Hotspot Hopscotch

Rising virus cases in a number of US and China hotspots have put risk trades on the defensive as the market weighs that against easy money policies. CHF and EUR are the highest performers, while gold and silver attempt to recover further from the day's lows. CFTC positioning data showed euro net longs at the highest in two years. It is also interesting to mention last week'snote from JP Morgan's quantitative strategist Marko Kolanovic.

The re-opening narrative is running into a hard truth: That many people won't participate in the economy until it's safe. Those who are overzealous might face a second wave.

The US remains the main focus and a number of primarily southern states where case rates are rising. Florida reported record numbers on Saturday and Texas hospitalizations continue to rise. Headlines from those hotspots began to move the market late last week but it's certainly a global story.

The overall number of new cases on Saturday hit a record of 142,672 with Latin America the epicenter at the moment. However Saudi new cases hit a record Sunday and deaths in Iran hit a two-month high. Tokyo reported the most cases in 5 weeks with half traced back to nightclubs. Even China is slipping backwards with Beijing forced to lockdown part of the city because of local transmission.

In a sense, none of this is particularly surprising so what happens next will be a test of how much short-term bad news the long-term bulls can withstand. Early-week indications are soft but certainly not insurmountable.

Kolanovic's latest note

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +96K vs +81K prior GBP -24K vs -36K prior JPY +17K vs +33K prior CHF +2K vs +9K prior CAD -23K vs -33K prior AUD -37K vs -41K prior NZD -11K vs -13K prior

The specs largely disbelieve the reopening story but the enormous long-euro position can't be ignored.