Stocks, Bonds & Dollar Rebound, Crude Oil Spills

03/31/2020 11:30 am EST


Adam Button

Co-Owner and Managing Director,

Crude continues to weaken and stock rally likely will fade as Q1 comes to an end, reports Adam Button.

Equity indices, bonds and the U.S. dollar rallied to start the week, with crude oil continuing to get battered. Is it a sign of a bottom, or quarter-end rebalancing?

We're hesitant to take a signal from Monday's trading because of quarter-end flows that drove an unusually strong buying in everything USD-denominated. With stock down so much, money managers with a percentage of their portfolio mandated to be in stocks needed to buy equities to rebalance their portfolio.

On the fundamental side, we highlighted the Dallas Fed yesterday and it was far worse than anticipated at -70.0 vs +1.2 previously. Comments in the report highlighted strains on cashflow and worries about solvency. The area is being hit particularly hard because of low oil prices.

On that front, Brent hit at 17-year low of $21.65 and WTI fell below $20 once again. In Canada, oil is trading at less than $4 and that showed in the Canadian dollar. However, it's clear that quarter-end flows were a factor in trading on the day, as Canadian oil company shares rallied strongly despite falling prices.

Flow-driven trading may continue into Tuesday but should be less of a factor as the new month and quarter begin. Watch for a quick sell-off on Wednesday.

Increasingly the market will turn to data as March numbers begin to roll in. One coming up is the China PMI for March. The manufacturing number is forecast to rebound to 44.8 from 35.7 and services to 42.0 from 29.6. Real-time numbers like car sales and vehicle traffic show a spotty rebound in China but these numbers might offer a better idea.

Watch this space for a conversation with Ashraf on Trends in Yield Differentials

Adam Button is co-owner and managing director of and a contributor at You can see Ashraf’s daily analysis at and sign up for the Premium Insights. Ashraf's Tweet on indices here.

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