European Shares Higher as New Stimulus Package Optimism Outweighs US-China Tensions

Asian shares finished mixed as investors focused on the regional turmoil in Hong Kong, but European shares are edging higher on Wednesday as investors eyed a fresh European Union stimulus plan. Meanwhile in the United States investors continue to remain optimistic over the reopening of the economy and progress toward a coronavirus vaccine. Nonetheless, the trade was a little tentative at all global exchanges on simmering U.S.-China tensions.

At 09:40 GMT, the UK’s FTSE 100 is trading 6160.20, up 92.44 or +1.52%. Germany’s Dax is at 11706.36, up 201.71 or +1.75% and France’s CAC 40 Index is trading 4699.60, up 93.36 or +2.03%.

Meanwhile, the pan-European STOXX 600 rose 0.3%, hovering near an 11-week high hit in the previous session, led by hard-hit banking, travel and leisure, and auto sectors.

The easing of lockdowns in many European countries and improving economic data have spurred buying in the growth-exposed cyclical sectors in recent weeks, putting European stocks on course for a modest 2.9% gain in May.

European Commission Prepares to Unveil New Stimulus Plan

Euro Zone stocks were also supported as the European Commission (EC) prepares to unveil a plan to help the EU economy recover from its coronavirus slump with a mix of grants, loans and guarantees exceeding 1 trillion Euros.

Hopes for a coordinated fiscal response to the coronavirus crisis have been boosted since France and Germany made proposals for a 500-billion-Euro Recovery Fund.

UK Midcaps Hit 11-Week High on Reopening Optimism

British midcaps hit an 11-week high on Wednesday as hopes of an economic recovery with the easing of coronavirus lockdowns offset concerns about growing political unrest in Hong Kong over Beijing’s proposed national security laws.

The domestically-focused FTSE 250 gained 1.2%, rising for an eighth straight session as thousands of retailers prepared to reopen from June 1 from a months-long shutdown that has crushed the UK economy.

UK Prime Minister Boris Johnson Faces Political Battle

In the U.K., pressure is mounting on U.K. Prime Minister Boris Johnson as a political battle over the position of his top aide Dominic Cummings, who is accused of breaking U.K. lockdown rules, intensifies. Cummings has refused to apologize and Boris Johnson has backed his advisor, despite widespread calls for Cummings to resign.

Dow Futures Surge in Pre-Market Trade

U.S. stock futures pointed to more gains at Wednesday’s open as optimism about the reopening of the economy and a potential coronavirus vaccine offset concerns about rising U.S.-China relations.

Dow futures pointed to an implied open of more than 400 points. The S&P 500 and NASDAQ futures also implied solid gains at the open.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Geopolitics, COVID-19 and Economic Data to Drive the Markets

On the Macro

It’s a busy week ahead on the economic calendar, with 59 stats in focus in the week ending 15th May. In the week prior, 57 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead for the greenback.

In the 1st half of the week, April inflation figures are due out on Tuesday and Wednesday.

Falling commodity prices and a slump in consumer spending is expected to deliver deflationary pressures.

Barring particularly dire numbers, expect the stats to have a muted impact on the Dollar and risk sentiment.

It gets more interesting in the 2nd half of the week, however.

Weekly initial jobless claims figures on Thursday, April retail sales, and May consumer sentiment figures on Friday will provide direction.

While we expect the numbers to be negative once more, consumer sentiment figures will need to see a pickup. Jobless claims will also need to see a marked decline…

A continued surged in jobless claims will weigh on risk sentiment late in the week.

Outside of the numbers, it’s going to be chatter from the Oval office and COVID-19.

Trump’s looking to rally support from voters the best way he knows how. It may not be as successful this time around. The U.S has paid a high price for the administration’s shortcomings early on in the pandemic…

The Dollar Spot Index ended the week up by 0.66% to 99.734.

For the EUR:

It’s also a busy week ahead on the economic data front.

It’s a quiet start to the week, however, with stats limited to March industrial production figures on Wednesday. We expect the markets to brush aside the numbers, leaving risk sentiment as the key driver.

In the 2nd half of the week, 1st estimate German GDP numbers for the 1st quarter will influence on Friday.

Expect finalized April inflation figures in the 2nd half of the week and Eurozone trade data to have a muted impact.

On Thursday, the ECB’s Economic Bulletin will also garner plenty of interest. Does the ECB see April as the bottom of the economic abyss?

While risk sentiment will be key in the week, lockdown measures will need to ease further to provide support.

The EUR/USD ended the week down by 1.29% to $1.0839.

For the Pound:

It’s a busy week ahead on the economic calendar.

The markets will need to wait until Wednesday, however, for a data deluge.

Key stats include 1st estimate GDP numbers for the 1st quarter and March manufacturing production figures.

Retail sales, industrial production, and trade data will likely have a muted impact on the day.

On Friday, house price figures for April will also be brushed aside.

Outside of the numbers, updates from trade talks between the UK and the U.S, Brexit, and COVID-19 updates will also be key.

Risk sentiment will need to improve, however, for the Pound to get any early bids…

The GBP/USD ended the week down by 0.77% to $1.2410.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

March’s manufacturing sales figures on Thursday will likely have a muted impact on the Loonie.

The lack of stats will leave the Loonie in the hands of market risk sentiment.

From a Loonie perspective, the focus will remain on the near-term economic outlook and demand for crude.

The U.S administration’s renewed focus on China will also be a factor in the week…

Crude oil inventory numbers and OPEC’s monthly report will provide direction mid-week.

The Loonie ended the week up by 1.15% to C$1.3927 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively busy week ahead.

In the 1st half of the week, key stats include business and consumer confidence figures on Tuesday and Wednesday.

April’s business confidence and May consumer confidence figures will likely reflect sentiment towards COVID-19. In the past, both have been on the slide in response to monetary policy easing. We should see a similar outcome this time around.

Later in the week, April employment figures are also due out and will influence. Following better than expected March numbers, April figures are likely to be quite dire…

At the end of the week, industrial production figures out of China could deliver further support, however.

The Aussie Dollar ended the week up by 1.78% to $0.6532.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic data front.  On the economic data front, April electronic card retail sales and Business PMI figures are due out on Monday and Friday.

Expect the Kiwi to be relatively resilient to any weaker numbers. Lockdown measures were in place through April…

The main event of the week is the RBNZ monetary policy decision on Wednesday.

We had heard of negative rates in recent weeks. New Zealand is COVID-19 free now, however, and economic data has not been as bad as had been expected…

Could there be a more upbeat outlook, which would certainly give the Kiwi Dollar a boost in the week?

The Kiwi Dollar ended the week up by 1.20% to $0.6136.

For the Japanese Yen:

It’s a particularly quiet week ahead on the economic data front. March’s current account figures, due out on Wednesday, will have a muted impact on the Yen.

A lack of stats leaves the Yen in the hands of market risk sentiment. While the Yen has not found too much support from COVID-19, rising tensions between the U.S and China and Iran and the U.S could deliver support.

The Japanese Yen ended the week up by 0.24% to ¥106.65 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic data front.

In the first half of the week, April inflation figures are due out on Tuesday, which should have limited influence on market risk sentiment.

April’s industrial production, fixed-asset investment, and retail sales figures on Friday will be of interest, however.

Outside of the numbers, chatter from Beijing on Trump’s latest accusations will need monitoring… There are also updates on trade talks to consider.

The Chinese Yuan ended the week down by 0.16% to CNY7.0742 against the U.S Dollar.

Geo-Politics

OPEC

OPEC + will need to continue to toe the line on production to support crude oil prices.

Economic data suggests that production will need to be reined in further. Expect any chatter in the week to influence.

OPEC’s monthly report on Wednesday and inventory numbers for the week will have an impact…

For the Saudis, April production was at an all-time high, so cutting production will be optics and could test the oil price recovery…

Lockdown measures are easing but does that deliver the upswing in demand to deliver the needed rebalancing?

UK Politics:

Brexit, U.S – UK trade talks, and lockdown measures are the key areas of focus in the week ahead.

Last week, we saw the Pound under pressure as a result of negative feedback on Brexit alone…

From the weekend, there was nothing positive on the Brexit front to support the Pound. In fact, if Johnson sticks to his guns and refuses to extend the transition period, a hard Brexit looks likelier than not.

When considering the UK COVID-19 numbers, Brexit woes, and a likely drawn-out U.S – UK trade deal negotiation, upside for the Pound looks limited.

U.S Politics:

A sense of unpredictability has returned. There are China and Iran to consider in the week ahead…

Trump will certainly be looking to deflect the attention away from COVID-19 and the blame for that matter. The impact on the U.S economy and labor market conditions has been catastrophic. His 2nd term as president depends on how well he manages to pass the buck…

Kicking off another trade war and rolling out sanctions on China may not be the answer.

The Coronavirus:

Easing measures continued in the week and Trump spoke of the need to continue easing, irrespective of the impact on the COVID-19 numbers. It could be a disastrous outcome and bring an end to any hopes of a 2nd term for Trump and the Republicans.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drug remdesivir.
  2. The downward trend in new coronavirus cases continues.
  3. Governments progress with easing lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence…

At the time of writing, the total number of coronavirus cases stood at 4,101,641, with the U.S reporting 1,347,309 cases to-date.

The Weekly Wrap – Crude Oil Prices, Economic Data, and COVID-19 Updates Drive Risk Appetite

The Stats

It was a particularly busy week on the economic calendar, in the week ending 8th May.

A total of 57 stats were monitored, following the 60 stats from the week prior.

Of the 57 stats, 29 came in ahead forecasts, with 26 economic indicators coming up short of forecast. 2 stat was in line with forecasts in the week.

Looking at the numbers, just 18 of the stats reflected an upward trend from previous figures. Of the remaining 39, 38 stats reflected a deterioration from previous.

For the Greenback, the pendulum swung back in favor of the Greenback in the week. The U.S Dollar Spot Index rose by 0.66% to end the week at 99.734. Partially reversing a 1.30% fall from the previous week, it was a 3rd week in the green out of 4.

Economic data, COVID-19 news, geopolitics were in focus throughout the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 4,000,975, which was up from last Friday’s 3,392,718. Week-on-week, the total number of cases was up by 608,257, on a global basis. This was higher than the previous week’s increase of 564,143 in new cases.

In the U.S, the total rose by 189,444 to 1,318,504. In the week prior, the total number of new cases had risen by 204,064.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 42,031 to bring total infections to 823,870. In the previous week, the total number of new cases had risen by 54,254.

It was worth noting that the U.S and the EU member states monitored all saw a spike in new cases on Thursday.

Out of the U.S

It was a busy week on the economic calendar.

In the 1st half of the week, there was nothing positive for the markets to consider.

Factory orders tumbled by 10.3% in March, the trade deficit widened in March, and service sector activity tanked.

The market’s preferred ISM Non-Manufacturing PMI slid from 52.5 to 41.8.

Employment figures also tested market resilience throughout the week.

After some quite dire ADP numbers on Wednesday, initial jobless claims jumped by another 3.169m in the week ending 1st May.

The surge preceded April’s nonfarm payroll figures on Friday, which showed a 20.5m slump. As a result of the slide, the U.S unemployment rate jumped from 4.4% to 14.7% in April.

The only consolation was that economists had forecast an unemployment rate of 16%. It was enough to support the demand for riskier assets on the day.

In the equity markets, the Dow rose by 2.56%, with the NASDAQ and S&P500 rallying by 3.50% and 6.00% respectively.

Out of the UK

It was a relatively quiet week on the economic calendar. Key stats included finalized April private sector PMI numbers and house price figures.

The stats were skewed to the negative. Finalized services and composite PMI were revised upwards from prelim figures, providing the only positive.

It was of little consolation, however, with the PMIs still at 13 levels in spite of the upward revisions

House prices fell by 0.7%, reversing a 0.2% rise in March.

Also negative was a slide in the construction PMI from 39.3 to just 8.2 in April.

While the stats were negative, the BoE gave the Pound much needed support by standing pat on monetary policy.

The support for the Pound came in spite of the BoE delivering a gloomy economic outlook.

On the geopolitical risk front, updates on Brexit pinned back the Pound mid-week, with both sides making little progress.

There was some hope of progress towards a U.S – UK trade deal, but it is going to take some time for any meaningful progress.

In the week, the Pound fell by 0.77% to $1.2410. The FTSE100 ended the week up by 3.00%, following on from a 0.19% gain from the previous week.

Out of the Eurozone

It was another busy week economic data front, with the stats heavily skewed to the negative once more.

Manufacturing and Service PMIs for April for Italy and Spain were in focus in the 1st half of the week.

Finalized PMIs from France, Germany, and the Eurozone together with German factory orders and Eurozone retail sales also drew interest.

For Italy and Spain, while Manufacturing PMIs were on the slide and it was the Services PMIs that delivered a market shock.

The Service PMIs on Wednesday coincided with a record slide in German factory orders in March.

Eurozone retail sales were not much better, with an 11.20% fall coming before the April lockdown…

Later in the week, dire industrial production figures and trade data out of Germany had a muted impact. Perhaps the only consolation in the week was that Germany avoided a trade deficit by some margin.

For the week, the EUR rose by 1.29% to $1.0839, reversing a 1.46% gain from the previous week.

For the European major indexes, it was a bullish week. The EuroStoxx600 and DAX30 rose by 1.08% and by 0.39% respectively, while the CAC30 fell by 0.49%.

Elsewhere

It was another bullish week for the Aussie Dollar and the Kiwi Dollar, with the pair managing to avoid a Friday reversal.

In the week ending 8th May, the Aussie Dollar rose by 1.78% to $0.6532, with the Kiwi Dollar up by 1.20% to $0.6136.

For the Aussie Dollar

It was a relatively busy week for the Aussie Dollar on the economic data front.

Key stats included March retail sales and trade figures on Wednesday and Thursday.

Retail sales surged by 8.5%, with the jump attributed to hoarding. In spite of expectations of an April slump, the Aussie found support from the numbers.

Trade data also impressed, with the trade surplus widening from A$4.361bn to A$10.602bn.

Again, the markets and the RBA are expected economic conditions to deteriorate in the 2nd quarter, which limited the upside from the stats.

On the monetary policy front, the RBA left interest rates unchanged on Tuesday, while assuring the markets of more support should the need arise.

The RBA’s base case scenario for the economic outlook failed to sink the Aussie Dollar in the week.

From elsewhere, it was trade data from China that ultimately gave the Aussie Dollar a boost. A 3.5% increase in exports caught the markets by surprise…

For the Kiwi Dollar

It was also a busier week on the economic calendar.

Key stats included 1st quarter employment figures and inflation expectations.

Employment increased by 0.7% in the 1st quarter, leading the unemployment rate up to 4.2%. Economists had forecast a 0.3% decline and an unemployment rate of 4.3%.

While the employment figures were positive, inflation figures were quite the opposite.

Inflation expectations for 2-years out slumped in the 2nd quarter from 1.93% to 1.24%. Things were not much better for 1-year, with inflation forecasted to tumble from 1.88% to 0.74%. This was of little surprise, however, when considering the slump in crude oil prices.

Ultimately, better than expected employment figures and an end to the coronavirus in NZ were the positives.

The NZ economy should now be in recovery mode, which could give the RBNZ some breathing room.

For the Loonie

It was a relatively busy week on the economic calendar, with the stats skewed to the negative.

While the stats showed further deterioration from the previous month, they were more upbeat than forecasts.

In March, the trade deficit widened from C$0.98bn to C$1.41bn, against a forecast of C$2.00bn.

In April, employment tumbled by 1.994m, following a 1.011m fall in March. Economists had forecast a 4m decline. The unemployment rate jumped from 7.8% to 13%, which was well below a forecast of 18%.

From the private sector, the Ivey PMI did disappoint, however, with the PMI falling from 26.0 to 22.8 in April. Economists had forecast a PMI of 25.0.

Ultimately, an upward trend in crude oil prices and improved risk sentiment delivered the gains for the Loonie on the week.

The Loonie rose by 1.15% to end the week at C$1.3927.

For the Japanese Yen

It was a relatively quiet week on the data front.

Key stats included March household spending and finalized April services PMI figures.

There was nothing positive to take from the numbers, with household spending sliding by 4% in March.

Service sector activity also ground to a halt, with the finalized PMI revised down from 22.8 to 21.5. In March, the PMI had stood at 33.8.

While the stats were skewed to the red, the Yen found some support though nothing to write home about…

The Japanese Yen rose by 0.24% to end the week at ¥106.65. In the week prior, the Yen had risen by 0.56% against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front.

Key stats included April service sector PMI and trade data.

The stats were skewed to the positive in the week. The pace of contraction in service sector activity eased in April, with the PMI rising from 43.0 to 44.4.

Of greater significance, however, was a 3.5% increase in exports. Economists had forecast a 15.7% slide.

Imports did tumble by 14.2%, however, with the lack of demand raising some uncertainty over what lies ahead.

The Yuan failed to end the week in the green, with Trump’s threats and an uncertain economic outlook weighing.

In the week ending 8th May, the Yuan fell by 0.16% to CNY7.0742 against the Greenback.

The CSI300 rose by 1.30%, while the Hang Seng ending the week down by 1.68%.

The Euro is Knocked Back Further

European bourses opened higher but made little headway before some profit-taking set in, while US shares are trading higher. Benchmark 10-year yields are firmer, and the US Treasury yield is near 67 bp and is approaching the upper end of its recent range.

The yield has not closed above here since April 14. Despite the German court ruling yesterday, peripheral European bonds are not under pressure, and in fact, the Italian premium has narrowed a little. The dollar remains firm against most of the major currencies. The yen is resilient and Japanese markets re-open tomorrow.

The dollar bloc is little changed, but the euro and sterling are under heavy. The euro slipped below $1.08 in the European morning, and sterling was sold below $1.24.

Among emerging markets, the South Korean won is the strongest, though foreigners were net sellers of its equities today. The South African rand was resisting the dollar’s tug but has since turned weaker. On the other hand, South African bonds continued yesterday’s recovery.

Despite the recent downgrades and being dropped from the FTSE World Government Index, foreign investors have returned to South Africa’s bond market, and its bond sales yesterday were oversubscribed. Gold is hovering a little above $1700. June WTI, which traded near $10 a barrel early last week, briefly poked above $26 today before setting back to $24 and is now near the middle of the session’s range.

Asia Pacific

China’s mainland markets re-opened from the May Day holiday. When the local markets were shut on April 30, the dollar was at about CNY7.0635. The offshore yuan had weakened in the meantime. The US dollar rose from around CNH7.0815 on April 30 to close yesterday near CNH7.1225. The PBOC set the dollar’s reference rate against the yuan at CNY7.0690, which was a bit weaker than the CNY7.0720 that the models projected. The dollar fell to CNH7.10, as three-day low before recovering.

There is little evidence that Chinese officials are seeking to express their frustration with the escalation of US rhetoric over the virus or Taiwan through the exchange rate. On the other hand, the dramatic decline in energy prices is another hurdle to China fulfilling the trade agreement with the US, which seemed to have been a stretch under normal circumstances.

Australia appears to have reported an 8.5% surge in March retail sales, as households stockpiled. However, prices jumped in Q1, and when retail sales are adjusted for price changes, the Q1 performance is not impressive. In real terms, retail sales rose by 0.7% in Q1 after a 0.5% increase in Q4 19. The median forecast in the Bloomberg survey expected a 1.8% increase. Separately, New Zealand reported the jobless rate rose to 4.2% in Q1 from 4.0% in Q4 19. Employment rose 0.7% in the quarter while economists had expected a 0.2% decline. Private wage growth slows.

The dollar is trading heavily against the yen for the fourth consecutive session and has gained only once in 11 sessions. It slipped to almost JPY106.20 today, its weakest level since March 17. It is fraying the band of support that appeared to have been built in the JPY106.40-JPY106.60 area, which now becomes resistance. Some are linking the yen’s persistence to repatriation from US derivatives such as collateralized loan obligations.

However, our understanding was that most of these purchases were funded with dollar borrowings or swaps. The Australian dollar finished last week near $0.6420. It firmed slightly over the past two sessions but has stalled a cent below last week’s highs (~$0.6570). Watch the $0.6400 area, where the 20-day moving average is found. It has not closed below this moving average since April 3.

Europe

The flash PMI reports steal most of the thunder from the final estimates. The new information today is the German factory orders for March, which were weaker than expected, falling 15.6%, half again as much as the median forecast in the Bloomberg survey anticipated (-10%). The eurozone retail sales for March were also reported. They fell 11.2% on the month, more than the 10.6% decline expected.

The final PMI eurozone as a whole ticked up from the flash. The service component stands at 12 rather than 11.7, but still off from 26.4 in March. The composite edged up to 13.6 from 13.5, but it means virtually nothing given the 29.7 reading in March. German services and composite PMI were revised higher from the flash while France’s reports were revised slightly lower. Italy came in a little better than expected, and by that, we mean that the drop was a smidgeon smaller than expected, while Spain’s showed a larger decline than expected.

The euro was unable to recover much after falling from around $1.09 to about $1.0825 in response to the German Constitutional Court ruling yesterday, and it has been sold further today. A trap was laid by the court. It is not as simple as complying with a German court’s demand, as many observers seem to think.

If the ECB provides the justifications that its Public Sector Purchase Program is indeed a proportionate response, it concedes that the German court can overrule the European Court of Justice. This would set a dangerous precedent, most immediately for the likes of Hungary and Poland. They are already at odds with the ECJ over the independence of the judiciary, for example.

On the other hand, if the ECB were not to provide the justification, then it would leave the Bundesbank in an awkward position. Could it ignore the German Constitutional Court and continue to buy bonds under the PSPP program? The Germany court claimed that the ECJ had overstepped its authority (ultra vires).

The PSPP program accounts for less than a quarter of the ECB’s current purchases, success here will likely encourage challenges of the Pandemic Emergency Purchase Program, which is not bound by the capital key. Also, troubling was the German Court’s urging of the German government and parliament to challenge the ECB.

Even Bundesbank President Wiedmann, who wanted to ECB to adhere to the German Court’s demand for formal justification of its purchases, tried to defend the ECB’s independence. It begs the question, not of monetary or fiscal union, but the need for a legal union, and perhaps, a reaffirmation of the primacy of EU law over national law.

The euro has been sold below $1.08 in the European morning. It is at its lowest level since April 24 when it reached almost $1.0725. The low from late March was set near $1.0635, and the risk of a retest is growing. Resistance is now seen near $1.0850. Sterling also traded at its lowest level since April 24 when it briefly took out the $1.2360 area. It is slightly heavier than the euro. There is an option for about GBP325 mln at $1.2400 that expires today. Initial resistance is in the $1.2400-$1.2420 area.

America

Three US reports attract attention today. First is the ADP private-sector jobs estimate. Millions of jobs were lost in April, and the ADP will give some clue as to the magnitude ahead of the national figures on Friday. Something on the magnitude of 21 mln job loss is expected. Second, the US Treasury will announce the details of its quarterly refunding that is expected to boost the size and also re-introduce a 20-year bond. Third, the EIA oil inventory figures will be watched, following the API estimate of an 8.4 mln barrel build, the smallest since late March.

Oil prices are extending their recovery. The five-day rally coming into today is the longest in over a year. Most of the talk is about reductions in supply, and many expect that US inventory growth slowed for the third consecutive week. The EIA estimated that oil stocks rose almost 9 mln barrels in the week to April 24. Near $28.35, the June WTI contract would meet a (38.2%) retracement objective of this year’s decline. Reports suggest some shale producers they could start up again if crude were above $30.

Brazil’s currency and equity markets are among the worst performers so far this year. The currency is off 27%, and the stock market has fallen 30%. The central bank meets later today and is expected to cut the Selic rate again as the economy has deteriorated sharply. Inflation expectations had dropped since the last meeting when the officials had thought they provided enough stimulus. Although most economists expect a 50 bp rate cut, the market appears to in between a 50 and 75 bp cut.

Yesterday, Brazil reported March industrial output. The median forecast in the Bloomberg survey was a sharp 3.7% decline. Instead, it plummeted by 9.1%. The IBGE measure of CPI will be released later in the week. It is expected to fall to around 2.5% from 3.3% in March. Fitch cut its outlook for Brazil’s BB- rating to negative late yesterday. It cited the economic weakness, fiscal efforts, and tensions between President Bolsonaro and Congress. The virus contagion is spreading, and the economic situation is likely to get worse.

The US dollar is trading within yesterday’s range against the Canadian dollar after finding support in front of CAD1.40. Yesterday’s high was just shy of CAD1.4100. Firm equities warn of the risk that the greenback is sold through CAD1.40 today. A low near CAD1.3930 was seen at the end of last week. Meanwhile, the US dollar is also pushing near yesterday’s high against the Mexican peso near MXN24.17 in the European morning. The intraday technicals suggest it may hold, but if it doesn’t, the risk is for MXN24.40. Support is seen in the MXN23.60-MXN23.80 area.

FTSE 100 – Correction May not be Over Just Yet

Longer-term still looking promising

The charts were starting to look quite promising. We had a clear uptrend and price broke back above the 200/233 period simple moving average band on the 4-hour chart.

UK100 (FTSE 100) 4-Hour Chart

 OANDA fxTrade Advanced Charting Platform

Then we ran into our first obstacle on the daily chart , the 55-day SMA , which is when the profit taking kicked in. This took us back below the 55/89 SMA band on the 4-hour chart where we’re now testing the 200/233 band.

So far, the 38.2 fib is holding within the first band but that doesn’t mean much yet. A break back through 5,800 would add some promise, especially if combined with a significant close above the 55/89 SMA band (4 hour chart). Obviously, that doesn’t necessarily been it’s correction over but it’s a major hurdle overcome.

UK100 (FTSE 100) Daily Chart

Given the initial trend line break , failure of 55-SMA (daily) and immediate resistance around the 55/89 SMA (4hour) band, I fear more pain may be in store for the FTSE .

This still looks like more of a corrective move but maybe one that has a little more to run. The area around the 50 and 61.8 fibs may appeal more, should the 38.2 fib and 200/233 band fall.

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Risk, Earnings, Oil, Gold, Bitcoin

The FTSE 100 took a hammering on Friday while many of the bourses were closed which is why it’s not coming under such heavy fire today. There’s some catch-up going on across much of the continent in the aftermath of Trump’s comments on potential Chinese tariffs. The last thing we need right now is a resumption of the trade war.

Earnings ended last week on a sour note, with Amazon and Apple adding a bit of gloom to a season that has, to that point, been given a bit of a free pass. Perhaps this is more of a timing issue than an earnings one but it appears to have contributed to the sea of red we’re now seeing. More earnings to come this week but we are past the peak.

Thankfully, the same appears to be true of the coronavirus itself. Boris Johnson emphasized this last week, even as the UK is on course to overtake Italy with the second-highest number of reported fatalities, behind the US. We should learn a lot more about the lockdown easing process over the coming weeks, although I imagine it’s going to be very flexible as we see what impact it has on the data and healthcare system.

Oil slips as risk appetite dwindle

Oil prices appear to be mirroring sentiment in the markets today, with WTI down 7% on the June contract. A little over two weeks until expiry, we’ll soon see just how at ease traders have become with storage capacity. US production is now around one million barrels a day off its peak but falling very gradually in the last month, only 100,000 barrels per week.

The same isn’t true of rig numbers, which have been plunging so I imagine this will catch up with the production figures and alleviate the storage pressures in time. Whether that will come in time for the June expiry I’m not sure. Should be a fascinating couple of weeks.

Is gold a safe haven again?

Gold has enjoyed a nice bump these last couple of trading sessions. It technically remains range-bound but the move has come alongside stock market declines. I’m not going to speculate just yet about whether its normal relationship with risk has restored, I’ve done that enough over the last couple of months only for it to revert. Whatever is giving it a boost today, only a break of $1,750 will be meaningful, although $1,740 – the most recent peak – will be interesting a could create some excitement.

Bitcoin needs hype to sustain move above $10,000

Bitcoin is holding above $8,500 after peaking around $9,500 last week. It’s often difficult to attribute the moves in bitcoin to anything in particular but the proximity to the halving event seems logical, from the perspective that it gives it exposure rather than anything more fundamental. You would think that anything significant would be priced in by now.

Whether the exposure can see it through $10,000 is one thing, whether it can sustain it is another. We’ve seen it before, the mere act of it rising fast creates the stories which generates the exposure. If that doesn’t happen, any rally may quickly fizzle out and we could find ourselves back at the early April levels.

Economic Calendar

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Week Ahead – China and Iran U.S Foreign Policy, COVID-19, Monetary Policy, and Data in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 8th May. In the week prior, 60 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the greenback.

In the 1st half of the week, the market focus will be on April’s ISM Non-Manufacturing PMI and ADP Nonfarm employment change figures.

While the markets all too aware of labor market conditions, expect both sets of numbers to have an impact. The ADP numbers are likely to be quite horrific…

On Thursday, the markets will be looking for a marked fall in weekly initial jobless claims figures ahead of Friday’s data deluge.

Another 3m plus increase in initial jobless claims will likely test market risk appetite on the day.

On Friday, April’s nonfarm payroll and wage growth figures wrap things up. Following the surge in jobless claims, the markets will get an idea of where the bottom of the abyss sits…

The unemployment rate is forecasted to jump to 16%… Even the eternal optimist will likely gasp at the numbers.

Expect March factory orders numbers on Monday and 1st quarter unit labor costs and nonfarm productivity on Thursday to be brushed aside.

The Dollar Spot Index ended the week down by1.30% to 99.079.

For the EUR:

It’s also a busy week ahead on the economic data front.

Through the 1st half of the week, Spain and Italy’s private sector PMIs are due out on Monday and Wednesday.

Following the market’s reaction to the prelim numbers from France, Germany, and Spain, however, don’t expect too much influence.

Both Italy and Spain have been far more adversely affected by COVID-19, which will deliver dire numbers.

Expect March retail sales figures from the Eurozone and German factory orders to also be brushed aside on Thursday.

In the 2nd half of the week, the release of French non-farm payrolls and German trade data will also be a non-event.

For the EUR, a continued downward trend in new coronavirus cases is a must. This, coupled a further easing in lockdown measures, would provide support in the week.

The markets are currently forward-looking from an economic perspective…

On the policy front, the markets will be looking for progress on an EU COVID-19 aid package…

The EUR/USD ended the week up by 1.46% to $1.0981.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized April service and composite PMI numbers are due out on Tuesday along with construction PMI numbers on Wednesday.

Barring a material downward revision to the composite, we would expect the numbers to have a muted impact.

In a shortened week, with the UK markets closed on Friday, the BoE monetary policy decision is the main event on Thursday.

While there’s unlikely to be any cut in interest rates, the BoE may deliver further monetary policy support. The UK remains in lockdown going into May, which will weigh on the economy further as Brexit uncertainty continues to shroud Britain.

Key in the early part of the week will be COVID-19 numbers and plans to ease lockdown measures. The markets are expecting the release of the government’s plans in the week ahead.

The GBP/USD ended the week up by 1.12% to $1.2506.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

March trade figures on Tuesday will likely have a muted impact ahead of April’s Ivey PMI on Thursday.

While we would expect the PMI to have some influence, avoiding sub-40 would likely be considered positive.

At the end of the week, employment figures will also be in focus. There will need to be a marked drop in the number of layoffs to limit any downside in the Loonie.

Away from the numbers, a continued easing in lockdown measures globally should also provide support. While demand for crude oil continues to be an issue, the markets will expect a pickup as economies reopen.

The Loonie ended the week up by 0.10% to C$1.4089 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead.

New home sales and building approval figures on Monday will garner some attention. The housing sector is at the mercy of consumer sentiment, which took a knock in March.

March retail sales and trade data are due out on Wednesday and Thursday and will also garner some interest.

We don’t expect too much influence, however, with fiscal and monetary policy already delivered as a result of the COVID-19 pandemic.

The numbers will give an initial sense of what lies ahead. China was in shut down mode and consumers were all too aware of the likely economic impact of the pandemic.

Away from the numbers, the RBA monetary policy decision on Tuesday will garner plenty of interest.

The last minutes suggested that monetary policy will be on hold near-term. A similar message on Tuesday would provide further support to the Aussie Dollar.

Expect market risk sentiment, COVID-19 news, and lockdown easing plans to also influence in the week.

The Aussie Dollar ended the week up by 0.84% to $0.6418.

For the Kiwi Dollar:

It’s a quieter week ahead on the economic data front.  Early in the week, economic data is limited to March building consents and 1st quarter employment figures.

Expect 1st quarter employment change figures to have some influence on Wednesday.

On Thursday, inflation expectation figures are unlikely to be too impressive following the recent uptrend.

While New Zealand is now free COVID-19, the indirect economic impact is significant, however.

Dire 1st quarter employment numbers would support the dovish outlook on the monetary policy front. The big question, however, is whether the RBNZ can avoid delivering negative rates down the road…

The Kiwi Dollar ended the week up by 0.76% to $0.6063.

For the Japanese Yen:

It’s a shortened week, with the Japan market closed Monday through Wednesday.

Following last week’s support from the Bank of Japan, expect the markets to brush aside economic data in the week.

Key stats are limited to March’s household spending figures and April’s finalized services PMI.

Outside of the numbers, however, the Yen could come under pressure should the spread of the virus accelerate… News from late last week was Yen negative as reports of a marked pickup in new cases hit the wires.

The Japanese Yen ended the week up by 0.56% to ¥106.91 against the U.S Dollar.

Out of China

It’s another relatively quiet week ahead on the economic data front.

April services PMIs figures and trade data are due out on Wednesday and Thursday.

Expect the numbers to influence, with the markets looking for the private sector to avoid a contraction.

April’s trade figures will give the markets an idea of what impact global demand is having on the Chinese economy.

The Chinese Yuan ended the week up by 0.26% to CNY7.0632 against the U.S Dollar.

Geo-Politics

OPEC

OPEC+ delivered price support last week by beginning to rein in oil production. Trump’s threat to the Saudis, however, will unlikely go unnoticed. April production figures are reportedly on the higher side, which would mean that production cuts would need to be more significant. It’s not about the size of the cuts but the actual production figures.

It wouldn’t be the first time that producers cranked up production ahead of a demand to cut output…

Expect inventory numbers in the coming weeks to have greater influence alongside the news wires. Trump could target Iran further and put more pressure on the Saudis.

UK Politics:

We wrote many moons ago of a UK – U.S trade agreement and its influence on the UK – EU Brexit talks.

News of UK – U.S trade negotiations commencing on Monday will redirect the UK government’s attention away from the EU.

This can only be a good thing for Boris and the team. A swiftly negotiated and fair trade agreement would certainly give Brussels reason to blush and be anxious. Trump has continued to threaten the EU with tariffs. With the Presidential Election rapidly approaching, there couldn’t be a better time to ruffle the EU’s feathers, while supporting the Anglo-American relationship…

For the Pound and the UK government, the EU may need to concede more than it had intended. One other positive is the fact that EU member states are not even able to support each other.

Near-term, chatter on the need for an extension to the transition period will also be likely.

U.S Politics:

As at the weekend, tensions between the U.S and Iran remained elevated. One thing is certain, Iran will not back down in the Gulf, which makes some sort of action inevitable…

That’s one distraction for voters who are now seeing Trump attempt to lay the coronavirus pandemic on Beijing’s doorstep.

There’s been talk of U.S sanctions on China as punishment for the spread of the coronavirus… As the global economic meltdown continues, the last thing the world needs is another full-blown trade war between the world’s largest economies…

The Coronavirus:

Over the course of last week, the number of new coronavirus cases globally took a downward swing.

In the week ending 1st May, the total number of new cases rose by 333,637 to 3,392,718 on Friday. In the previous week, ending 24th April, the total number of new cases had risen by 347,549.

The downward trend was attributed to the EU, which reported just 28,403 new cases in the week ending 1st May. In the previous week, the EU had reported an increase of 43,699 new cases.

From the U.S, there was also a week-on-week fall in new cases. By contrast, however, the number of new cases was on an upward trend throughout the week…

From the market’s perspective, there are 3 key considerations:

  1. Progress is made with COVID-19 treatment drug remdesivir.
  2. The downward trend in new coronavirus cases continues.
  • Governments progress with easing lockdown measures.

Corporate Earnings

Expect earnings to remain in focus in the week ahead.

While the markets are not expecting great things, it’s only going to get worse before it gets better. That can never be a good thing when considering the current levels across the equity markets.

The Weekly Wrap – COVID-19, Monetary Policy, Earnings and Economic Data Were in Focus

The Stats

It was a particularly busy week on the economic calendar, in the week ending 1st May.

A total of 60 stats were monitored, following the 59 stats in the week prior.

Of the 60 stats, 24 came in ahead forecasts, with 35 economic indicators coming up short of forecasts. 1 stat was in line with forecasts in the week.

Looking at the numbers, just 13 of the stats reflected an upward trend from previous figures. Of the remaining 47, 45 stats reflected a deterioration from previous.

For the Greenback, it was a bearish week, with a pickup in market risk appetite pinning back the Greenback. The U.S Dollar Spot Index fell 1.30% to 99.079, bringing to an end a run of 2 consecutive weeks in the green.

Economic data, COVID-19 news, and monetary policy were in focus throughout the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 3,392,718 on Friday, which was up from last Friday’s 2,828,575. Week-on-week, the total number of cases rose by 564,143. On a global basis, this was lower than the previous week’s increase of 580,538.

In the U.S, the total rose from 924,996 to 1,129,060 with France, Germany, Italy, and Spain reporting a combined total of 781,839. Last Friday, the 4 member states and a combined total of 727,585.

Over the course of the week, there was an uptrend of new cases on a global basis, attributed to a rise in the U.S.

By contrast, the 4 most adversely affected EU member states reported a downward trend. Of the 4, France saw a material decline in new cases, with a daily average of 1,049 news cases in the week.

In spite of the upward trend in the U.S, plans of easing lockdown measures remained in place.

Key support for riskier assets in the week was positive updates on the effectiveness of COVID-19 treatment drug remdesivir.

Out of the U.S

It was another relatively busy week on the economic calendar, with the economic data skewed to the negative.

Key stats included April consumer confidence and 1st quarter GDP numbers on Tuesday and Wednesday.

The CB Consumer Confidence Index slumped from 120.0 to 86.9 in April, which was of little surprise following the lockdown.

In the 1st quarter, the economy contracted by 4.8%, which was far worse than a forecasted 4.0% contraction.

Of greater concern is the fact that the lockdown had yet to take full effect until April, suggesting worse to come.

On Thursday, the markets had hoped for a marked fall in the number of weekly jobless claims. A marked fall would have eased concerns of a more deep-rooted recession.

Yet more disappointment, however, with a 3.839 m increase ringing the alarm bells at the end of the month.

While the U.S administration is talking of easing lockdown measures, the number of layoffs has been unprecedented. It’s going to take far longer than initially anticipated for life to return to normal for the vast majority of the labor market.

Rounding off the week, the markets preferred ISM Manufacturing PMI for April delivered more bad news. The manufacturing PMI fell from 49.1 to 41.5, though this was better than a forecasted 36.9.

Away from the stats, the FED left rates unchanged on Wednesday, while delivering yet more support. Powell assured the markets that rates would remain close to zero until the economy recovers.

Powell held back from painting a rosy picture by delivering a more realistic view of the economy and outlook.

While the FED delivered support for riskier assets on Wednesday, economic data on Thursday was the straw that broke the camel’s back…

In the equity markets, the Dow fell by 0.22%, with the NASDAQ and S&P500 declining by 0.0.21% and 0.34% respectively. A Friday sell-off left the majors in the red for the week.

Out of the UK

It was a particularly quiet week on the economic calendar. Economic data was limited to finalized April manufacturing PMI figures on Friday.

The PMI came in at a record low 32.6, which was revised down from a prelim 32.8. In March, the PMI had stood at 47.8.

While the stats were skewed to the negative, a pickup in risk appetite delivered much-needed support.

Also providing support was Boris Johnson’s return to office and plans to ease lockdown measures. In the week, the government talked of having passed the peak in the pandemic, which was also Pound positive.

In spite of the uptick in the week, the markets will need to consider the outlook that remains murky. There’s Brexit and more uncertainty to consider, assuming that the government extends the transition period…

In the week, the Pound rose by 1.12% to $1.2506. The FTSE100 ended the week up by 0.19%, partially reversing a 0.60% fall from the previous week.

Out of the Eurozone

It was a busy week economic data front, with the stats heavily skewed to the negative once more.

The markets had to wait until Thursday for a data deluge. Key stats included 1st quarter GDP numbers for France, Spain, and the Eurozone.

April unemployment numbers for Germany also delivered the bears with hope…

In the 1st quarter, the French economy contracted by 5.8%, which was the largest contraction on record.

Economic data from the Eurozone also broke records, with the economy shrinking by 3.8%.

From Germany, a 373k jump in unemployment led to a rise in the unemployment rate from 5.0% to 5.8%

On the monetary policy front, the ECB held back from expanding the bond-buying program.

As expected, Lagarde looked to place the onus on EU finance ministers to drum up support for the economy. Lagarde did assure ECB support but little else. She also talked of a contraction of between 5 to 12% for 2020…

An unwilling ECB and uncooperative EU member states do bring into question the viability of the EU project. I have continued to raise concerns over this. Brussels is in no position to force the likes of the Netherlands and Northern Europe to open their coffers…

For the week, the EUR rose by 1.46% to $1.0981, reversing a 0.48% decline from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 5.08% to lead the way, with the CAC30 and EuroStoxx600 rising by 4.07% and 3.17% respectively.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar, in spite of a sharp reversal on Friday.

In the week ending 1st May, the Aussie Dollar rose by 0.74% to $0.6418, with the Kiwi Dollar up by 0.76% to $0.6063.

For the Aussie Dollar

It was a relatively busy week for the Aussie Dollar on the economic data front.

1st quarter inflation figures were in focus along with private sector credit and manufacturing sector numbers.

A pickup in inflationary pressure in the 1st quarter provided support at the start of the week. The upside was limited, however, with commodities under pressure at the start of the 2nd quarter.

In contrast, wholesale inflationary pressures softened, though marginally…

From the private sector, credit was on the rise in March, driven by a jump in business credit. The manufacturing sector hit a wall, however, with the AIG Manufacturing Index sliding from 53.7 to 35.8. It was the worst contraction since the Global Financial Crisis.

While the stats were mixed, risk appetite had delivered support for the Aussie Dollar before a 1.44% slide on Friday.

For the Kiwi Dollar

It was a quieter week on the economic calendar. March trade data and April business confidence figures delivered mixed results.

Defying the odds, exports hit a record high in March, leading to a widening in the surplus from NZ$531m to NZ$672m.

Year-on-year, the deficit widened, though the widening was certainly not material considering global trade terms.

Business Confidence did take a dive, however, with the ANZ Business Confidence Index sliding from -63.5 to -66.6.

The ANZ survey had very little to offer to the bulls, leaving sentiment towards COVID-19 to provide support.

Key news from the week was New Zealand becoming virus-free, which would support a more rapid easing of lockdown measures.

For the Loonie

It was a relatively quiet week on the economic calendar, with the stats skewed to the negative.

Stats were limited to February GDP and March RMPI figures that had a muted impact in the week.

With stats on the lighter side, the upside for the Loonie came from a pickup in crude oil prices. Improved market risk appetite also delivered.

Positive updates on the clinical trials of remdesivir were key for riskier assets in the week. Successful treatment would allow governments to more aggressively ease lockdown measures and open borders.

Both are key to the demand for crude and to a rebuild of the supply chain.

The Loonie rose by 0.10% to end the week at C$1.4048. A 1.03% pullback on Friday limited the upside for the week.

For the Japanese Yen

It was a relatively busy week on the data front.

Key stats included March retail sales and prelim industrial production figures.

While both sets of numbers came in ahead of forecasts, both were down from the previous month.

Industrial production slid by 3.7%, following a 0.3% fall in February. Retail sales tumbled by 4.6%, reversing a 1.6% rise in February.

Of greater concern for Japan, however, was the rise in new coronavirus cases.

Outside of the numbers, the BoJ stepped forward to deliver monetary policy support.

The markets brushed aside inflation figures on Friday, with deflationary pressures anticipated near-term.

The Japanese Yen rose by 0.56% to end the week at ¥106.91. In the week prior, the Yen had risen by just 0.03% against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front.

Industrial profit figures for March failed to spook the markets on Monday, in spite of profits tumbling by 34.9% year-on-year. In February, profits had risen by 5.4%.

Later in the week, private sector PMIs for April delivered mixed results, though nothing alarming.

The NBS Manufacturing PMI rose from 53.0 to 53.4, while the Caixin Manufacturing PMI slipped from 50.1 to 49.4.

With contribution from the services sector on the rise, a pickup in service sector activity was positive. The NBS Non-Manufacturing PMI rose from 52.3 to 53.2.

While the numbers were well above those seen in the U.S and the EU, global demand will be a concern near-term…

In the week ending 1st May, the Yuan rose by 0.26% to CNY7.0632 against the Greenback.

The CSI300 and Hang Seng ending the week up by 3.41% and 3.04% respectively.

FTSE Nearly Wipes Out Weekly Gains; Continental European Markets Closed

Global equity markets are trading lower on Friday on grim U.S. economic data, mixed company results and President Donald Trump’s threat to impose new tariffs on China over the coronavirus crisis.

MSCI’s index of global stocks fell 0.5% after a tumble late Thursday broke a six-day winning streak for the index, according to Reuters.

Trading volumes were thin with many European markets closed for a May 1 public holiday. Markets in Germany, France, Italy and other major European economies are closed for Labor Day after European stocks finished out their strongest month since October 2015 on Thursday.

UK’s FTSE 100 Down at Mid-Morning

London-listed stocks fell as data showed the UK housing market was grinding to a halt, with the FTSE 100 down 2.2%, wiping out much of the strong gains from earlier in the week.

British Airways (BA) operator IAG shed another 2.6% as details of its plans to cut staffing, including a quarter of its pilots, to weather the collapse in air travel caused by the coronavirus. BA reportedly intends to cut 1,130 of its 4,346 flight captain and co-pilot jobs.

U.K. Manufacturing Outlook is Bleak

On the data front, the final U.K. Markit manufacturing PMI reading on Friday showed British manufacturers suffered their worst decline in output for three decades in April. The headline activity index slumped to 32.6 from 47.0 in March.

A survey by trade body Make U.K. published late on Thursday suggested that British manufacturing activity could more than halve in the second quarter as the coronavirus pandemic has caused a collapse in demand for 80% of manufacturers.

Investors Shrug-Off UK PM Boris Johnson’s Pledge to End Lockdowns

The FTSE 100 was under pressure on Friday despite U.K. Prime Minister Boris Johnson’s pledge to lay out a plan to exit nationwide lockdowns.

In his first news conference since recovering from the coronavirus, Johnson said the U.K. was past the peak of its outbreak, and vowed to set forth a plan next week on how the country might gradually return to normality.

“Never Sell Shell” Adage Goes into Dustbin, IOC Future in Doubt?

With a surprise statement to the financial world, the Dutch-British oil giant has changed its dividend policy with a bang, removing part of the attraction to institutional investors. For the first time since 1945 Shell has cut its first-quarter payout by two-thirds amid coronavirus crisis.

Shell cuts dividend for first time since WW2

The FTSE largest dividend payer has decided to cut its dividend due to the collapse of global oil prices due to the coronavirus pandemic. At present financial centers are reeling from the news, as the Shell dividend was a major basis to hold the company’s shares for thousands of retail investors and pension funds. In a reaction Shell’s CEO Ben van Beurden, stated that the company would take “prudent steps” to protect its financial resilience “under extremely challenging conditions” caused by Covid-19.

One of the main underlying issues for the dramatic decision by Shell are the dramatic financial figures reported for Q1 2020. In its financial statement the IOC reported that its profits in Q1 tumbled by 46% to $2.9bn (£2.3bn), in comparison to $5.3bn in Q1 2019. Van Beurden reiterated that the dividend cut is based on the need to address the continued deterioration in the macroeconomic outlook and the significant mid- and long-term uncertainty.

He also said that it was meant to bolster the company’s resilience, underpin the strength of Shell’s balance sheet and support the long-term value creation. The company still will pay out a total dividend of $3.5bn for the quarter to its shareholders.

Shell’s move has come at a difficult time

As the financial world is fully focusing on the impact of Corona, the global lockdown and expected negative economic growth for 2020. At the same time, Shell’s competitors, such as British oil giant BP, are not yet deciding to cut their dividend. Bernard Looney, BP’s CEO, stated this week that the board had decided not to cut its dividend for the first quarter despite plunging to a loss. The BP executive however has indicated that there could be dividend cuts coming if the current situation deteriorates further.

Shell’s decision will have shocked its shareholders, especially the retail investors, but also pension funds, as most of them will have been counting on the historical payouts for their total investment returns. The fact that Shell has decided to go this way is a real sign that the privately owned oil and gas sector is fighting for its survival.

Whatever optimism is still there in the market, the last 24 hours partly supported by better than expected storage figures in the USA, will disappear for sure when investors and analysts start to understand that the situation is very dire. Large IOCs and independents will be able to survive the current onslaught, due to their balance sheets and cash available, but the future of others, especially high-cost producers, will be very dark.

The Shell move is not a one-time issue, it is a sign that investors are entering a new world. Without the attractiveness of high dividend pay-outs, the overall attractiveness is becoming bleak. If the Shell example is going to be followed by others, institutional investors and retail investors will for sure have a look at their total portfolio in oil and gas, and most probably will head to other sectors based on ROIs and other issues.

Lower investment attractiveness is a real threat, as future investment strategies of IOCs and Independents will depend on the views held in the market. If returns are threatened, and a sacrosanct Shell dividend is removed, financing costs for most will increase substantially.

Another still undervalued issue of most IOCs and Independents could now also for once emerge on the desks of analysts. Most privately owned oil and gas companies have no real reserve potential to build a future on. If there is no change in attitude at the HQs of the likes of Shell, BP, ExxonMobil or Statoil, these companies are going to fight an uphill battle they will lose.

With an average of 3-5 years of reserves/production ratios, most are in dire need to find or acquire more reserves to prolong their life. Cutting dividends is dramatic, blood is on the wall in investment land, but if Shell and others are not going to invest in upstream assets right now, as prices are attractive, more blood is going to be spilled.

European Shares Higher Amid Speculation of Fresh ECB Stimulus Measures

European equity markets are expected to open higher Monday as global investors await central bank meetings later this week that could decide if further stimulus measures are necessary to reboot economies deeply damaged by the coronavirus pandemic.

Ahead of the session, investors in Europe are watching how the region gradually exits lockdown strategies that have crippled economies in Europe, however, the focus for investors will be whether central banks will announce additional stimulus measures later this week.

The U.S. Federal Reserve has a two-day meeting starting Tuesday and the European Central Bank (ECB) meets Thursday.

According to CNBC, London’s FTSE is expected to open 77 points higher at 5,827, Germany’s DAX is called 210 points higher at 10,555, France’s CAC 40 is seen 92 points higher at 4,484 and Italy’s FTSE MIB is expected to open 344 points higher at 17,095.

Asian Shares, US Futures Jump in Morning Trade

A rally in Asia may be helping to boost European shares ahead of the opening. On Monday, Asian stocks surged as the Bank of Japan (BOJ) announced more stimulus steps to help cushion the economic impact of the coronavirus. BOJ policymakers matched market speculation by pledging to buy unlimited amounts of government bonds, removing its previous target of 80 trillion yen per year. It also raised purchases of corporate and commercial debt, and eased rules for what debt would qualify.

Meanwhile, U.S. stock futures are trading higher in the early Monday morning trade as investors assessed the possibility of re-opening several key states in the United States.

New York Governor Andrew Cuomo said Sunday the state plans to re-open its economy in phases. The first phase, Cuomo said, would involve New York’s construction and manufacturing sectors. As part of the second phase, businesses will need to design plans for a re-opening that include social distancing practices and having personal protective equipment available.

Fed, ECB, Economic Reports and Earnings – Main Catalysts This Week

The Fed is widely expected to leave current QE and interest rate decisions unchanged. However, policymakers are expected to underline that its policies will be in place indefinitely to support the economy.

The ECB is expected to raise the size of its emergency bond buying package (PEPP) by around 500 billion Euros to 1.250 trillion and to continue pressing for a sizeable fiscal stimulus.

In economic news, the U.S. and European Union will release GDP estimates for the first quarter and the highly influential U.S. ISM survey on manufacturing.

Finally, 173 companies in the benchmark S&P 500 Index are scheduled to report this week, including Apple, Amazon, Facebook, Microsoft, Caterpillar, Ford, General Electric and Chevron.

The Week Ahead – Monetary policy, Economic Data, COVID-19, and Geo-politics are in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats to monitor in the week ending 1st April. In the week prior, 49 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the greenback.

Key stats in the week include April consumer confidence figures on Tuesday and 1st quarter GDP numbers on Wednesday.

We expect both sets of numbers to have an influence on the broader market.

The markets will be looking to see if the IMF forecasts for 2020 are reasonable or on the pessimistic side.

On Thursday, the weekly jobless claims and April inflation figures will also garner some attention.

March’s personal spending numbers on Thursday, however, could have the greatest impact. The markets will get a sense of just how bad consumption was going into the April shutdown.

Wrapping up the week, ISM Manufacturing PMI numbers on Friday will also influence. Anything below 40 and expect a pickup in demand for the havens…

On the monetary policy front, the FED is in action on Wednesday. Expect any forward guidance to materially influence the global financial markets.

The Dollar Spot Index ended the week up by 0.60% to 100.380.

For the EUR:

It’s also a busy week ahead on the economic data front.

The markets will need to wait until Thursday for a data deluge, however.

On Thursday, 1st estimate GDP numbers for France, Spain, and the Eurozone are in focus.

There are also German and Eurozone unemployment numbers and French and German consumer spending figures.

Expect plenty of influence ahead of the ECB’s monetary policy decision later in the day.

The GDP numbers come at just the right time and may give the ECB cause to promise more support.

Assuming a hold on monetary policy, the focus will be on Lagarde and the ECB Press Conference.

Prelim inflation numbers out of member states and the Eurozone will likely have a muted impact on the EUR.

The European markets are closed on Friday…

The EUR/USD ended the week down by 0.48% to $1.0823.

For the Pound:

It’s a quiet week ahead on the economic calendar.

Finalized April Manufacturing PMI numbers on Friday are in focus.

Barring a material deviation from prelim, however, the markets will likely brush aside the numbers.

Expect the focus to remain on UK politics, any updates on Brexit and the transition period, and COVID-19.

The GBP/USD ended the week down by 1.06% to $1.2367.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

February GDP and March RMPI numbers are due out on Thursday.

With the BoC having already delivered in recent weeks, the Loonie will likely brush aside the numbers.

We will expect market risk sentiment and crude oil prices to be the key driver in the week.

The key for crude oil price stability, near-term, remains a more sizeable cut in production by OPEC, Russia, and the U.S.

The Loonie ended the week down by 0.73% to C$1.4103 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead. We’re not expecting too much influence from the numbers, however.

On Wednesday, 1st quarter inflation figures will have limited impact, with deflationary pressures expected to build in April.

Wholesale inflation figures for the 1st quarter, due out on Friday, could give some idea of what’s to come, however.

Expect March private sector credit figures on Thursday and April manufacturing figures on Friday to garner some interest.

HIA new home sales figures on Friday will likely have a muted impact, however.

The Aussie Dollar ended the week up by 0.08% to $0.6371.

For the Kiwi Dollar:

It’s a busier week ahead on the economic data front. In a shortened week, 1st quarter employment and March trade figures are in focus.

With New Zealand having weathered the COVID-19 storm, the numbers may be considered the bottom for the Kiwi Dollar.

Better than expected figures should provide some much-needed support ahead of April business confidence numbers on Thursday.

A pickup in business confidence would add to the upside, though April was still affected by the global lockdown.

The Kiwi Dollar ended the week down by 0.30% to $0.6017.

For the Japanese Yen:

It’s a busy week ahead.

March prelim industrial production and retail sales figures will be the key drivers on Thursday.

We would expect March job to application numbers on Tuesday and April inflation figures on Friday to be brushed aside.

The BoJ’s monetary policy decision on Tuesday will have an impact, however… Will the BoJ make a move or hold off? The press conference later in the day may tell more…

The Japanese Yen ended the week up by 0.03% to ¥107.51 against the U.S Dollar.

Out of China

It’s a relatively quiet week ahead on the economic data front.

Industrial profit figures for March are due out on Monday. With economic woe gripping the markets, expect the numbers to have an influence on risk sentiment.

April’s NBS private sector PMIs are due out on Thursday and will also provide direction to riskier assets.

A pullback to sub-50 would certainly be a concern for the global financial markets. March numbers had delivered support, whilst raising the question of whether the expansion was sustainable…

The Chinese Yuan ended the week down by 0.11% to CNY7.0815 against the U.S Dollar.

Geo-Politics

OPEC

What’s next for OPEC and other global oil producers? The markets have spoken and far more is needed to deliver price stability. A further 20m bpd cut would counter the slide in demand, which may be a bitter pill for producers to swallow. Some producers, simply as a result of price pressure alone, will have had little choice but to cut output. The list won’t include the Saudis, however…

UK Politics:

No news is not always good news, particularly when Brexit is involved. Little progress has been made in trade talks, which will place more pressure on Johnson to extend the transition period.

An insistence on sticking to the timelines will pressure the Pound… Expect plenty of chatter with the British PM due to return to Office on Monday.

Outside of Brexit, the markets will also be in search of some direction on how the government plans to ease lockdown measures. The number of COVID-19 related deaths has now surpassed 20,000.

U.S Politics:

Unlike the EU, the U.S administration continues to deliver much-needed support.

While Trump’s handling of the coronavirus pandemic is in question, funds appear to be heading out the door.

This has not prevented Democrat front runner Joe Biden from narrowing the gap.

The U.S President looks to be changing the narrative, however, with some focus now being placed on Iran…

The Coronavirus:

Friday’s figures delivered a spike in the number of new cases globally and in the U.S.

This will need to be a blip for the markets to avoid another meltdown in the early part of the week. Expect the weekend and early part of the week updates to garner plenty of attention.

While Saturday’s figures were lower, they remained higher than the numbers reported pre-Friday.

A new upward trend would certainly question plans to ease lockdown measures in the U.S…

Corporate Earnings

It’s a big week ahead on the U.S corporate earnings front. A deluge of bad news could be yet another resilience test for the global equity markets…

From Germany, Adidas (Mon), Daimler (Thurs), and Deutsche Bank (Thurs) are due to release earnings results…

The Weekly Wrap – Crude Oil, Private Sector PMIs, and COVID-19 Drive the Majors

The Stats

It was a busy week on the economic calendar, in the week ending 24th April.

A total of 59 stats were monitored, following the 44 stats in the week prior.

Of the 59 stats, 14 came in ahead forecasts, with 43 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, just 11 of the stats reflected an upward trend from previous figures. Of the remaining 48, all 48 stats reflected a deterioration from previous.

For the Greenback, it was another relatively bullish week. The U.S Dollar Spot Index rose 0.60% to 100.380, following 0.30% gain from the previous week.

Economic data, COVID-19 news, economic sentiment, and commodity prices influenced in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 2,828,575 on Friday, which was up from the previous Friday’s 2,248,037. Week-on-week, the total number of cases increased by 580,538. On a global basis, this was higher than the previous week’s increase of 550,504.

In the U.S, the total rose from 709,201 to 924,996, with France, Germany, Italy, and Spain reporting a combined total of 727,585. Last Friday, the 4 member states had a combined total of 652,639.

Out of the U.S

It was a relatively busy week on the economic calendar, with the economic data skewed to the negative once more.

April’s private sector PMI and weekly jobless claims figures were the main area of interest in the week.

While the manufacturing PMI fell from 48.5 to 36.9, it was the service sector slide from 39.8 to 27.0 which was most alarming.

Hopes of a marked decline in the number of weekly jobless claims were also dashed. In the week ending 17th April, initial jobless claims surged by another 4.427m…

On Friday, durable goods orders tumbled by 14.4% in March, reversing a 1.2% rise in February.

Things were not much better from the housing sector. Existing home sales slid by 8.5% in March, with new home sales tumbling by 15.4%.

While the stats were skewed to the negative, the Greenback found support as risk aversion gripped the global financial markets.

WTI futures saw an unprecedented fall into negative territory, adding to the market angst in the week.

From a Dollar perspective, the administration’s progress in delivering more fiscal support was also positive.

In the equity markets, the Dow fell by 1.93%, with the NASDAQ and S&P500 declining by 0.18% and 1.32% respectively.

Out of the UK

It was a particularly busy week on the economic calendar.

In the 1st half of the week, employment and inflation figures were in focus. Through the 2nd half of the week, it was private sector PMI numbers and retail sales figures.

The stats were skewed to the negative. Inflationary pressures eased, with retail sales tumbling in March.

Service sector activity came to a standstill in April, with the PMI tumbling from 34.5 to 12.3. Manufacturing sector activity was not much better, however, with the PMI falling from 47.8 to 32.9.

Dire economic data, risk aversion, and an upward trend in new coronavirus cases weighed on the Pound.

In the week, the Pound fell by 1.06% to $1.2367. The FTSE100 ended the week down by 0.60%, following on from a 0.95% decline from the previous week.

Out of the Eurozone

It was a busy week economic data front, with the stats heavily skewed to the negative.

In the 1st half of the week, April’s ZEW Economic Sentiment figures for Germany and the Eurozone caught the markets off-guard.

Both rebounded back into positive territory, reflecting the economist view that a v-shaped rebound is to be expected.

That was the only optimism, however, with consumer and business confidence taking a hit.

Germany’s GfK Consumer Climate and IFO Business Climate Index both fell to record lows.

Things were no better across the private sector. April’s prelim service sector PMIs for France, Germany, and the Eurozone fell to record lows. Manufacturing PMIs also continued to decline.

With the economic data negative, EU ministers also failed to deliver a long-term aid package, which pinned the EUR back on Thursday.

Limiting the downside, however, was easing of lockdown measures in Germany, with Italy and France to follow.

For the week, the EUR fell by 0.48% to $1.0823, following on from a 0.57% decline from the previous week.

For the European major indexes, it was a bearish week. The DAX30 and CAC40 slid by 2.73% and by 2.35% respectively, while the EuroStoxx600 fell by 1.16%.

Elsewhere

It was another mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 24th April, the Aussie Dollar rose by 0.08% to $0.6371, while the Kiwi Dollar fell by 0.30% to $0.6017.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front.

There were no material stats to provide the Aussie Dollar with direction. The lack of stats left the Aussie in the hands of the RBA meeting minutes on Tuesday that delivered support.

While not hawkish, the minutes suggested that the RBA will stand pat on policy near-term, which provided the support.

Any upside was limited, however, with commodities under pressure.

For the Kiwi Dollar

It was a busier week on the economic calendar. 1st quarter inflation figures provided support at the start of the week, with the annual rate of inflation picking up to 2.5%.

Talks of easing containment measures also limited the downside for the Kiwi Dollar in the week.

Risk aversion mid-week and a slide in the GlobalDairyTrade Index on Tuesday weighed on the Kiwi, however.

For the Loonie

It was a relatively busy week on the economic calendar, with the stats skewed to the negative.

In March, inflationary pressures eased, with the annual rate of inflation falling from 1.8% to 1.6%.

February retail sales and Wholesale sales figures had a muted impact on the Loonie, however.

Crude oil prices ultimately did the damage, with a WTI slide into negative territory sending the Loonie to C$1.42 levels on Tuesday.

The Loonie fell by 0.73% to end the week at C$1.4103, with a pickup in crude oil prices late in the week limiting the damage.

For the Japanese Yen

It was a relatively busy week on the data front. March trade and inflation figures and April private sector PMIs were in focus, with all the stats negative.

In March, the trade surplus narrowed from ¥1,108.88bn to ¥4.9bn, with exports sliding by 11.7%. Inflationary pressures also eased, with the annual rate of core inflation easing from 0.6% to 0.4%.

Things were not much better across the private sector in April. While the manufacturing PMI fell from 44.8 to 43.7, the Services PMI tumbled from 33.8 to 22.8.

Negative stats and an increase in the number of new coronavirus cases limited demand for the Yen, in spite of risk aversion in the week.

The Japanese Yen rose by just 0.03% to end the week at ¥107.51. In the week prior, the Yen had risen by 0.86% against the U.S Dollar.

Out of China

It was a quiet week on the economic data front.

There were no material stats out of China to provide direction. At the start of the week, the PBoC cut both 1-year and 5-year loan prime rates, however, to provide support.

The 1-year LPR was cut from 4.05% to 3.85%, with the PBoC cutting the 5-year by 10 basis points to 4.65%.

In spite of further monetary policy support and the assurance of more, the moves failed to support the equity markets.

The Yuan also remained under pressure as concerns linger over China’s economic outlook.

In the week ending 24th April, the Yuan fell by 0.11% to CNY7.0815 against the Greenback.

The CSI300 and Hang Seng ending the week down by 1.11% and 2.25% respectively.

European Shares Give Back Gains After Dire PMI Reports

European shares are reversing earlier gains on Thursday after economic data out of the Euro Zone showed record deterioration due to the coronavirus crisis. Shares were higher on the opening after the release of promising corporate earnings and a rebound in crude oil prices. Also helping to underpin the markets were better performances in Asia and the U.S. futures markets.

At 09:31 GMT, the U.K.’s FTSE 100 Index is trading 5769.66, down 0.97 or -0.02%. Germany’s DAX is at 10387.19, down 27.84 or -0.27% and France’s CAC 40 Index is trading 4429.19, up 17.39 or +0.39%.

Earnings Key Driver of Early Market Sentiment

Credit Suisse posted a 75% jump in first-quarter net profit compared to the same period last year, with net income of 1.31 billion Swiss Francs. The Swiss lender also set aside 568 million Swiss Francs for potential credit losses due to the coronavirus pandemic.

Swiss travel retailer Dufry jumped 9.4% to lead the Stoxx 600 after outlining plans to strengthen its capital structure. However, British financial services company Legal & General tumbled 6.9% after Deutsche Bank cut its price target.

French carmaker Renault reported a 19.2% fall in first-quarter revenue but said it was too early to quantify the impact that the coronavirus crisis would have on earnings this year. Renault shares climbed 1.7%.

Euro Zone Business Activity Ground to a Halt in April: PMI

Economic activity in the Euro Zone all but ground to a halt this month as the new coronavirus sweeping across the world forced governments to impose lockdowns and firms to down tools and shut their businesses, a survey showed on Thursday, Reuters reported.

HIS Markit’s Flash Composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, sank to 13.5, by far its lowest reading since the survey began in mid-1998 and considerably below all forecasts in a Reuters poll. Even the most pessimistic contributor to the poll had predicted a reading of 18.0.

Dismal Outlook for Euro Zone Economy

“April saw unprecedented damage to the Euro Zone economy amid virus lockdown measures coupled with slumping global demand and shortages of both staff and inputs,” said Chris Williamson, chief business economist at HIS Markit.

“The ferocity of the slump has also surpassed that thought imaginable by most economists.’

“In the face of such a prolonged slump in demand, job losses could intensify from the current record pace and new fears will be raised as to the economic cost of containing the virus,” Williamson said.

The Week Ahead – It’s All About the Lockdowns and the Hope of an Economic U-Turn

On the Macro

It’s a busier week ahead on the economic calendar, with 56 stats to monitor in the week ending 24th April. In the week prior, 41 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead for the greenback. Following last week’s IMF forecasts, economic data is back in the spotlight.

Expect prelim private sector PMI numbers for April to have the greatest impact, with PMIs due out on Thursday.

Private sector activity had continued to expand in March, April figures will likely tell a very different story…

The weekly jobless claims figures on Thursday will also influence.

From the housing sector, existing home and new home sales figures for March are unlikely to reflect the impact of COVID-19.

Mortgage applications began to fall late in March, which suggests that April numbers will be of greater relevance…

We also anticipate that the markets will brush aside March durable goods orders on Friday.

Outside of the numbers, the downward trend in new coronavirus cases will need to continue to support an easing in lockdown measures.

The Dollar Spot Index ended the week up by 0.30% to 99.782.

For the EUR:

It’s a busy week ahead on the economic data front.

In the first half of the week, the focus will be on April economic sentiment figures for Germany and the Eurozone. The ZEW numbers will reflect economist and analyst sentiment following the March dive in optimism.

The Eurozone’s consumer confidence figure for April, on Wednesday, will also garner plenty of attention.

In the 2nd half of the week, the focus will then shift to prelim April private sector PMI numbers.

The French, German and Eurozone numbers will likely reflect a quicker pace of contraction. We could see the EUR come under immense pressure should the EU and ECB fail to talk of more support.

From Germany, consumer and business confidence figures for May and April will also be in focus. We would expect the PMI numbers to be the key driver, however.

The EUR/USD ended the week down by 0.57% to $1.0875.

For the Pound:

It’s also a busy week ahead on the economic calendar.

Through the 1st half of the week, employment and inflation figures are in focus.

We would expect March inflation and claimant count figures to have the greatest influence. It’s unlikely, however, that the full impact of the coronavirus will be reflected in the numbers. That should limit any upside in the event that the numbers come in better than expected.

In the 2nd half of the week, the focus will shift to March retail sales and April private sector PMI numbers.

Expect the April PMIs to have a greater impact on the day. A slide in retail sales in March would also pressure the Pound, however. There would be little support from any positive retail sales figures…

Outside of the numbers, any chatter on Brexit and fiscal policy will also need consideration. The markets will be wanting to know when the British PM will be back behind the desk. There is also the issue of Britain’s transition period to consider.

The GBP/USD ended the week up by 0.35% to $1.2499.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

February retail sales and March inflation figures are due out on Tuesday and Wednesday.

We would expect the inflation figures to have a greater impact, though weak retail sales numbers could test support. March and April numbers will likely be far worse, so weak numbers in February would point to dire numbers ahead.

February wholesale sales and March new house price figures should have a muted impact on the Loonie.

Outside of the numbers, expect market risk sentiment and outlook towards crude oil supply and demand to also influence.

The Loonie ended the week down by 0.32% to C$1.4001 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead, with no material stats for the markets to consider. A lack of stats leaves the focus on the RBA minutes due out on Tuesday.

The RBA minutes have tended to be on the more dovish side of late. There’s certainly little reason for the RBA to be anything but dovish for now…

Private sector PMIs from key economies and commodity prices will also influence in the week.

The Aussie Dollar ended the week up by 0.27% to $0.6366.

For the Kiwi Dollar:

It’s also a quiet week ahead on the economic data front. Economic data is limited to 1st quarter inflation figures.

While any softer inflation numbers are Kiwi negative, market risk appetite will remain the key driver.

The RBNZ has already spoken of a willingness to provide further support. Following the IMF forecasts, the RBNZ may well be back in the spotlight in the early summer, which should limit any major upside.

The Kiwi Dollar ended the week down by 0.69% to $0.6035.

For the Japanese Yen:

It’s a busier week ahead.

March trade data due out on Monday and prelim April private sector PMIs on Thursday will be in focus.

The stats are unlikely to have a material impact on the Yen, however. We have seen the Dollar retain its crown amidst the risk aversion. Continued improvement in risk appetite would likely limit any downside for the Yen.

The Japanese Yen ended the week up by 0.86% to ¥107.54 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

There are no material stats due out of China in the week. A lack of stats leaves monetary and fiscal policy moves in focus.

On Monday, the PBoC will deliver the 1-year and 5-year loan prime rates. A cut in line with forecasts would provide riskier assets with support on the day. Much will depend, however, on Beijing’s plans to reignite the economy amid the ongoing lockdown in the West.

The Chinese Yuan ended the week down by 0.54% to CNY7.0737 against the U.S Dollar.

Geo-Politics

OPEC

More cuts needed to address that supply glut and Trump certainly failed to restore price stability. We could see efforts to return oil prices to $30 in the week, though much will depend on COVID-19. One positive is the plan to ease lockdown measures. As we have seen before, however, it will take some time for the supply glut to reverse.

UK Politics:

When is PM Johnson back and will there be an extension to the transition period?

Members of Parliament return this week. Those that plan to physically attend will need to follow social distancing rules.

Not much is expected in the week ahead, which will leave any updates on Brexit and fiscal policy in focus.

U.S Politics:

Trump isn’t making any friends and blaming the WHO for America’s slow response to the coronavirus is not going to fool too many…

Navigating through the economic meltdown will have to be the President’s first priority. It’s far too early to begin the blame game.

With the U.S President looking to begin easing confinement measures, we will likely hear more chatter from Trump’s 2020 rival… In the week, it will boil down to whether governors will agree to ease lockdown measures. Trump was tweeting over the weekend and rubbed a number of governors up the wrong way…

The Coronavirus:

A continued downtrend in new cases going into the week will support a phased easing of containment measures.

We will expect the details to be the key driver in the week.

Countries that trail the front runners in easing lockdown measures could see their currencies take a hit.

The markets have accepted the economic fallout and are now looking for that recovery. Last week, we saw the IMF throw cold water on a V-shaped rebound. With the U.S Presidential election in November, Trump will be looking to do just that…

Expect EU member states to also be looking to further easing restrictions. We will also be looking for attempts by Brussels to deliver a 2nd COVID-19 aid package.

The IMF forecasts certainly suggest that a number of economies need to deliver more. One that springs to mind is the EU. Surely the EU project is at risk should ministers fail to stump up more than a measly EUR500bn…

This is dwarfed by the efforts of the U.S administration and FED and even their support is not guaranteed to deliver an economic rebound…

Corporate Earnings

Following the IMF forecasts, this quarter’s earnings season is likely to be a non-event…

Key earnings releases from the U.S include:

Coca-Cola (Tues), Netflix (Tues), Delta Airlines (Wed), Intel (Thurs), Southwestern Airlines (Thurs), American Express (Fri), and Verizon (Fri).

The Weekly Wrap – Talks of Reopening Economies Overshadowed the IMF and Economic Data

The Stats

It was a relatively busy week on the economic calendar, in the week ending 17th April.

A total of 44 stats were monitored, following the 41 stats in the week prior.

Of the 44 stats, 14 came in ahead forecasts, with 23 economic indicators coming up short of forecast. 7 stats were in line with forecasts in the week.

Looking at the numbers, just 17 of the stats reflected an upward trend from previous figures. Of the remaining 27, 23 stats reflected a deterioration from previous.

For the Greenback, it was a relatively bullish week, with the dollar recovering some of last week’s 1.09% loss. The U.S Dollar Spot Index rose by 0.30% to end the week at 99.782.

Economic data continued to take a back seat in the week. Once more, the markets were focused on the coronavirus numbers and government plans to ease containment measures.

As at the time of writing, the total number of coronavirus cases stood at 2,248,037, which was up from last Friday’s 1,697,533.

In the U.S, the total rose to 709,201, with France, Germany, Italy, and Spain reporting a combined total of 652,639.

Out of the U.S

It was a busier week on the economic calendar, with the economic data skewed to the negative.

March retail sales and industrial production figures and April manufacturing numbers were in focus on Wednesday

Core retail sales fell by 4.5%, with retail sales sliding by 8.7%. Industrial production figures were no better in March, with production falling by 5.4%, month-on-month.

On the manufacturing front, NY Empire State Manufacturing Index tumbled from -21.5 to -78.2 in April.

On Thursday, the numbers no better, with the Philly FED Manufacturing Index sliding from -12.7 to -56.6.

The weekly jobless claims figures continued to shock, with initial jobless claims rising by another 5.245m.

While the stats were skewed to the negative, talk of a phased easing of lockdown measures across the U.S was positive.

The markets were even able to brush aside the dire IMF economic forecasts that spooked the markets on Wednesday.

In the equity markets, the NASDAQ rallied by 6.09%, with the Dow and S&P500 gaining 2.21% and 3.04% respectively.

Out of the UK

It was a particularly quiet week on the economic calendar.

Economic data was limited to March retail sales figures that delivered no surprises. The BRC Retail Sales Monitor fell by 3.5%, year-on-year, following a 0.4% decline in February.

With economic data on the lighter side, support came from news of British PM Johnson coming out of ICU.

While it wasn’t plane sailing through the week, risk appetite ultimately supported the Pound in the week.

In the week, the Pound rose by 0.35% to $1.2499. The FTSE100 ended the week down by 0.95%, partially reversing a 7.89% gain from the previous week.

Out of the Eurozone

It was a quiet week economic data front. The stats had a muted impact on the EUR and the European equity markets, however.

Finalized March inflation figures for France, Germany, Italy, and the Eurozone had little impact. February industrial production figures for the Eurozone also failed to move the dial.

The acceptance of a coronavirus fueled economic meltdown limited the impact as the markets looked forward.

News of some easing of containment measures in Italy and other EU member states was EUR positive.

It wasn’t enough to deliver a 2nd consecutive week in the green, however. The IMF’s forecasts, disappointment over the EU Stimulus package and economic forecasts pinned the EUR back.

For the week, the EUR fell by 0.57% to $1.0875, partially reversing a 1.26% gain from the previous week.

For the European major indexes, it was a mixed week. The DAX30 and EuroStoxx600 rose by 0.58% and by 0.50% respectively, while the CAC40 slipped by 0.17%.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar, with monetary policy divergence splitting the two.

In the week ending 17th April, the Aussie Dollar rose by 0.27% to $0.6366, while the Kiwi Dollar fell by 0.69% to $0.6035.

Support for riskier assets reversed losses for the Aussie on Friday and limited the downside for the Kiwi.

For the Aussie Dollar

It was a relatively busy week for the Aussie Dollar on the economic data front.

Economic data included March and April business and consumer confidence figures and March employment numbers.

The stats were skewed to the negative, with the business and consumer confidence in decline.

Employment numbers for March were better than anticipated, though this was more of a timing issue. April figures are expected to reflect the economic effects of COVID-19.

Outside of the numbers, falling commodity prices also pinned back the Aussie Dollar.

For the Kiwi Dollar

It was a particularly quiet week on the economic calendar. There were no material stats from New Zealand to provide the Kiwi with direction.

The lack of stats left the Kiwi in the hands of market risk sentiment and the outlook towards monetary policy.

While the RBA is expected to stand pat on rates, the RBNZ has spoken of more support and even negative rates down the track.

A 1.12% rally on Friday, driven by demand for riskier assets, reversed most of the week’s losses.

For the Loonie

It was a relatively quiet week on the economic calendar.

On the data front, February manufacturing sales figures had a muted impact, in spite of a 0.5% rise.

Earlier in the week, however, the Bank of Canada did provide some support, with a rate hold on Wednesday.

After having delivered 2 emergency moves in response to the impact of the global lockdown, the BoC revealed no plans for further rate cuts.

With the BoC on hold, whilst ramping up its T-Bill purchases, risk sentiment also the Loonie in the week.

Crude oil prices weighed, however, with WTI ending the week at sub-$19 per barrel levels.

The Loonie fell by 0.32% to end the week at C$1.4001. A 0.58% rally on Friday limiting the loss for the week, as demand for riskier assets surged on the day.

For the Japanese Yen

It was a quiet week on the data front. Economic data was limited to finalized industrial production numbers for February.

The stats had a muted impact on the Yen, in spite of a downward revision to production.

Market expectations are for the Yen to continue to strengthen against the Dollar, as lockdown measures ease.

A downward trend in the number of new coronavirus cases also provided support to the Yen.

The Japanese Yen rose by 0.86% to end the week at ¥107.54. In the week prior, the Yen had risen by just 0.07% against the U.S Dollar.

Out of China

It was a busy week on the economic data front.

In the 1st half of the week, March trade data came in better than had been forecasted.

China’s U.S Dollar trade balance rebounded from a US$7.09bn deficit to a US$19.9bn surplus. Both imports and exports saw significantly lower declines than had been reported in February.

At the end of the week, 1st quarter GDP figures along with March retail sales and industrial production figures were in focus.

Market resilience passed the test once more, with quite dire numbers failing to weigh on risk appetite on Friday.

Quarter-on-quarter, the economy contracted by 9.8%, with the economy contracting by 6.8% year-on-year.

In March, retail sales slumped by 15.8%, with industrial production falling by a further 1.1%.

With updates on the coronavirus and talks of easing lockdown measures, the markets brushed aside the dire numbers on Friday.

In the week ending 10th April, the Yuan fell by 0.54% to CNY7.0737 against the Greenback.

The CSI300 rose by 1.87%, with the Hang Seng ending the week up by just 0.33%.

Trump’s Re-Opening Plans, Promising COVID-19 Drug Results Boost European Shares

The major European stock indexes are expected to open up about 3% higher based on the futures trade, as U.S. President Donald Trump rolled out plans for a gradual re-opening of the economy and on reports of a potential drug to treat the COVID-19 disease.

At 10:26 GMT, the UK’s FTSE 100 is trading 5806.46, up 178.03 or +3.16%. Germany’s DAX 30 is at 10683.97, up 382.43 or +3.71% and France’s CAC 40 is trading 4516.77, up 166.61 or +3.83%.

Late on Thursday, Trump laid out new guidelines for U.S. states to emerge from the shutdowns in a staggered, three-stage approach, sending U.S. S&P 500 Index futures to a near five-week high.

Also lifting investor sentiment at the end of the week was a report detailing encouraging partial data from trials of U.S. drugmaker Gilead Sciences Inc.’s experimental drug remdesivir in severe COVID-19 patients.

Trump Unveils Three-Stage Process for States to End Coronavirus Shutdown

President Donald Trump laid out new guidelines on Thursday for U.S. states to emerge from a coronavirus shutdown in a staggered, three-stage approach meant to revive the U.S. economy even as the country continues to fight the pandemic.

The recommendations call on states to show a “downward trajectory” of COVID-19 cases or positive tests for the disease over 14 days before proceeding with the plan, which gradually loosens restrictions on businesses that have been shuttered to blunt the spread of the virus.

“We are not opening all at once, but one careful step at a time,” Trump told reporters at the White House.

The plan faces criticism because it did not include provisions to ramp up testing or set a specific standard for levels of the disease before economic opening.

Stocks Jump after Drug Shows Effectiveness in Treating the Coronavirus

European and US stock futures jumped in overnight trading stateside following a report that said a Gilead Sciences drug was showing effectiveness in treating the coronavirus.

Gilead Sciences shares popped by more than 16% in after-hours trading Thursday after details leaked of a closely watched clinical trial of the company’s antiviral drug Remdesivir, showing what appears to be promising results in treating COVID-19.

The University of Chicago’s phase 3 drug trial found that most of its patients had “rapid recoveries in fever and respiratory symptoms” and were discharged in less than a week, health-care publications STAT News reported.

“The best news is that most of our patients have already been discharged, which is great. We’ve only had two patients perish,” University of Chicago infectious disease specialist Kathleen Mullane said, according to STAT News, which obtained a video of her remarks.

European New Car Sales Plunge by 51.8% in March

Passenger car sales tumbled by more than 50% in Europe’s major markets in March as lockdowns imposed due to the new coronavirus took their toll, data showed on Friday.

In March, new car registrations dropped by 51.8% to 853,077 vehicles in the European Union, Britain and the European Free Trade Association (EFTA) countries, statistics from the European Auto Industry Association (ACEA) showed.

Sales fell in all EU markets, with Italy – hit particularly hard by the pandemic – reporting the biggest drop of 85.4%, while registrations tumbled by 37.7% in Germany, 72.2% in France and 69.3% in Spain.

The Week Ahead – COVID-19 and OPEC in Focus, with Economic Data on the Lighter Side

On the Macro

It’s a quieter week ahead on the economic calendar, with just 41 stats to monitor in the week ending 10th April. In the week prior, 78 stats had been in focus.

For the Dollar:

It’s a particularly quiet week ahead for the greenback.

April prelim Michigan Consumer Expectation and Sentiment figures on Thursday will garner plenty of attention.

In March, both indexes took a sizeable fall but with containment measures now in place until the end of April, further downside is anticipated.

Inflation figures due out on Thursday and Friday will likely have limited impact. With consumption on the slide in March, it will be a question of how bad rather than if there are deflationary pressures.

Expect the weekly jobless claims figures to also influence. Will the markets be able to stomach another weekly surge?

At the start of a shortened week, February JOLTs job openings should have a muted impact…

Outside of the stats, chatter from the Oval Office and the latest updates on the coronavirus will need consideration.

On the monetary policy front, the minutes on Wednesday will also draw interest as the markets look for what ammo the FED has remaining.

The Dollar Spot Index ended the week up by 2.25% to 100.576.

For the EUR:

It’s an even quieter week ahead on the economic data front.

German factory orders and industrial production figures for February are due out on Monday and Tuesday. In the 2nd half of the week, German trade data for February is also due out.

We don’t expect the numbers to have any influence, however, with March and April figures of greater significance.

Outside of the numbers, the EUR could find support should the spread of the virus begin to ease across the region. Concerns over the economic outlook would limit any upside, however.

The EUR/USD ended the week down by 3.05% to $1.0801.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

While on the busier side, the markets will need to wait until Thursday for key stats.

February industrial and manufacturing production and GDP figures will be in focus on Thursday. With the numbers being for February, however, any upside from positive numbers would likely be muted.

Expect February’s trade data to be brushed aside on the day.

Outside of the numbers, progress on Brexit negotiations and coronavirus news will be the key drivers.

The UK saw a relatively large increase in new cases last week but continues to fare better than its neighbors. Should this continue, the Pound will likely be relatively resilient to any risk aversion.

The GBP/USD ended the week down by 1.53% to $1.2269.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

March Ivey PMI numbers will garner some attention on Tuesday. Following 2 emergency moves by the BoC, however, the markets will want to wait to assess what impact monetary policy has had on the economy. This will take some time…

The numbers will, however, give an idea of how badly the sector has been affected by the global shutdown.

On Thursday, the focus will then shift to March employment figures. Expect the employment change number to have the greatest influence in the week.

Housing sector numbers on Wednesday should have a muted impact on the Loonie.

Outside of the stats, it continues to boil down to market sentiment and outlook towards consumption.

Extended lockdowns in key economies will limit any material upswing in consumption and output in China.

A planned purchase of crude oil by China and OPEC – Russia talks will certainly influence, with a sizeable cut in output required.

The Loonie ended the week down by 1.57% to C$1.4205 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week ahead on the economic calendar.

Economic data is limited to February trade data that is due out on Tuesday. While we can expect some interest in the numbers, any positive numbers will have a muted impact on the Aussie Dollar.

The global supply chain remains broken at the start of the 2nd quarter and there is no clear line of sight on when conditions will improve.

On Tuesday, the RBA is also in action. Following the emergency rate cut and rollout of its first-ever QE program, however, no moves are anticipated.

Later in the week, the RBA’s Financial Stability Review will give the markets an idea of how bad it could get, however…

Away from the calendar, expect updates on the coronavirus and anticipated impact on the global economy to remain the key driver.

The Aussie Dollar ended the week down by 2.77% to $0.5997.

For the Kiwi Dollar:

It’s a particularly quiet week ahead on the economic data front. Economic data is limited to 1st quarter business confidence figures. There are unlikely to be too many surprises here, which should limit any downside for the Kiwi.

With stats on the lighter side, the Kiwi will remain in the hands of market risk sentiment and the news wires.

The Kiwi Dollar ended the week down by 2.60% to $0.5878.

For the Japanese Yen:

It’s a quiet week ahead.

February household spending figures, due out on Tuesday, will have a muted impact on the Yen.

Machinery orders on Thursday will garner some interest, however, with Japan already impacted by the virus in February.

A sharp fall in orders would be of little surprise for the markets, however, which now needs to assess April and May data.

Outside of the stats, it will be all eyes on the U.S and the spread of the coronavirus…

The Japanese Yen ended the week down by 0.57% to ¥108.55 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

Key stats are limited to March inflation figures that will likely be brushed aside on Friday.

While there are some concerns over the coronavirus numbers out of China, any increased activity in the private sector will be well received.

Beijing will be looking to avoid a spike in infections, however, that could lead to another lockdown.

The Chinese Yuan ended the week up by 0.06% to CNY7.0915 against the U.S Dollar.

Geo-Politics

Trade Wars:

The spread of the coronavirus has led to talks of recessions and even the talk of a depression. This would certainly be the time for tariffs to be withdrawn and for the world powers to stand on a united front to restore the supply chain. It would be a bitter pill for Trump to swallow, however, with trade imbalances and currency manipulation his pet hates.

One thing is certain, China will likely fail to meet much of the trade agreement conditions, making the phase 1 agreement somewhat redundant. Turning things around before the November election will be a challenge, so there is an incentive to put a different spin on it…

OPEC

Trump has certainly set crude oil prices up for a tumble, after tweeting that Russia and OPEC will cut production by a whopping 10m bpd.

WTI ended last week up by 31.8%, with Brent up by 36.8%, the upside coming after WTI tested support at $20.

An emergency meeting on Monday will decide, not only the fate of oil prices near-term but OPEC’s position in the sector. If OPEC and Russia agree to a 10m barrel per day cut in production that will give the U.S a much stronger position moving forward.

The price war is largely as a result of the continued rise in output from the U.S. Shale producers are unlikely to rein in output. It would be a surprise for Russia and OPEC to agree to such a sizeable cut in output. The U.S President may have been better off letting the 2-sides reach a common ground without intervention.

Expect a historic slump in oil prices should both Russia and OPEC fail to agree to such a cut…

UK Politics:

Brexit and UK politics, in general, is on hold as the UK government tackles COVID-19. The news wires have been particularly critical of the government’s handling of the virus. An inability to provide clarity has led to the criticism as the PM continues to self-isolate. It’s no different elsewhere, however, with many governments also facing criticism over action and, in some cases, inaction.

While Boris Johnson will need to restore calm, Brexit talks will certainly not be high on the agenda. With April upon us and Johnson’s June deadline around the corner, that extension may be on the horizon…

U.S Politics:

There’s nothing to report for now, with the Democratic Convention postponed until August. This was in response to primaries being delayed by a number of states, while others moved to a mail-in system.

Joe Biden remains the front runner for the Democrats, which continues to be market-friendly.

The Coronavirus:

The spread of the coronavirus remains the key driver in the week ahead. Across Europe, the markets will be looking for the number of new cases to begin falling off recent highs. An extended lockdown in Italy will need to start delivering improved figures to support the EUR and European major boerses.

Trump’s warning of a grim 2-weeks ahead suggests a sharp increase in new cases for the U.S. That won’t stop the markets from ditching riskier assets should the numbers be truly alarming.

With central banks and governments having made their moves, the next question will be whether it will be enough.

An extended period of lockdown suggests not…

The Weekly Wrap – COVID-19 and Dire Data Weigh on Riskier Assets

The Stats

It was a particularly busy week on the economic calendar, in the week ending 3rd April.

A total of 78 stats were monitored, following the 52 stats in the week prior.

Of the 78 stats, 43 came in ahead forecasts, with 29 economic indicators coming up short of forecast. 6 stats were in line with forecasts in the week.

Looking at the numbers, just 28 of the stats reflected an upward trend from previous figures. Of the remaining 50, 44 stats reflected a deterioration from previous.

For the Greenback, it was a relatively bullish week, with support kicking in after the previous week’s 4.33% slide. The U.S Dollar Spot Index rose by 2.25% to end the week at 100.576.

Economic data failed to sink the Dollar. Once more, the markets were focused on the impact of the coronavirus on the global economy.

As at the time of writing, the total number of coronavirus cases stood at 1,098,025. In the U.S, the total rose to 277,161, with France, Germany, Italy, and Spain reporting a combined total of 394,522.

Out of the U.S

It was a busy week on the economic calendar. ISM Manufacturing and Non-Manufacturing PMIs were in focus along with labor market numbers.

At the start of the week, however, March consumer confidence figures set the tone. The CB Consumer Confidence Index fell from 132.6 to 120.0, reflecting the early effects of COVID-19.

Manufacturing sector activity fared better than anticipated. The ISM Manufacturing PMI fell from 50.1 to 49.1, which was far better than a forecasted 45.0.

That was about the only good news for the markets, however.

 

Initial jobless claims surged to 6.684m in the week ending 27th March, dwarfing the previous week’s record high.

At the end of the week, nonfarm payrolls also spooked the global financial markets. ISM Non-Manufacturing PMI numbers could have been far worse, however.

The ISM Non-Manufacturing PMI slipped from 57.3 to 52.5, with nonfarm payrolls tumbling by 701k As a result of the continued shutdown across the U.S, the unemployment rate surged from 3.5% to 4.4%.

In the equity markets, the Dow fell by 2.70%, with the S&P500 and NASDAQ declining by 2.08% and 1.72% respectively.

Out of the UK

It was a quieter week on the economic calendar.

Key stats in the week were limited to finalized March private sector PMI numbers and 4th quarter GDP and business investment figures.

The markets showed little reaction to the 4th quarter numbers as expected, with the focus remaining on March numbers.

Minor downward revisions to both the Manufacturing and Services PMI left the Pound on the back foot. The Pound’s weekly loss was minor, however, when considering the previous week’s bounce back.

In the week, the Pound fell by 1.53% to $1.2269, following the previous week’s 7.15% rally. The FTSE100 ended the week down by 1.72%.

Out of the Eurozone

It was a particularly busy week economic data front.

In the early part of the week, key stats in the week included March unemployment numbers out of Germany and the Eurozone’s prelim inflation figures.

Germany’s unemployment numbers impressed though had yet to reflect the impact of the coronavirus. Prelim inflation figures, however, showed inflationary pressures easing. The Eurozone’s annual rate of inflation softened from 1.2% to 0.7%.

In the 2nd half of the week, the focus was on March private sector PMI numbers.

While the Manufacturing Sector activity in France and Germany held up pretty well, it was a different story for Spain and Italy.

Service sector PMI numbers were even more disappointing for the 2 member states worst hit by the virus.

Spain’s Services PMI tumbled from 52.1 to 23.0, with Italy’s slumping from 52.1 to 17.4. Both saw PMIs fall to record lows

Finalized Service PMIs for France, Germany and the Eurozone were also worse than prelims adding further pressure on the EUR.

The Eurozone’s Composite PMI came in at 29.7, revised down from a prelim 31.4 and down from a February 51.6.

At composite level, Ireland ranked 1st with a 131-month low 37.3. Italy was last with a record low of 20.2. Germany (35.0), France (28.9), and Spain (26.7) also saw record-low PMIs.

ECB talk of a recession set the mood early in the week and the stats supported the negative outlook.

For the week, the EUR slid by 3.05% to $1.0801, partially reversing a 4.24% slide from the previous week.

For the European major indexes, it was a bearish week. The DAX30 and EuroStoxx600 fell by 1.11% and 0.59%, while the CAC40 slid by 4.53%.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 3rd April, the Aussie Dollar slid by 2.77% to $0.5997, with the Kiwi Dollar falling by 2.60% to $0.5878.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front once more. There were no material stats to provide direction.

Better than expected economic data out of China failed to deliver a 2nd consecutive weekly gain.

Negative sentiment towards the global economic outlook weighed on commodity prices and the Aussie in the week. This was coupled with a pickup in demand for the Greenback as coronavirus updates continued to spook the markets.

For the Kiwi Dollar

It was a relatively quiet week on the economic calendar, with key stats limited to March business confidence figures.

The ANZ Business Confidence Index tumbled from -19.4 to -63.5, which was far worse than a forecasted -24.1.

In spite of the slide, the Kiwi managed to stand its ground in the early part of the week. A 2nd half of the week pullback left the Kiwi in the deep red.

Building consent figures had a muted impact on the Kiwi despite a 4.7% jump in February.

For the Loonie

It was a quiet week on the economic calendar.

Key stats were limited to January and February numbers that had a relatively muted impact on the Loonie.

A narrowing in the trade deficit from C$1.66bn to C$0.98bn in February did little to support late in the week.

Outside of the numbers, crude oil prices certainly influenced, with sentiment towards supply and demand weighing.

Late in the week a rebound in crude oil prices on the hopes of a Trump instigated Russia – OPEC agreement to cut production provided little support.

OPEC and Russia may be willing to talk but agreeing to materially cut production is an altogether different story. The U.S and Canada would also need to cut production.

The Loonie fell by 1.57% to end the week at C$1.4205, partially reversing a 2.65% rise from the previous week.

For the Japanese Yen

It was a busier week than usual on the data front, though the numbers had a relatively muted impact on the Yen.

Key stats included Q1 Tankan survey numbers, and February retail sales and industrial production figures. The Tankan numbers were better than expected but negative nonetheless.

A bounce back in both retail sales and a further rise in industrial production were of little consolation.

Expectations are for an extended economic slowdown affirmed by finalized March private sector PMI numbers.

For the Japanese economy and the yen, the biggest risk remains a 2nd COVID-19 breakout…

The Japanese Yen fell by 0.57% to end the week at ¥108.55. In the week prior, the Yen had risen by 2.70% against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front. March private sector PMIs were in focus throughout the week.

Better than expected PMI numbers did give some much-needed support to riskier assets in the week. The numbers were ultimately not good enough to avoid a pullback in the commodity currencies.

Both large and smaller manufacturers reported a return to expansion in March. The NBS Manufacturing PMI rose from 35.7 to 52.3, with the Caixin PMI rising from 40.3 to 50.1.

Things were less upbeat across the services sector, however, which now accounts for almost 50% of GDP.

While the NBS Non-Manufacturing PMI rose from 29.6 to 52.3, the Caixin Services PMI rose from 26.5 to 43.0.

Perhaps of greater significance in the week was the easing of confinement measures in China’s 7th largest GDP contributor.

Borders remain closed and global demand remains particularly weak, however, removing the hope of a sharp rebound.

In the week ending 3rd April, the Yuan rose by 0.06% to CNY7.0915 against the Greenback.

The CSI300 rose by just 0.09% following a 1.56% gain from the previous week. The Hang Seng saw red, however, falling by 1.06% to partially reverse a 1.56% gain from the previous week.

The Coronavirus Continues To Impact The Financial Markets. Crude Oil And Equity Markets

The coronavirus continues to impact the financial markets. What data do we have about the pandemic?

We’ve seen the epicenter gradually migrate from East to West, with the U.S becoming the epicenter in recent days.

The total number of cases in the U.S has surged to 187,347. When considering the most affected member states of the EU, however, the total number of cases continues to surpass the U.S. Just factoring in the number of cases in Italy, Spain, Germany, and France, the total number of cases stand at 325,651.

It is grim reading as the global number rapidly approaches 1,000,000.

Demographics have certainly played a part in the mortality rates seen across the different geographies. Continental Europe has suffered the most, with mortality rates sitting as high as 10% in Spain and Italy.

In Germany, the mortality rate sits at just 1%, which is quite a variance.

Across in the U.S, projections are for the mortality rate to accelerate beyond the current 3%. In fact, projections are quite alarming. When considering the Federal and State power structure, however, the spread of the virus was always predicted to be more severe than in China… For the EU, the reintroduction of borders was particularly important, even though it should have occurred sooner.

For now, as the numbers continue to rise, the bigger question will be the relevance of the numbers circulated.

Limited testing kits could see hospitals run out, leading to a marked fall in actual tests. This could ultimately skew the daily updates on the number of new cases.

A more meaningful approach would be for both new cases and total daily tests to be circulated. This would give a better lay of the land for the markets, the WHO and local authorities in each country.

Such transparency, however, is a big ask as governments look to calm citizens and avoid an even bigger market rout…

It appears that the two major economies are handling the virus differently. What about the global equity markets?

The global equity markets appear to have yielded to the fact that the global shutdown will continue until late April.

Of greater concern, however, is that the markets are anticipating a sharp rebound in economic activity at the bell…

In reality, however, an extended shutdown to the end of April would need to lead to an end to the spread of the virus. We would also need to see borders reopen and for supply chains to be rebuilt and quickly.

It is somewhat hard to imagine that all of this is feasible in days or even weeks. Protectionism alone suggests that governments will maintain border controls for far longer. There will be doubts over the numbers being released across many jurisdictions that will make governments all the more cautious…

Quarterly earnings have been written off and companies are being pushed into taken on additional debt burden. Airlines, in particular, are facing a dark future. Assuming a June quarter-end rebound is therefore likely over-optimistic. As we saw in China’s Manufacturing PMI, while production was on the rise in March, global demand continued to slump. That is not a positive, PMI at above 50 or not…

When we throw in the lasting impact of the U.S – China trade war, the volatility is unlikely to abate any time soon. Until we stop seeing marquee stocks swinging by 10-20% in a day, we’re unlikely to have seen an end to the downside.

So there is still data that market participants could watch. Meanwhile, how is Italy handling the situation? It was all over the news throughout the past couple of weeks.

Italy remains in lockdown and the government announced its extension until Easter.

In reality, however, daily infection rates remain high, raising questions over the current strategy.

We have seen self-isolation imposed on those with symptoms and those tested positive but not in need of medical care. Unfortunately, the self-isolation has driven the spread of the virus. The elderly are taking care of the elderly, who have also taken care of the young and vice-versa. It’s for this reason that the numbers in Italy are horrific and Spain is no different.

There should be a slowdown in the spread, however, assuming citizens abide by the self-isolation rules. But to expect the spread to materially slow by Easter is optimistic.

If we continue to see the daily cases rise by 4-6k levels then the shutdown should extend for the 2nd month. That would be more aligned with China, which successfully curtailed the spread to acceptable rates. Even then, Beijing still had to shut down as imported cases began to rise.

Reopening borders would certainly be a big mistake. Tourism and manufacturing may account for a 3rd of GDP, but moving too early could be even more devastating…

In the meantime, the crude oil price benchmarks are also on the headlines. What is the situation?

That was some slide in crude oil prices. Hitting the lowest level in 18 years, sentiment towards supply and demand seems more reflective of the current economic environment.

Governments and companies appear to be eager to get things going but it’s unlikely to happen overnight

The Saudis are ramping up production at a time when the EU and the U.S, in particular, are in shutdown mode.

We have also heard of Trump calling on Russia to discuss restoring price stability. It seems highly questionable, however, that Trump and the U.S would form an oil alliance with Russia. Trump may look to pressure Russia into cutting output, however. The last thing Trump needs is for the administration to have to start bailing out U.S shale producers. At $20 per barrel, it may be hard to avoid…

Looking ahead, OPEC will need to announce a sizeable cut in production. This is also unlikely, however, when considering production costs. For the Saudis alone, production costs sit at sub-$10 per barrel. There’s a long way to go before they need to pull back from flooding the market…