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Sheer Panic: Futures Surge, Tumble, Surge, Tumble…

Courtesy of ZeroHedge View original post here.

First the good news: for the first time in a week, there were no overnight limit up/down trigger halt in the S&P500 future.

Now, the not so good news: the global dollar margin call/short squeeze escalated even more overnight, resulting in total chaos in Asia, as multiple regional indices hit circuit breakers, the Korean Kospi was halted after falling more than 8%, Indonesian stocks triggering limit down at 5% and the Philippines market reopened only to drop 24% on the open triggering a circuit breaker. The panic dollar scramble also led to a flash crash in the Aussie, Kiwi and various other EM currencies as reported overnight.

Worse, this happened even as the Fed stepped in with yet another Lehman-era facility, a Money Market backstop (MMLF), which however did nothing to convince panic-stricken equity markets that a coronavirus-driven global recession could be averted, or to ease the record $12 trillion dollar funding squeeze, as measured by the surge in the FRA/OIS…

… or the Bloomberg dollar index, which just hit a new all time high.

The result was chaos in US futures, which while not trading outside the +/- 5% band got close, and after initially surging, they then tumbled, reversed and surged again, then tumbled some more, as traders weighed the growing likelihood of a global recession and a cascade of corporate defaults triggered by unprecedented lockdowns and supply-chain disruption. Overall, the S&P has now traded in a “narrow” 200 point sinewave for the past 3 days.

“It’s a good start and a step in the right direction with the tools that they have available, but they can still do more,” Sue Trinh, global macro strategist at Manulife Asset Management in Hong Kong, told Bloomberg TV. “There’s much more need for U.S. dollar liquidity to get to where it’s needed the most,” she said. “At the moment the markets are screaming it’s not enough — we need to see more of that.”

The latest plunge took place even though earlier on Wednesday the U.S. Senate cleared the second major bill responding to the coronavirus pandemic and White House economic adviser Larry Kudlow said the government might take equity positions as part of corporate rescues.

The meltdown in global markets, which has brought back memories of the 2008 financial crisis, has pushed Wall Street’s three main indexes down about 30% from their record closing highs last month and erased the Dow Jones Industrials’ .DJI gains since the President Donald Trump’s 2017 inauguration.

There was some more good news in the euro zone, where sovereign bonds soared from France and Italy to Greece after the region’s central bank boosted its efforts to stabilize the economy and capital markets, by announcing a €750BN “pandemic” QE, coupled with a commercial paper purchasing facility. The move rippled across debt markets, with the cost of insuring high-yield bonds in Europe dropping from a seven-year high, and peripheral bond yields tumbled.

Unfortunately whatever firepower the ECB deployed only made its way to bonds, with European stock markets staging a feeble attempt to rebound only to sink shortly after the open.

And speaking of recession, Europe is already in it with German business confidence in free fall, as the March Ifo index fell to 87.7 in March from 96 in Feb, the lowest level since 2009 (Ifo expectations dropped to 82.0 from 93.2, while current conditions to 93.8 from 99).

Even as Donald Trump dubbed himself a “wartime president” and joins foreign policy makers in hurrying to counter an abrupt economic shock, investors seemed largely underwhelmed by many of the actions taken so far. The rush into cash and havens has battered risk assets almost everywhere, particularly equities, high-yield bonds and non-dollar currencies.

There were more bizarre moves: the yen, often a haven amid market stress, slumped in a sign of the extraordinary demand for the greenback, which strengthened for an eighth day versus a basket of its major peers to its highest in at least 15 years. Of course, the dollar was untouchable, rising against virtually every currency in the world.

In commodities, WTI oil futures rebounded after their 24% drop in prices in the prior session – with underlying themes still failing to fade but with sentiment supported by the ECB’s PEPP announcement. WTI has clambered of its near-multi-decade low after testing USD 20/bbl to the downside, whilst its Brent counterpart drifts closer to the USD 25/bbl, albeit ultimately in positive territory on the day. Meanwhile, spot gold remains sub-1500/oz with prices subdued amid the flight for cash. The yellow metal meanders around 1475/oz in early EU trade and sees a recent low at USD 1452/oz. Finally, copper prices see detrimental downside amid the overall demand implications of the virus and a firmer Buck. The red metal briefly gave up the USD 2/bl level during overnight trade before trimming some losses as European players entered the market.


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