps (2-yr) and +5 bps (30-yr). The German yield curve bear steepened with yields rising 3.5 bps (2-yr) to 11.1 bps (30-yr). 10-yr yield spread changes vs Germany narrowed by 3 to 8 bps with Greece (-17 bps) outperforming. The Eurogroup on Tuesday reached broad consensus to use the ESM’s firepower to grant credit lines to EMU countries in need. The ECB is also said to couple its unlimited buying programme OMT to those credit lines. Yesterday, nine EMU governments even made a statement, calling for joint debt issuance to finance the fight against the virus. Countries like Germany or the Netherlands are strongly opposed. EU Leaders will today normally hold a Summit via teleconference to decide on the issue.

Asian stock markets are mixed this morning with Japan underperforming (-4%). European and US equity futures trade with losses as well. Core bonds are slightly upwardly oriented. Today’s eco calendar is rather thin apart from the EU Summit. US weekly jobless claims will rise to astronomic levels and could be a wake-up call for those who believe we already turned the corner. With US monetary and fiscal stimulus now announced/in place, we’ll see how strong the resilience of the stock market bounce is. We continue to prefer to err on the side of caution. The length and severity of quarantine measures put in place will grind economies to a halt and probably longer than anticipated. For the corporate sector, this risks turning liquidity problems into solvency issues. The fall-out on the corporate sector is illustrated by the junking of Ford by Moody’s and S&P. Several other BBB-rates companies await a similar faith, throwing a huge amount of debt into junk.

From a technical point of view, the German 10-yr yield tested the upper band of the trading band since last Summer. The US 10-yr yield trades volatile, but still below the previous all-time low (2016), which is first resistance. For US yields, the Fed’s unlimited QE announcement is the de facto start of curve control. That implies that the mid-March Treasury sell-off in times of stress is less likely to see a repeat.

Download The Full Sunrise Market Commentary

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex Analysis

Editors’ Picks

EUR/USD extends slump after NFP shows massive job loss

EUR/USD is trading below 1.08, down on the day. The Non-Farm Payrolls report has shown a loss of 701,000 jobs, worse than expected. The ISM Non-Manufacturing PMI surprised to the upside with 52.5 points. 


GBP/USD drops below 1.23 amid sour mood, after UK data

GBP/USD has dropped below 1.23 as the market mood sours. Final UK Services PMI dropped to 34.5 points, worse than expected.  


NFP Quick Analysis: 701K jobs lost only be tip of the iceberg, why King Dollar is ready for coronation

The US lost 701,000 jobs in March, the worst in 11 years. The Non-Farm Payrolls figures are lagging the fast-moving events. Wage growth is also skewed and should be ignored. The safe-haven dollar has room to rise. 

Read more

WTI trades in three-week’s highs near $26.50 a barrel

WTI is jumping from multi-year lows following the US President Trump’s tweet of yesterday (Thursday) suggesting a Saudi-Russian deal was on the pipeline.

Oil News

Gold remains confined in a range, moves little post-NFP

Gold extended its sideways consolidative price action around the $1615 region and had a rather muted reaction to the US monthly employment details

Gold News

Forex Majors