U.S. Stocks Mixed After Initial Jobless Claims Release

U.S. Initial Jobless Claims Show Major Increase In Unemployment

U.S. Initial Jobless Claims release showed that 6.6 million Americans filed for unemployment benefits. Last week’s number was revised from 6.6 million to 6.9 million. The analyst concensus called for an increase of 5.25 million but estimates varied widely.

In the past three weeks, almost 16 million Americans filed for unemployment benefits. The economy is losing jobs at an unprecedented pace, but it remains to be seen whether the market will react negatively to the news since previous reports were also dismal but did not prevent stocks from showing upside.

World Leaders Start To Think About Reopening Economies

According to data from Johns Hopkins University, there are 432,438 coronavirus cases in the U.S., 152,446 cases in Spain, 139,422 cases in Italy and 113,296 cases in Germany.

While the total numbers are big, the pace of contagion is slowing down, especially in Europe, which entered the crisis earlier than U.S. In this light, it’s not surprising that governments start to prepare their early plans on how to reopen economies that received a mighty blow from virus containment measures.

Germany stated that a gradual return to normal life was possible if the current trend continued and that the country will look at the situation after the Easter holidays.

As per Italy’s Prime Minister Giuseppe Conte, the country may gradually lift existing restrictions by the end of April. The U.S. President Donald Trump is optimistic as usual and wants to see the U.S. economy reopen with a ‘big bang’. However, it’s still too early to tell when this will happen.

OPEC+ Talks Begin

Oil is experiencing a choppy trading session as traders and investors try to guess whether oil producing countries will reach consensus today. A lot is at stake since coronavirus dealt a heavy blow to oil demand and the world may run out of oil storage in a few months if no production cut measures are implemented.

The results of the talks could have a material impact on general market dynamics since oil stocks are guaranteed to be highly sensitive to oil price movements today.

Wall Street Surges on Hopeful Coronavirus Signs, Healthcare, Energy Sector Strength

U.S. stock markets surged on Wednesday on hopeful signs the coronavirus outbreak in the United States was close to a peak. The markets also received an additional boost after Bernie Sanders’ announced he was suspending his presidential campaign, and Bloomberg reported OPEC and its allies are edging closer to a production cut deal.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 2749.98, up 90.57 or +3.45%. The blue chip Dow Jones Industrial Average finished at 23433.57, up 778.71 or +3.49% and the technology-driven NASDAQ Composite closed at 8090.90, up 203.64 or +2.62%.

Coronavirus Concerns Ease

Stocks were supported early Wednesday after President Donald Trump said Americans might be getting to the top of the “curve” in relation to the outbreak. Meanwhile, New York Governor Andrew Cuomo said the state’s efforts at social distancing were working in getting the virus under control in one of the biggest hotspots in the country.

Later on Wednesday, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told Fox News that the U.S. death count related to the coronavirus is now lower than initially thought, noting there should be a turnaround after this week.

Healthcare Stocks Jump after Bernie Sanders Drops Out

Healthcare stocks jumped after Senator Bernie Sanders dropped out of the presidential race, relieving some of Wall Street’s political concerns amid the economic crisis stemming from the coronavirus.

Some of Sanders’ policy proposals, including Medicare for All, raised concern among several business owners and investors who feared taxes would go up under his presidency. His healthcare policy would have essentially abolished private insurance and had cast a shadow over healthcare stocks for months.

Fed Minutes

The Federal Reserve on Wednesday released the minutes from last month’s two emergency meetings. These showed officials grew increasingly concerned by the swiftness with which the pandemic was harming the U.S. economy and disrupting financial markets, prompting them to take “forceful action.”

The minutes revealed that the Fed is prepared to keep rates near zero until the economy has “weathered” the coronavirus impact.

Energy Sector Boosted

The U.S. energy sector rose sharply on Wednesday after U.S. West Texas Intermediate crude oil futures jumped more than 8% in a surprise move just ahead of the end of the regular trading session

Traders said the catalyst behind the surge in prices was a report from Bloomberg that the oil minister of Algeria said OPEC and its allies, known as OPEC+, was discussing a massive cut that could reach 10 million barrels per day.

The Internals

Advancing issues outnumbered declining ones on the NYSE by a 6.89-to-1 ratio; on NASDAQ, a 4.87-to-1 ratio favored advancers.

The S&P 500 posted 3 new 52-week highs and no new lows; the NASDAQ Composite recorded 6 new highs and 21 new lows.

Volume on U.S. exchanges was 11.56 billion shares, compared to the 15.25 billion average for the full session over the last 20 trading days.

COVID-19 Remains the Key Driver, with UK and the U.S Stats also in Focus

Earlier in the Day:

It was a relatively busy start to the day on the economic calendar on Thursday. The Kiwi Dollar, Aussie Dollar, and British Pound were in action in the early part of the day.

Outside of the numbers, the markets also responded to the latest COVID-19 figures.

On Wednesday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 13,365 to 513,888. In the U.S, the total number of cases increased by 25,965 to 426,300. That took the total number of cases globally to 1,506,361.

Key take away from the numbers was a marked decline in the new of new cases amongst the 4 EU member states. On Wednesday, there were 13,365 new cases, which was down from 29,916 on Tuesday. Numbers from the U.S were also better, with the number of new cases down from 32,950 to 25,965.

For the Kiwi Dollar

Electronic card retail sales slid by 3.9% in March, month-on-month, reversing a 0.5% increase in February.

According to NZ Stats,

  • Spending on eating out and accommodation plunged by more than NZ$300m as a result of COVID-19 containment measures.
  • Groceries had record-high sales in March of NZ$376m, a rise of 17%.
  • Sales of clothes and shoes slumped by 31%, spending on fuel slid by 19%, with furniture, hardware & appliances seeing a 20% fall in sales.

The Kiwi Dollar moved from $0.60124 to $0.60139 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.12% to $0.6005.

For the Aussie Dollar

Through the early part of the day, the RBA released its Financial Stability Review that contained few, if any, positive takeaways. The spread and impact of the coronavirus was the main area of focus.

The Aussie Dollar moved from $0.62321 to $0.62084 upon release of the RBA’s Financial Stability Review. At the time of writing, the Aussie Dollar was down by 0.19% to $0.6218.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.12% to ¥108.96 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar, with Germany’s February trade figures in focus.

While we consider February numbers of little influence, today’s data will garner some interest. In February, we saw the supply chain broken, with worse to come in March, so we could get a sense of what’s to come.

Survey-based figures for March were dire, while February industrial production and factory orders were not as bad as forecasted.

We then saw a rebound in China’s private sector in March, though export demand continued to sag. All in all, a marked narrowing in the trade surplus could lead to a possible deficit in March…

Outside of the numbers, we expect that Wednesday’s coronavirus numbers will also influence. If we see a marked fall in the number of new cases the markets will likely brush aside the trade figures.

At the time of writing, the EUR was up by 0.03% at $1.0861.

For the Pound

It’s a particularly busy day ahead on the economic calendar.

Key stats include February Manufacturing and Industrial production and GDP numbers.

While the numbers are for February, expect the Pound to come under pressure if the stats disappoint. The markets are all too aware of what lies ahead in March and April. A dire February would almost assure a recession and the need for further support, both fiscal and monetary…

Expect February trade figures to have a muted impact, however.

Outside of the numbers, while the markets will consider the latest COVID-19 updates, Boris Johnson’s health may have greater influence.

At the time of writing, the Pound was up by 0.15% to $1.2401.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar. Wholesale inflation figures for March are due out, along with April economic sentiment and the weekly jobless claims numbers.

Can the markets stomach another shock surge in initial jobless claims? Surely we won’t be seeing 6m plus numbers…

Economic sentiment figures are certainly up for a tumble, with wholesale inflationary pressures likely to ease.

Outside of the numbers, chatter from the Oval Office and the latest COVID-19 figures will also provide direction.

The Dollar Spot Index was down by 0.01% to 100.110 at the time of writing.

For the Loonie

It’s also a busier day ahead on the economic calendar, with March employment numbers in focus.

There are unlikely to be any positives for the markets to hold onto… Economists have forecast a 350k slump in employment and an unemployment rate of 7.2%.

An OPEC – Russia deal alone to scale back on production is not going to be enough. Trump is going to have to nudge shale producers to refuse oil dollars to also support the Loonie.

If the BoC thought it was done, the RBNZ’s message from Wednesday suggests that central bank action in March was just the beginning…

The Loonie was up by 0.09% at C$1.4025 against the U.S Dollar, at the time of writing.

European Equities: COVID-19 Updates and U.S Stats in Focus

Economic Calendar:

Thursday, 9th April

German Trade Balance (Feb)

The Majors

It was a mixed day for the European majors on Wednesday. The DAX30 fell by 0.23%, while the CAC40 and EuroStoxx600 rose by 0.10% and 0.02% respectively.

There were no material stats from the Eurozone or the U.S to provide direction on the day, leaving the markets in the hands of the coronavirus numbers.

Throughout the day, there were also updates from an EU Finance Ministers meeting, where member states failed to agree on a stimulus package.

The Stats

It was a quiet day on the Eurozone economic calendar on Wednesday. There were no material stats from the Eurozone to provide the majors with direction.

There were also no stats from the U.S, with the release of the FOMC Meeting Minutes due after the European close.

The Market Movers

For the DAX: It was another bullish day for the auto sector. Continental and Volkswagen led the way, rising by 2.40% and 2.97% respectively. BMW and Daimler saw more modest gains of 0.38% and 1.12% respectively.

It was a bearish day for the banks, however, with Commerzbank and Deutsche Bank falling by 4.06% and by 1.20% respectively.

Deutsche Lufthansa found further support, rising by 0.36% on the day.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole rose by 0.77% and 0.24% respectively, while Soc Gen fell by 0.08%

The auto sector struggled on the day, however, with Peugeot and Renault falling by 2.27% and 0.52% respectively.

Air France-KLM also saw red, falling by 0.53%, while Airbus SE continued its recovery with a 4.86% gain on the day.

On the VIX Index

The VIX resumed its downward trend on Wednesday, with a 7.17% loss. Reversing a 3.23% gain from Tuesday, the VIX ended the day at 43.4.

In spite of the continued spread of the virus, the VIX is now down by 49.2% from its 18th March high of 85.5.

We’ve seen the U.S equity markets bounce back off the back of fiscal and monetary policy support. Hopes of a slowdown in the spread of the virus have also provided support, while little attention is being paid to the actual economic fallout.

On Wednesday, the S&P500 rallied by 3.41%, with the Dow and NASDAQ gaining 3.44% and 2.58% respectively.

VIX 09/04/20 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar, with Germany’s February trade figures in focus.

While we can expect some influence from the numbers, the market focus will remain on COVID-19 updates. Any negative news and we can expect risk aversion to sweep across the markets.

From the U.S, it’s a relatively busy day ahead, with the weekly jobless claims and April consumer sentiment figures due out. Barring particularly dire wholesale inflation numbers, the March figures should have a muted impact this afternoon.

On Wednesday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 13,365 to 513,888. In the U.S, the total number of cases increased by 25,965 to 426,300. That took the total number of cases globally to 1,506,361.

While Italy saw another day on day increase in the number of new cases, Spain reported just 1,530 new cases. This was well below Tuesday’s 10,015. France also reported lower numbers on Wednesday after having reported 11,059 cases on Tuesday. For the 4 most-affected member states, the total had risen by 29,916 on Tuesday.

For the U.S, the numbers were also showed a fall in the number of new cases from Tuesday’s 32,950 to 25,965 on Wednesday.

While the figures are good news for the majors, some caution is needed, however, with testing and reporting affecting the numbers each day.

In the futures markets, at the time of writing, the DAX was up by 121 points, with the Dow up by 114 points.

Fed Policymakers Took ‘Forceful Action’ to Fight Swiftness of Coronavirus’s Economic Destruction

Today’s Fed minutes didn’t shed much light on the central bank’s future moves, but it did highlight its concerns over the swiftness with which the coronavirus outbreak was harming the U.S. economy and disrupting financial markets. The speed at which the damage was spreading prompted policymakers take “forceful action”, the minutes of the meetings showed.

At its first meeting of the year on January 29, Fed policymakers were expressing an air of cautious optimism about the economy. Fed members were predicting steady growth in 2020 and continued strength in the job market after having to defend the economy in 2019 with three rate cuts to fight the negative consequences of the Trump administration’s trade war with China.

Even through the release of the January minutes on February 19, policymakers remained upbeat about the economy although they did concede the novel coronavirus “warranted close watching”. Ironically, that was the day before the U.S. stock market began its more than one month sell-off.

Comments at that time suggested policymakers thought the virus would likely have minimal spillovers to the rest of the world, disrupting the supply of parts and final goods from Chinese factories but not posing much in the way of a broader threat.

The Fed’s limited concerns in mid-February were probably being influenced by the data being made available from the World Health Organization (WHO) and the Center for Disease Control (CDC) at that time. Remember, it wasn’t until March 12 that the WHO declared the COVID-19 outbreak a pandemic.

On March 2, Fed Chair Jerome Powell announced the first of two emergency rate cuts. On March 15, Powell slashed rates to zero, broadened access to U.S. dollars for foreign banks and restarted the massive asset purchases that have come to define monetary policy in a crisis.

Despite the aggressive actions by the Fed, the virus had already spread to the United States, and the crisis was worsening here and around the world.

By then it was already too late for the Fed to consult its conventional models since they proved progressively less able to measure what was happening to the U.S. and global economy. At that time, the Fed had no choice but to whip out its playbook from the 2008-2009 financial crisis and to start making moves to stabilize the financial markets and the economy.

With today’s minutes, most Fed officials now agree the U.S. economy is in a recession that may cut U.S. output by double digits in the second quarter and place about 20 million people or more on the unemployment line, at least temporarily. The measures to control the spread of COVID-19 are primarily responsible for those numbers.

In its minutes, the Fed also reiterated its previous stance that it would be appropriate to maintain rates at the current near-zero levels until policymakers were confident that the economy had “weathered recent events.”

WTI Crude Spikes into Close Following Bullish Bloomberg Report on OPEC Production Cut Expectations

U.S. West Texas Intermediate crude oil futures jumped more than 8% in a surprise move just ahead of the end of the regular trading session

Traders said the catalyst behind the surge in prices was a report from Bloomberg that the oil minister of Algeria said OPEC and its allies, known as OPEC+, was discussing a massive cut that could reach 10 million barrels per day.

Oil Fund Trading Halted

The excessive volatility fueled by the bombshell news forced regulators to shut down the United States Oil Fund (USO), which tracks the price of oil. The halt in trading was necessary due to wild activity into the end of the session. The ETF resumed trading shortly after the initial halt.

US Crude and Fuel Stocks Soar as Demand Craters Due to Pandemic

U.S. crude oil stockpiles spiked higher while fuel demand slumped last week, each by their most ever, government data showed on Wednesday, as the U.S. oil industry felt the full brunt of efforts to stem the spread of the coronavirus pandemic.

Crude stocks soared by 15.2 million barrels in the week to April 3, their biggest-one week rise. Most of those inventories were sent to the key Cushing, Oklahoma, futures storage hub, where stocks rose by 6.4 million barrels last week, the U.S. Energy Information Administration (EIA) said, also the most in one week ever.

U.S. gasoline stocks rose by 10.5 million barrels in the week, also exceeding expectations and falling just shy of an all-time record. Gasoline product supplied in the most recent week slumped by 24% to 5.1 million bpd.

Demand Sinks

Crude and Fuel prices have sunk this year as the coronavirus pandemic has sapped global fuel demand, virtually shutting down commercial aviation worldwide and cutting off gasoline demand as people stay home and businesses remain shuttered.

On Wednesday, the EIA said U.S. fuel demand dropped by about one-third in the last three weeks, with last week’s fall of 3.4 million barrels per day the most ever.

Daily Production Drops

Crude output has already to drop as well, with daily production plunging 600,000 barrels per day to 12.4 million bpd, in its biggest decline since July 2019, the EIA said.

Refineries severely cut activity the week-ending April 3, with crude runs falling 1.3 million bpd. Refinery utilization rates tumbled 6.7 percentage points to drop to just 75.6% capacity use.

Mid-Week Drivers: COVID-19, Oil Prices and Russia and Boris Johnson

During the weekend we had news from oil producers. Meanwhile, the coronavirus continues to plague the world, as even the Prime Minister of the United Kingdom has been infected. In addition, March economic data has revealed the ongoing economic turmoil.

Dukascopy: Let us start our discussion with the crude oil market. We heard that there was some sort of disagreement present over the weekend between Russia and Saudi Arabia. Moreover, OPEC+ did not hold a meeting on Monday.

What is going on and how is it impacting oil prices?

We saw OPEC and Russia delay the Monday meeting until Thursday. That sent the markets into a tizzy early in the week.

Expectations are for some form of an agreement, however, with both sides agreeing to meet. Both would have likely delayed further had there been little to put on the table on Thursday.

In reality, however, the U.S, Canada and the rest will also need to cut production. If the U.S, in particular, fails to also agree to any cuts then both Russia and OPEC may fail to adhere to any agreements made this week…

Dukascopy: I agree, it is well known that a majority of oil producers need oil to remain above 40 Dollars per barrel to remain in business. At the top of this is the Russian Federal budget that is planned with 42 USD in mind, and oil sales make up nearly 60% of government income.

In the meantime, we still have the coronavirus outbreak going on. It has been dictating most of the equity market moves. Moreover, as countries react to it with stimulus, we are seeing moves on the currency exchange rate charts.

We are seeing governments and central banks committed to offset the impact of the virus on the respective economies.

The governments, central banks, and even the markets will need to let the dust settle, however.

We saw the number of new cases slow on Monday and then rise again on Tuesday, which caught the markets off guard. Hopes had been for a downward trend to continue through the week.

Tuesday’s COVID-19 numbers were a reminder that we are not out of the woods just yet.

From a stimulus perspective, it’s not in place to support an economic rebound once the virus has been contained and lockdown measures eased.

Central banks and governments will need to deliver more down the road. For the likes of FED, what ammo they have left will be one question that the markets will have to ask.

On Wednesday morning we heard the RBNZ talk of a willingness to ramp up its purchasing program. There was even the talk of negative rates down the road…. This weighed on the Kiwi Dollar mid-week.

So, we are seeing plenty of volatility across the FX and equity markets. With plenty of uncertainty over what lies ahead, this is unlikely to abate anytime soon.

Dukascopy: So the selling and the virus spread have calmed down for the time being. It might give the governments some time to prepare for battling the virus not only from a medical but also from an economical perspective.

The spread of the virus has certainly eased. We are not seeing numbers similar to those last week. But, France saw a spike on Saturday and another on Tuesday. Italy also saw another rise after having reported its lowest number of new cases since Mid-March on Tuesday.

Governments, in particular, will need to do much more to ensure that we don’t see the spread of the virus accelerate again.

These containment measures really need to remain through April into early May. The economic fallout is going to be significant with an extended lockdown, but the fallout would be far worse should the spread of the virus continue into May at the current rate.

Meanwhile, there was news recently that the Prime Minister of the United Kingdom Boris Johnson has gotten infected by the coronavirus.

Dukascopy: We can agree upon wishing the PM a hasty recovery from the illness.

For sure that we wish Boris Johnson a speedy recovery. There had been some mixed messages earlier in the week. Initially, Downing Street reported that the PM was not on a ventilator. Updates then revealed that Johnson was receiving oxygen in ICU.

The markets are going to need some clarity on that. Boris Johnson is Pound positive, while the markets consider Foreign Secretary Raab a hard Brexiteer. Raab is also generally less supportive of fiscal policy support.

He may have to change his stance near-term, however, as a result of the unprecedented impact of COVID-19.

Either way, the markets will want some clarity on the PM’s health and we can expect the Pound to remain reactive to the news wires.

Dukascopy: Let’s move to our usual main topic – macroeconomic data releases. It is expected that the data sets most likely will be used mainly as a measure of the ongoing turmoil. Using historical data and market impact reaction analysis has become useless in the current unprecedented environment.

On the economic data front, we’re now passing February numbers and seeing May and April figures.

These figures will give a picture of the economic fallout from the Coronavirus.

We are unlikely to get an indication of what effect stimulus has had until we start seeing May – June figures.

When considering the fact that the U.S only began shutting down in late March, early May, we may even need to wait until June to at least assess the effects of the FED’s moves.

This is all before even considering the impact of the Stimulus Bill that has yet to fully pass through the economy.

When considering the time frames, this does leave the markets at risk of another tumble.

Let’s face it, there’s no spending, as such, to support the U.S economy. April Manufacturing and Service sector PMIs in the U.S may actually look more similar to the Eurozone’s March figures. Stimulus effects are unlikely to be evident, which certainly supports the view that there is more choppiness to come…

Dukascopy: Good to know that the data will be helpful in measuring and managing the impact of the coronavirus.

The Ray of Hope Fades as COVID-19 Cases Rise and EU Member States Find Little in Common

In the early part of the week, we saw the European equity markets find support. The support came in hopes of a slowdown in the number of coronavirus cases that drove demand for riskier assets.

On Monday, we had raised concerns over the market’s eagerness to bet on a single number rather than identify a trend.

While the European equity markets found further support on Tuesday, off the back of market positive COVID-19 numbers for Monday, uncertainty has set in once more.

Through the European session today, we have seen the European markets fall back into the red. Barring a bounce back, we are likely to see an end to a run of 3 consecutive days in the green.

Granted, the pullback is minor relative to moves seen of late but it is a pullback nonetheless.

Coronavirus Numbers in Focus

When we consider the recent coronavirus numbers, there must be some caution in taking single day updates in isolation.

We remain focused on France, Germany, Italy, and Spain from an EU perspective as these are the worst-hit member states.

As at the time of writing, the total number of coronavirus cases across the 4 states totaled 500,523 on Tuesday, giving a daily increase of 29,916. While down from a 42,323 spike from Saturday, it’s up from a lowly 16,711 increase on Sunday…

More significantly was a jump from Monday’s 921 low back to 3,000 levels in Italy. The length of the current lockdown should begin to yield significant results, yet we are still seeing a steady rise on average.

Figures out of France suggest that reporting and testing frequencies continue to influence. On Sunday, we saw the number of new cases fall from a Saturday 25,615 to a Sunday 2,886. On Tuesday, the total number of new cases rose by 11,059. By EU member state standards, the rise was significant. Only Spain came close, with a 10,015 increase on the same day.

So, the markets will need to become more patient and consider means and medians over individual daily numbers.

As we rapidly approach mid-April, Italy is certainly not going to see containment measures ease at the end of this week…

That simply spells more trouble for the Italian and EU economy.

The EU Model

As we continue to consider the economic ramifications of the coronavirus, not just on the EU but beyond, the EU model is in question once more.

Only today, news hit the news wires of EU ministers having failed to agree on a coronavirus economic rescue package.

If we look at the UK, the U.S, Japan, China, and numerous other countries, the EU is well behind the curve. All of these nations have delivered some form of a fiscal stimulus package or at least agreed in principle.

Spain reportedly warned of the country’s EU membership and one can only imagine that a number of others are also questioning their membership.

For “The Establishment”, Britain’s withdrawal couldn’t have come at a worse time. The British government is free from obligations and can go about its business to combat the effects of the virus…

France, Germany, and Italy are also suffering, though economically there is no member state worse off than Italy.

Unsurprisingly Italy was pushing for an Italian Job today… The Netherlands, on the other hand, had different ideas.

Why?

Perhaps because The Netherlands has reported just coronavirus 20,549 cases. This is one-fifth of those reported by any of the 4 member states that we follow.

By GDP, The Netherlands ranks below all 4 member states. When considering the economic impact of COVID-19, some support must be expected, however.

So, with there now being two sides to the COVID-19 rescue package, there may also be 2-sides to the very existence of the EU as we know it today.

At the time of writing, the EUR was down by just 0.08% to $1.08822 against the Greenback.

EUR/USD 08/04/20 Hourly Chart

Perhaps the markets simply don’t believe that the likes of Italy and Spain would jump ship. Well, perhaps a threat from Germany would sound the alarm bells.

The EU’s largest economy would undoubtedly be forced to foot a large portion of any rescue package. Imagine that, with the more than 100,000 coronavirus cases…

The German electorate is not going to like that, particularly when the Brits are paying nada…

U.S. Stocks Set To Open Higher As Investors Hope That The Upside Trend Will Continue

The Absence Of Economic Data Helps The Market Gain More Ground

S&P 500 futures are gaining about 1% in premarket trading as investors hope that the situation with coronavirus is stabilizing.

Importantly, the first half of this week was light on the economic data side, so the market has not been tested by negative news.

This situation will change tomorrow as the U.S. Initial Jobless Claims data will be released. The previous release indicated that 6.6 million of Americans applied for unemployment benefits, while the analyst consensus for this week’s released calls for 5.25 million Initial Jobless Claims.

Previously, the market was able to shrug off the negative employment data, but it will be more difficult to do this time since the market is at higher levels.

Oil Stocks May Experience Big Moves Ahead Of OPEC+ Meeting

Oil price dynamics could play a role in today’s trading since an ultra-important meeting of OPEC+ countries is scheduled for April 9, and traders may start placing their speculative bets today.

If any big moves in oil occur, oil stocks will surely follow, impacting general market dynamics.

As usual, the major oil producers like Exxon Mobil or Chevron are in spotlight. So far, their shares have shown better dynamics than oil prices during the current crisis, but it remains to be seen whether they will be able to withstand another leg down in oil if it happens.

Europe Fails To Reach Consensus On Economic Aid Plan

EU finance ministers have spent all night on negotiations about European support for the struggling economies. Discussions were put on hold until Thursday.

Hard-hit Italy and Spain argue that European “coronabonds” should be issued, while countries like Germany and Netherlands are against mutualization of debt.

The global economy is very connected nowadays, so a coordinated action from all major countries is necessary to reduce the damage from virus containment measures.

So far, governments and central banks provided the markets with sufficient liqudity, but even the unprecedented measures won’t be sufficient enough to support the world economy after the acute phase of the crisis.

At this point, the equity markets are optimistic that appropriate solutions will be found, and the companies will get enough support to get through virus-induced crisis.

If this confidence evaporates, we’ll see another leg down in U.S. equities.

Relief Rally Stalls in Asia as Investors Reassess Risk Factors

The major Asia-Pacific stock indexes finished mostly lower on Wednesday after two sessions of sharp gains as investors dampened their optimism about the coronavirus while death tolls were still rising across the globe.

Mainland China’s new coronavirus cases doubled in 24 hours due to infected overseas travelers. Meanwhile in the U.S., New York State reported the number of COVID-19 hospitalizations seemed to be leveling off, while the death toll in the U.S. jumped by a record 1,800.

Wild price swings in the crude oil market also contributed to the lower Asia-Pacific trade.

On Wednesday, Japan’s Nikkei 225 Index settled at 19353.24, up 403.06 or +2.13%. Hong Kong’s Hang Seng Index finished at 23947.17, down 306.12 or -1.26% and South Korea’s KOSPI Index closed at 1807.14, down 16.46 or -0.90%.

China’s Shanghai Index settled at 2815.37, down 5.39 or -0.19% and Australia’s S&P/ASX 200 Index finished at 5206.90, down 45.40 or -0.86%.

Mixed Messages from Asia Continue

Some headlines are focusing on China’s recovery from the impact of the coronavirus, while others are following the tightening of restrictions as countries in the region continue to report new coronavirus cases and deaths.

China lifted travel restrictions in Wuhan, the virus epicenter in mainland China, effective from Wednesday, marking the end of a lockdown that began on January 23.

But Hong Kong extended its ban on public gatherings of more than four people until April 23. Additionally, Japanese Prime Minister Shinzo Abe declared Tuesday a state of emergency to combat coronavirus infections in major population centers. Meanwhile, Singapore also passed new laws that ban social gatherings.

Major Banks Sound the Risk Alarm

“There is reason to be cautious as this looked to be a relief rally ahead of next week’s start of Q1 earning season and before data reveals the depth of the virus impact,” said analysts at JPMorgan in a note.

“Data shows the recent move higher has been accompanied by short-covering and de-risking rather than active risk-taking on the long side,” the bank added.

Commonwealth Bank of Australia economist Joseph Capurso said in a note, “While the virus’ ‘curve is flattening’, the economic effects of the corona crisis will linger for years in our view,” Commonwealth Bank of Australia economist Joseph Capurso said in a note.

“Economies will take time to re-open, some businesses will not re-open, and unemployment will take years to return to levels reported at the end of 2019.”

The Crypto Daily – Movers and Shakers -08/04/20

Bitcoin fell by 1.87% on Tuesday. Partially reversing an 8.25% rally from Monday, Bitcoin ended the day at $7,203.0.

A choppy start to the day saw Bitcoin rise to an early morning intraday high $7,454.3 before easing back.

Falling short of the first major resistance level at $7,544.7, Bitcoin slipped to a morning low $7,237.4 before finding support.

Steering clear of the first major support level at $6,955.4, Bitcoin recovered to $7,400 levels before hitting reverse.

The reversal saw Bitcoin slide to a late intraday low $7,088 before finding support.

Steering clear of the first major support level, Bitcoin recovered to $7,200 levels to limit the loss on the day.

The near-term bearish trend, formed at late June 2019’s swing hi $13,764.0, remained firmly intact, reaffirmed by the March swing lo $4,000.

For the bulls, Bitcoin would need to break out from $10,000 levels to form a near-term bullish trend.

The Rest of the Pack

Across the rest of the majors, it was also a mixed day on Tuesday.

Tezos bucked the trend on the day, rising by 2.21%, while the rest of the pack saw red.

Monero’s XMR (-5.85%), EOS (-4.66%), and Ethereum (-4.07%) led the way down.

Binance Coin (-3.16%), Bitcoin Cash ABC (-3.03%), Bitcoin Cash SV (-3.75%), Ripple’s XRP (-2.57%), Stellar’s Lumen (-2.73%), and Tron’s TRX (-3.60%) also saw heavy losses.

Cardano’s ADA (-1.82%) and Litecoin (-0.71%) saw relatively modest losses on the day.

Through the start of the week, the crypto total market cap rose from a Monday low $190.55bn to a Tuesday high $211.57bn. At the time of writing, the total market cap stood at $208.58bn.

Bitcoin’s dominance continued to ease back from 65% levels last seen on Monday. At the time of writing, Bitcoin’s dominance stood at 64.1%.

24-hour trading volumes recovered from sub-$100bn levels to hit $171bn levels on Tuesday before easing back. At the time of writing, 24-hr volumes stood at $153.73bn.

This Morning

At the time of writing, Bitcoin was up by 2.07% to $7,351.9. A bullish start to the day saw Bitcoin rise from an early morning low $7,151.6 to a high $7,393.1.

Bitcoin left the major support and resistance levels untested early on.

Elsewhere, it was also a bullish start to the day for the crypto majors.

Bitcoin Cash ABC and Bitcoin Cash SV led the way with gains of 8.92% and 15.73% respectively.

BTC/USD 08/04/20 Daily Chart

For the Bitcoin Day Ahead

Bitcoin would need to move back through the morning high $7,393.1 to bring the first major resistance level at $7,408.87 into play.

Support from the broader market would be needed, however, for Bitcoin to break back through to $7,400 levels

Barring another crypto rally, the first major resistance level and Tuesday’s high $7,454.3 would likely pin Bitcoin back.

Failure to move back through the morning high could see Bitcoin hit reverse.

A fall back through to sub-$7,250 levels would bring the first major support level at $7,042.57 into play.

Barring a crypto meltdown, however, Bitcoin should steer of sub-$7,000 levels.

European Equities: Futures Point to a Negative Open as New COVID-19 Cases Rise

Economic Calendar:

Thursday, 9th April

German Trade Balance (Feb)

The Majors

It was another bullish day for the European majors on Tuesday, with the DAX30 rallying by 2.79% to lead the way. The CAC40 and EuroStoxx600 also found further support, rising by 2.12% and by 1.88% respectively.

Economic data took a back seat once more on Tuesday, with February figures continuing to be of little interest to the markets.

Coronavirus numbers at the start of the week had supported the upside on the day, with the downward trend in new cases continuing from Sunday.

The upside did come in spite of Japan calling a state of emergency that led to the government delivering a stimulus package.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Tuesday. Key stats were limited to Germany’s industrial production figures for February that had a muted impact on the majors.

Industrial production increased by 0.3% in February, following an upwardly revised 3.2% jump in January. Economists had forecast a 0.9% decline.

According to Destatis,

  • Production in industry, excluding energy and construction, increased by 0.4%.
  • Within industry, the production of intermediate goods increased by 0.8%, with the production of consumer goods rising by 1.8%.
  • The production of capital goods fell by 0.3%, however.
  • Outside industry, energy production increased by 2.7%, while the production in construction declined by 1.0%.

From the U.S, February JOLTs job openings also had a muted impact on the majors. February numbers were out of little interest following the latest employment figures.

The Market Movers

For the DAX: It was another bullish day for the auto sector. Daimler and Volkswagen led the way, rising by 1.56% and 1.46% respectively. BMW and Continental saw more modest gains of 0.24% and 1.06% respectively.

It was also another bullish day for the banks, with Commerzbank and Deutsche Bank rallying by 5.17% and by 3.16% respectively.

Deutsche Lufthansa jumped on the bandwagon, though the upside on the day was a more modest 0.90%.

From the CAC, it was also another bullish day for the banks. Credit Agricole rallied by 7.30% to lead the way, with BNP Paribas and Soc Gen rising by 4.31% and 4.48% respectively.

The auto sector continued to find further support. Peugeot rallied by 5.94%, with Renault gaining 2.39%.

Air France-KLM and Airbus SE also continued to benefit from the improved risk sentiment, with the pair rallying by 3.95% and 6.56% respectively.

On the VIX Index

The VIX saw its run of 3 consecutive days in the red come to an end on Tuesday. Reversing a 3.33% decline on Monday, the VIX rose by 3.23% to end the day at 46.7.

A pullback across the U.S equity markets on Tuesday delivered the upside on the day. The S&P500 gave up solid gains from the start of the day to end the day with a 0.16% loss.

A rise in the number of coronavirus related deaths contributed to the moves, with no March or April economic data to distract the markets.

VIX 08/04/20 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar, with no material stats due out of the Eurozone.

From the U.S, there are also no stats to provide direction later in the day, with the FOMC meeting minutes due out after the European close.

On Tuesday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 23,653 to 494,260. In the U.S, the total number of cases increased by 32,950 to 400,335. That took the total number of cases globally to 1,431,054.

Both France and Italy saw a sharp increase in the number of new cases on Tuesday, following promising numbers on Sunday and Monday.

In the futures markets, at the time of writing, the DAX was down by 127 points, with the Dow down by 82 points.

The Greenback Finds Early Support ahead of Today’s FOMC Meeting Minutes

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar on Wednesday. The Japanese Yen was in action in the early hours.

Outside of the numbers, the markets also continued to respond to the latest coronavirus numbers. Following the lower number of new cases on Monday, new cases were on the rise once more on Tuesday. Fatalities also continued to rise, weighing on risk appetite.

On Tuesday, the total number of coronavirus cases across France, Germany, Italy and Spain rose by 23,653 to 494,260. In the U.S, the total number of cases increased by 32,950 to 400,335. That took the total number of cases globally to 1,431,054.

Key take away from the numbers was 3,039 new cases in Italy, which was up from the 901 new cases on Monday. France also reported another spike, with 11,059 cases, which was up from 5,171 new cases on Monday.

For the Japanese Yen

Core machinery orders rose by 2.3% in February, month-on-month, coming in ahead of a forecasted 2.7% decline. In January, orders had risen by 2.9%. Year-on-year, orders fell by 2.4%, following a 0.3% decline in January. Economists had forecast a 2.9% fall.

The Japanese Yen moved from ¥108.707 to ¥108.577 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% to ¥108.77 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.57% to $0.6135, with the Kiwi Dollar down by 0.44% to $0.5951. While the Aussie Dollar gave up some of Tuesday’s RBA fueled gains, central bank policy weighed on the Kiwi Dollar.

Early this morning, RBNZ Assistant Gov. Hawkesby stated that they remained ready to adjust the size of the QE program as and when deemed appropriate. He also added that the OCR could be cut into negative territory at some point in the future.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar, with no material stats due out of the Eurozone to provide direction.

The lack of stats will leave the EUR in the hands of the coronavirus numbers and sentiment towards the economic outlook.

Based on the latest figures and March stats out of the Eurozone, both remain EUR negative.

At the time of writing, the EUR was down by 0.24% at $1.0866.

For the Pound

It’s also a quiet day ahead on the economic calendar. There are no material stats due out ahead of tomorrow’s data deluge, which will leave the Pound in the hands of the news wires.

The markets will be in search of updates on the British PM’s health, with Foreign Secretary Dominic Raab considered negative for the Pound. Standing in for Johnson, there are concerns that the Foreign Secretary may rein in fiscal policy support at a time when the coronavirus peak has yet to come.

At the time of writing, the Pound was down by 0.11% to $1.2318.

Across the Pond

It’s a relatively quiet day ahead on the U.S economic calendar, with FOMC meeting minutes in focus late in the session.

The markets will be looking for any forward guidance on policy and the economic outlook. We’ve seen the FED throw in the kitchen sink, which leaves the question of what ammunition they have left. Further support may well be needed should the lockdown extend into May…

The Dollar Spot Index was up by 0.21% to 100.114 at the time of writing.

For the Loonie

It’s a busier day ahead on the economic calendar, with housing sector numbers in focus later this afternoon.

March housing start numbers will garner some attention, with the spread of the coronavirus likely to hit the housing sector. February building permits, however, will likely have a muted impact on the day.

Outside of the numbers, risk sentiment will provide direction on the day ahead of tomorrow’s OPEC Plus meeting.

The Loonie was down by 0.26% at C$1.4030 against the U.S Dollar, at the time of writing.

US Stock Market Overview – Stocks Close Lower, Experiencing a Roller Coaster Session

US stocks experienced a wild ride on Tuesday, initially surging out of the gate with major averages climbing 3%. As the session continued, stocks began to slip especially as crude oil prices tumbled into the close. All three major averages finished in the red. Sectors in the S&P 500 index were mixed, led higher by cyclicals, utilities were the worst-performing sector. Housing prices slipped in the last 2-weeks of March according to Realty.com. There has been a robust rally off the bottom of nearly 22%, which likely means that prices are poised to pause.

The VIX volatility index edged higher rising slightly to 45%. This still implies daily moves of nearly 3%. The Dow easily whipsawed this much intra-day. Natural gas prices broke out to fresh highs, helping to offset some of the downdraft created by the fall in crude oil prices. On the NYSE there were 12-new highs and 44-new lows.

Coronavirus Still Deadly

US deaths from the new coronavirus continued to climb, as New York and New Jersey reported their highest daily tolls despite signs that the outbreaks in the two hardest-hit states were starting to slow. Confirmed infections in the US were more than double that of any other nation, at nearly 380,000, according to Johns Hopkins University.

Housing Prices Fall

In the weeks ending March 21 and March 28, the number of newly-listed properties fell by 13.1% and 34% respectively when compared with the same period a year ago, Realtor.com found. This is an indication that home sellers may be holding off on listing their properties right now.

More Loans for Small Business

The Russell 2000 has lagged behind the major indices, but congress is poised to add more help for small businesses. Congress said they plan to move within days to provide hundreds of billions of dollars in new funding for small-business loans, citing widespread demand for assistance. Heavy requests for the previously approved $350 billion in loans are pushing Republican and Democratic lawmakers to consider augmenting the program.

FBS Launches Online Trading School – FBS Trading Bootcamp

While in self-isolation, the bootcamp members will learn to trade on the news, apply technical analysis, and stay updated on the Forex market volatility.

Online classes will be available on the FBS official page on Facebook from April, 8 to April, 24. FBS Trading Bootcamp includes four lessons presented by the best FBS analysts. Those who join will be able to take an active part in the discussions and ask their questions in the comments.

The schedule and basic topicsага

Lesson 1. How to benefit from the news.

The analysts will get to the bottom of trading on news and economic releases explaining how to make money on world events. The students will learn the basics of fundamental analysis and get to know what moment is more appropriate for trading.

Lesson 2. Technical analysis in times of high volatility.

Technical analysis (TA) is a method of predicting the future performance of an asset’s price based on its historical performance. The tutor will explain what kind of technical tools to use and how to distinguish potentially good trading signals from the bad ones in the volatile market.

Lesson 3. Psychological approach of the winners.

Students will get an idea of how to deal with stress when the price goes up, stay calm and confident, and lose no market opportunities.

Lesson 4. How to enter the market at the right time

During this class, the analyst will summarize the results and tell how to pick the best levels for opening a trade.

Certificates

Upon finishing all the lessons, bootcampers will be asked to take a quiz and get a follow-up after it. Once the test is passed, the students will get the course completion certificate.


FBS is a broker with an international outlook that serves clients in Asia, Latin America, Europe, and the MENA. Its main focus lies in offering financial products for currency, precious metals, CFD, and stock trading for clients with different goals and backgrounds. The company features a low barrier to entry, top-ranking apps, and a wide social trading network. Over 11 years in the field, the broker won 50 international awards, including Best International Forex Broker, Best Forex Brand, and Most Progressive Forex Broker Europe.

 

U.S. Stocks Set To Continue Their Winning Streak

Early Signs Of Stabilization On The Virus Front Lead To Continuation Of The Rally

S&P 500 futures are pointing to a 3% gain in premarket trading following yesterday’s big upside move. The reason for the optimism is the same – the market hopes that the coronavirus situation will soon stabilize, and investors will be able to evaluate when the major economies will lift virus containment measures.

Currently, there are four countries that have more than 100,000 coronavirus cases – U.S., Spain, Italy and Germany, while France will likely join this list very soon. However, the pace of new infections is slowing down, which provides investors with hope that the situation is finally under control.

More Stimulus Measures Are Announced

While there are signs of stabilization on the virus front, the situation on the economic front will continue to worsen in the upcoming weeks.

EU finance ministers discuss a 500 billion euro aid package to facilitate recovery after the pandemic is over. Italy is ready to spend as much as necessary to help the economy get out of the current crisis.

In Japan, an almost $1 trillion stimulus package has been approved after the country declared coronavirus emergency. Currently, Japan has 3,906 coronavirus cases, according to data from Johns Hopkins University.

However, the population of Japan has a significant percentage of older people, so coronavirus presents an especially challenging problem for the country.

Japanese economy has been in poor shape even before the coronavirus crisis, and I doubt that even a $1 trillion package will help much, but the additional liquidity will certainly play a positive role for the world markets.

Uncertainty Over Oil Production Cut Deal Remains

Oil prices are flat today after major volatility in recent trading sessions as the market tries to evaluate whether major oil producers can reach a common ground and negotiate a realistic oil production cut deal.

At this point, it looks like Russia and Saudi Arabia want the U.S. to join the deal, which is a tough task. In case the production cut deal is reached, oil prices and oil stocks will get a boost, helping the market get to new local highs despite the worsening situation in the economy.

Asian Shares Mixed; Japan Rallies on Stimulus Hopes, Aussie Shares Sink on RBA Contraction Warning

The major Asia-Pacific stock indexes finished mixed, but mostly higher on Tuesday as investors followed Wall Street’s bullish lead on rising hopes the spread of the global coronavirus pandemic may be slowing.

Mainland Chinese stocks posted the biggest gain after investors returned from a three-day holiday weekend. The Nikkei followed with strong gains fueled by the announcement of a new fiscal stimulus package. Shares were down in Australia after the Reserve Bank of Australia (RBA) left its benchmark interest rate unchanged.

On Tuesday, Japan’s Nikkei 225 Index settled at 18950.18, up 373.88 or +2.01%. Hong Kong’s Hang Seng Index finished at 24176.76, up 427.64 or +1.80% and South Korea’s KOSPI Index closed at 1823.60, up 31.72 or +1.77%.

China’s Shanghai Index settled at 2820.76, up 56.78 or +2.05% and Australia’s S&P/ASX 200 finished at 5252.30, down 34.50 or -0.65%.

Risk Sentiment Improves

Risk sentiment improved as data over the weekend showed a slowing in the number of daily U.S. coronavirus cases. Death tolls in some of the world’s coronavirus hot spots, including Spain and Italy, also showed signs of easing.

Coronavirus data was mixed in Asia with South Korea reporting Tuesday less than 50 new cases of infection for the second day running. China also posted no new deaths as of April 6 for the first time since January when it started publishing daily updates. However, fresh infections rose in Singapore and Indonesia.

Japan to Announce Coronavirus Emergency, Prepares Near $1 Trillion Stimulus

Japanese Prime Minister Shinzo Abe on Tuesday unveiled plans for a stimulus package he described as among the world’s biggest as he prepared to declare a state of emergency to stem a rise in new coronavirus infections in major population centers.

Abe will announce the state of emergency for the capital Tokyo and six other prefectures, for a period of about one month, after earlier on Tuesday getting the green light from a panel of experts.

His cabinet will also finalize a massive stimulus package worth 108 trillion yen ($990 billion) – equal to 20% of Japan’s economic output – to cushion the heavy impact of the pandemic on the world’s third-largest economy.

Australian Shares finish Lower on RBA Outlook

Australian shares reversed course to end lower on Tuesday, with financials and healthcare stocks leading the decline after the central bank’s cautious commentary on the country’s near-term economic fortunes.

While the Reserve Bank of Australia (RBA) left its cash rate at a record low of 0.25% on Tuesday, as expected, it warned that a very large economic contraction is likely in the June quarter. The central bank also said the unemployment rate is expected to reach its highest level for many years.

The RBA Stands Pat as COVID-19 Numbers Give More Support to Riskier Assets

Earlier in the Day:

It was a busy start to the day on the economic calendar on Tuesday. The Kiwi Dollar, Aussie Dollar, and Japanese Yen were in action in the early hours.

Outside of the numbers, the markets also continued to respond to the latest coronavirus numbers.

On Monday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 17,051 to 470,607. In the U.S, the total number of cases, increased by 31,254 to 367,385. That took the total number of cases globally to 1,346,974.

Key take away from the numbers was 901 new cases in Italy, supporting the view that containment measures were taking effect. After a 25,615 spike in France on Saturday, the numbers also receded back to 5,000 levels on Sunday.

From the U.S, a plateauing in NY was positive for the markets.

For the Kiwi Dollar

The NZIER Quarterly Survey of Business Survey (QSBO) showed that a net 67% of businesses expect a deterioration in general economic conditions. In the 4th quarter, a net 21% of businesses had expected a deterioration.

  • In the 1st quarter, a net 11% reported weaker demand in their own business, with 13% expecting weaker demand in the 2nd
  • Service sector firms reported a weakening in own trading activity. This was as a result of the enforcement of strict border controls and social distancing requirements that affected tourism and hospitality-related sectors.
  • Retailers also reported a sharp decline in the week before the lockdown.
  • By contrast, manufacturers and builders saw an improvement in demand in the weeks leading up to the lockdown.

The Kiwi Dollar moved from $0.59284 to $0.59320 upon release of the figures. At the time of writing, the Kiwi Dollar up by 0.83% to $0.5982.

For the Japanese Yen

Household spending fell by 0.3% in February, year-on-year, following on from a 3.9% slide in January. Economists had forecast a 3.9% decline.

According to the Statistic Bureau,

  • Spending on clothing & footwear (-7.7%), fuel, light & water charges (-6.0%), transportation & telecommunication (-5.9%), education (-5.6%), and culture & recreation (-4.7%) weighed.
  • There were marked increases, however, in spending on furniture & household utensils (+8.3%), medical care (+7.8%), and food (+4.2%).
  • Spending on housing saw a more modest 1.7% increase.
  • Month-on-month, household spending rose by 0.8% in February, following a 1.6% decline in January.

The Japanese Yen moved from ¥109.133 to ¥109.188 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.41% to ¥108.77 against the U.S Dollar.

For the Aussie Dollar

The trade surplus narrowed from a revised A$4.74bn surplus to an A$4.361bn surplus in February. Economists had forecasted an A$3.65bn surplus.

According to the ABS,

  • Goods and services credits fell A$1,882m (-5%) to A$37,760m.
    • Non-rural goods exports fell by A$394m (-2%), non-monetary gold by A$332m (-23%) and rural goods by A$310m (-7%).
    • While the net exports of goods under merchanting held relatively steady, services credits slid A$846m (-10%).
  • Goods and services debits fell by A$1,498m (-4%) to A$33,399m.
    • Consumption goods imports fell by A$701m (-8%), capital goods by A$415m (-7%), and intermediate goods and other merchandising by A$262m (-2%).
    • Imports of non-monetary gold fell by A$52m (-9%), with services debits falling A$68m (-1%).

The Aussie Dollar moved from $0.61068 to $0.61091 upon release of the figures that preceded the RBA’s monetary policy decision and rate statement.

The RBA

The RBA held interest rates unchanged at 0.25%, which was in line with market expectations. Salient points from the RBA Rate Statement included:

  • The coronavirus remains the key area of focus.
  • Once the virus is contained, the RBA expects a recovery in the global economy, supported by both fiscal and monetary policy.
  • There are some signs that the markets are working more effectively after a period of historically high volatility. Support has come from central bank efforts to ensure liquidity.
  • Near-term, there is considerable uncertainty about the outlook for the Australian economy.
  • The degree of impact will depend on the success of efforts to contain the virus and for how long social distancing measures need to continue.
  • A very large contraction in the economy and surge in unemployment is likely in the June quarter, however.
  • The coordinated monetary and fiscal response, together with measures taking by Australian banks, will soften the impact and support an economic recovery.
  • The Board will not increase the cash target rate until progress is being made towards full employment and it is confident that inflation will be sustainable within the 2-3% target band.

The Aussie Dollar moved from $0.61252 to $0.61474 upon release of the statement. At the time of writing, the Aussie Dollar was up by 0.92% to $0.6144.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. German industrial production for February is due out later this morning.

Any numbers skewed to the positive will likely have a muted impact on the EUR, with the markets all too aware of economic conditions in March and early April.

Outside of the numbers, the latest coronavirus numbers will continue to have a greater impact on the day.  Positive numbers for Monday provided early support.

At the time of writing, the EUR was up by 0.27% at $1.0822.

For the Pound

It’s also another relatively quiet day ahead on the economic calendar. March house price figures are due out in the early part of the day. We don’t expect the numbers to have any influence on the Pound, however.

Health updates on the British Prime Minister and coronavirus numbers for the UK will have a greater influence on the day.

There is quite a lot of negative chatter about the UK economic outlook at present, which is negative for the Pound. A marked fall in the number of new cases early in the week would provide some much-needed support, however. The sooner the containment measures take effect the less of an impact the virus will have on the economy.

At the time of writing, the Pound was up by 0.38% to $1.2277.

Across the Pond

It’s a quiet day ahead on the U.S economic calendar, with stats limited to February’s JOLTs job openings.

Following the last 2-weeks of jobless claims and the March nonfarm payrolls, the markets will likely brush aside the numbers.

Consumer confidence has taken a hit as a result of the coronavirus, which will also make quit rates redundant near-term.

Outside of the numbers, expect chatter from the Oval Office and the latest COVID-19 figures to influence, however. The risk-on sentiment through the early part of the day weighed on the Greenback.

The Dollar Spot Index was down by 0.13% to 100.553 at the time of writing.

For the Loonie

It’s a busier day ahead on the economic calendar, with March Ivey PMI numbers in focus later this afternoon.

While the BoC has already delivered 2 emergency rate cuts, we will expect the March figures to have some influence.

It will ultimately boil down to the outcome of the emergency OPEC et al meeting and risk sentiment.

The Loonie was up by 0.19% at C$1.4084 against the U.S Dollar, at the time of writing.

S&P 500 Index Recovers About $1 Trillion in Market Value on Hopes Pandemic Could Level Off Soon

The major U.S. stock index futures settled sharply higher on Monday with the benchmark S&P 500 Index recovering about $1 trillion in market value after a drop in the daily death toll in New York, the country’s biggest coronavirus hot spot, raised hopes that the pandemic could level off soon. Despite Monday’s bounce, the S&P 500 remains nearly 20% – or $6 trillion in market value – short of its all-time high in mid-February.

In the cash market, the benchmark S&P 500 Index settled at 2663.68, up 175.03 or +6.66%. The blue chip Dow Jones Industrial Average finished at 22679.99, up 1627.46 or +7.29% and the technology-based NASDAQ Composite closed at 7913.24, up 540.16 or +6.95%.

Sector Performance

Defensive utilities sector led with big gains, while consumer staples and real estate – also considered safe bets during times of volatility – rose between 3% and 8%. The S&P 500 banking index jumped 7.2% and was set for its best day in more than a week. Bank of America, Citigroup, Wells Fargo and JPMorgan advanced between 5.8% and 8.8%, tracking Treasury yields.

Volatility Index Falls to Two-Week Low

Wall Street’s fear gauge fell to its lowest in two weeks, but analysts cautioned against calling a bottom. During the financial crisis of 2007-08, the S&P 500 remains nearly 20% – or $6 trillion in market value – short of its all-time high in mid-February.

The CBOE Volatility Index fell 3.3% to 45.24, the lowest level in about two weeks. Three weeks ago, the VIX hit a record high of 82.69, surpassing the peak level during the financial crisis.

Earnings Season Recession

S&P 500 companies are expected to enter an earnings recession in 2020, with declines in profit in the first and second quarters, according to IBES data from Refinitiv, as demand evaporates across sectors including airlines, luxury goods and industrials. First-quarter expectations now call for an earnings decline of 6% from the year-ago period.

The Internals

Advancing issues outnumbered decliners by a 9.45-to-1 ratio on the NYSE and by a 6.01-to-1 ratio on the NASDAQ.

The S&P index recorded two new 52-week highs and no new lows, while the NASDAQ recorded six new highs and 23 new lows.

Some Analysts Not Impressed by Rally

“We still believe that the odds are quite high that the lows from March will be retested and probably undercut before this bear market comes to an end,” Matt Maley, chief market strategist at Miller Tabak, said in a note on Monday.

European Equities: Futures Point to More Gains as Italy Reports a Marked Fall in New Cases

Economic Calendar:

Tuesday, 7th April

German Industrial Production (MoM) (Feb)

Thursday, 9th April

German Trade Balance (Feb)

The Majors

It was a bullish start to the week for the European majors on Monday, with the DAX30 rallying by 5.77% to lead the way. The CAC40 and EuroStoxx600 also found strong support, rising by 4.61% and by 3.73% respectively.

Economic data took a back seat on Monday, with February figures of little interest for the markets.

Sunday’s coronavirus numbers delivered the upside on the day. The total number of cases amongst the worst affected EU countries saw a marked fall on Sunday.

Across France, Germany, Italy, and Spain, the number of new cases rose by 16,711 to 453,556 on Sunday. On Saturday, the total number of cases had risen by a whopping 42,323 to 436,845.

These were significant numbers, particularly for Spain, which reported a rise of just 2,780 on Sunday, following 6,969 new cases on Saturday. Over the weekend, Spain had stated that the spread of the virus may have peaked.

From the U.S, the numbers also showed an improvement, with the number of new cases rising by 24,774 on Sunday to 336,131. On Saturday, 34,196 new cases had been reported.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Key stats were limited to Germany’s factory order numbers for February that had a muted impact on the majors.

Factory orders fell by 1.4% in February, following a downwardly revised 4.8% jump in January. Economists had forecast a 2.4% decline.

According to Destatis,

  • Domestic orders increased by 1.7%, while foreign orders slid by 3.6%, month-on-month.
  • New orders from within the Euro area slumped by 5.0%, with new orders from other countries falling by 2.7%.
  • New orders for intermediate goods increased by 0.9%, while new orders for the manufacture of capital goods slid by 3.4%. Consumer goods saw a 1.7% increase in new orders.
  • Destatis noted that the coronavirus pandemic had yet to have a notable impact on new orders in Germany.

There were no stats from the U.S to provide direction later in the session.

The Market Movers

For the DAX: It was a particularly bullish start to the week for the auto sector. Continental and Volkswagen led the way rallying by 12.95% and 13.96% respectively. BMW and Daimler weren’t far behind, with gains of 10.22% and 11.29% respectively.

It was also a bullish day for the banks, with Commerzbank and Deutsche Bank rallying by 7.67% and by 8.07% respectively.

Deutsche Lufthansa found much-needed support, with an 8.66% gain.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 3.68% and 3.76% respectively, with Soc Gen rallying by 9.16%.

The auto sector was also on the move on Monday. Peugeot rose by 8.97%, with Renault rallying by 14.17%.

Air France-KLM and Airbus SE found strong support, with the pair gaining 2.94% and 8.13% respectively.

On the VIX Index

The VIX saw red for a 3rd consecutive day on Monday, falling by 3.33%. Following on from an 8.07% decline on Friday, the VIX ended the day at 45.2.

A bullish start to the week for the equity markets saw the VIX hit reverse, as the U.S equity markets responded to the coronavirus numbers from Sunday.

The latest figures revealed a lower number of new cases, which drove demand for riskier assets at the start of the week.

Across the U.S equity markets, the S&P500 rose by 7.03%, with the Dow and NASDAQ each closing out the day with 7.33% gains.

VIX 07/04/20 Daily Chart

The Day Ahead

It’s another relatively quiet day ahead on the Eurozone economic calendar. German industrial production figures for February are due out ahead of the European open.

Once more, we expect the markets to brush aside the numbers. A marked slowdown in private sector activity in March that will likely continue through April will leave February numbers with little to no influence.

From the U.S, February’s JOLTs job openings will also be brushed aside, with the labor market figures in late March and early April more relevant and reflective of the effects of COVID-19 on the U.S economy.

With the stats likely to have little to no impact, the market attention will remain on the coronavirus numbers.

There will need to be a continued downtrend in new cases to support a sustained recovery. The majors do remain susceptible to another spike in cases.

On Monday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 17,050 to 470,606. In the U.S, the total number of cases increased by 28,127 to 364,258. That took the total number of cases globally to 1,342,775.

While there a higher number of cases on Monday, when compared with Sunday, the numbers were still well below Saturday numbers. Of greatest significance on the day were the numbers from Italy, with new cases rising by just 901.

In the futures markets, at the time of writing, the DAX was up by 158.5 points, with the Dow up by 91 points.