European Shares Seen Holding Tight to Record Levels: Reuters Poll

The Reuters poll of 18 fund managers, strategists and brokers surveyed over the past week predicted the STOXX 600 would reach 470 points by year end, just 0.4% below Monday’s close.

A much stronger-than-expected second-quarter earnings season and improving economic data in Europe pushed the benchmark STOXX 600 to its longest winning daily streak in almost 15 years in August.

With most of the results accounted for, European profits are expected to have surged a whopping 151% in the second quarter, according to the latest Refinitiv I/B/E/S data.

And European corporates are set for more quarters of double-digit profit growth, with the European Union pumping more support through its huge post-pandemic recovery fund and vaccines mitigating worries around the COVID-19 Delta variant.

Refinitiv data points to profit growth of 43% and 35% in the third and fourth quarter, respectively.

Data has already shown that euro zone business activity grew strongly again in August, only dipping from July’s two-decade high monthly pace, with the IHS Markit flash Composite Purchasing Managers’ Index, a gauge of economic health, at 59.5, well above the 50 mark separating growth from contraction.

European stocks are up 18% this year and have outperformed the MSCI’s global stock index, which is up 13% year to date.

But remaining anchored to record levels won’t come without challenges, as investors ponder risks that inflation could lead to a tightening of monetary policy conditions, especially in the United States, while China’s months-long regulatory crackdown on an array of private companies keeps investors on their toes.

Equities will “continue climbing a wall of worry,” said Emmanuel Cau, head of European equity strategy at Barclays, with the regulatory crackdown in China being “another challenge for investor confidence”.

Some $120 billion of market capitalization was wiped off the European luxury space, which shed 14% in two days in August, after Chinese President Xi Jinping delivered a blow to the sector, with plans for wealth redistribution.

ALL EYES WILL BE ON GERMANY

Investors are also taking into account the prospect of political gridlock in Germany in the wake of the upcoming elections, the first without Angela Merkel in more than 15 years.

“All eyes will be on Germany’s federal elections in September 2021”, said Roland Kaloyan, head of European equity strategy at SocGen.

Barclays is not planning to turn more defensive just yet after it moderated its cyclical exposure, as European shares still offer attractive relative value, Cau said.

European indexes are cheaper than global peers as they are heavy in banks and other cyclical stocks which benefit when the economy looks up, and are light on tech and growth stocks for which investors are reluctant to pay hefty premiums amid buoyant economic activity and rising interest rates.

According to the poll, Germany’s industrials-heavy DAX index should gain about 1.2% to 16,050 points at the end of the year against Monday’s close of 15,852.8 points.

London’s blue chip index is expected to rise 1.3% to 7,200 points. France’s CAC 40 index is seen rising 1.7% to 6,800 points.

While Italy’s FTSE MIB and Spain’s IBEX are seen making the biggest gains, jumping 2.9% to 26,810 points and 2.1% to 9,160 points, respectively, before the end of the year.

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

(Other stories from the Reuters Q3 global stock markets poll package:)

(Reporting by Joice Alves; additional polling by Sujith Pai and Indradip Ghosh; Editing by Chizu Nomiyama)

Stocks clamber up from 4-week lows, dollar eases from 10-week high

By Ritvik Carvalho

LONDON (Reuters) – Global stocks recovered some losses after hitting a four-week low on Monday as investors continued to digest last week’s surprise hawkish shift by the U.S. Federal Reserve, while the dollar stood just below a 10-week high.

Shares of banks, energy firms and other companies that tend to be sensitive to the economy’s fluctuations have fallen sharply since the Fed’s meeting on Wednesday, when the central bank caught investors off guard by anticipating two quarter-percentage-point rate increases in 2023.

Stocks in Asia took their cue from Wall Street’s falls on Friday but European shares bucked the trend, with the pan-European STOXX 600 index up 0.2% by afternoon trade in London. [.EU]

U.S. stock futures also moved firmly into positive territory, suggesting gains at the open on Wall Street later in the day. S&P 500 E-mini futures were up [.N]

“The interesting part about this correction is that it was lagged, so it took a while for the market to sort through the news,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

“The situation in reality is actually pretty good – the Fed is stabilizing inflation…Cyclical sectors may have overshot the market in the short term and so you may have a bit of pressure on the sector.”

Britain’s FTSE 100 was down 0.1%, France’s CAC 40 index gained 0.3% and Spain’s IBEX 35 fell 0.3%. Germany’s DAX was up nearly half a percent, while Italy’s FTSE MIB index rose 0.2%.

MSCI’s All Country World Index, which tracks shares across 49 countries, was down 0.2%, trimming some losses after hitting its lowest since May 24.

Benchmark 10-year U.S. Treasury yields recovered to 1.4414% after falling to their lowest since Feb. 24 at 1.3540%.

The yield curve – measured by the spread between two- and 30-year yields – earlier hit its flattest since late January, and as investors brought forward rate hike expectations while lowering the longer-term outlook for growth and inflation.

The U.S. dollar index hovered just below the 10-week high of 92.408 touched on Friday, following its biggest weekly advance in more than a year.

“Last week’s dollar rally is a combination of expectations and positioning (sold dollars), a concern that the Fed is ‘behind the curve’ (and therefore must do more and earlier than expected), and that stock markets have started to lose ground which makes the dollar strengthen as the most defensive currency,” Filip Carlsson, junior quantitative strategist at SEB, said in a morning note.

“We still see this as a correction and not the beginning of a new trend.”

St. Louis Fed President James Bullard further fuelled the sell-off on Friday by saying the shift toward faster policy tightening was a “natural” response to economic growth and particularly inflation moving quicker than anticipated as the country reopens from the coronavirus pandemic.

“The Fed’s pivot to begin the tightening discussion caught most by surprise, but markets began discounting this inevitable process months ago in our view,” Morgan Stanley analysts wrote in a report.

“It’s exactly what the mid-cycle transition is all about, and fits nicely with our narrative for choppier equity markets and a 10-20% correction for the broader indices this year.”

Earlier in Asia, Japan’s Nikkei led declines with a 3.6% drop and dipped below 28,000 for the first time in a month, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4%. Chinese blue chips lost 0.7%.

Several Fed officials have speaking duties this week, including Chair Jerome Powell, who testifies before Congress on Tuesday. European Central Bank President Christine Lagarde speaks before the European Parliament on Monday.

The euro traded above its lowest against the dollar since April 6 at $1.1896 on Monday, dropping from as high as $1.21457 last Tuesday.

Sterling recovered some ground, to trade 0.6% higher at $1.3880 after sliding to its lowest since April 16 on Friday. [GBP/]

Commodity-linked currencies have also suffered, with the Australian dollar hovering above a six-month low at $0.7495.

A stronger greenback has pressured cryptocurrencies too, with bitcoin falling 10% to around $31,930, while smaller rival ether lost 15% to around $1,903.

In commodities, gold rebounded 1.1% to $1,783 an ounce on Monday, looking to snap a six-day losing streak, but remained near the lowest since early May.

Three-month copper on the London Metal Exchange fell to its lowest since April 15, following an 8.6% drop last week, the biggest weekly fall since March 2020.

Crude oil rose for a second day, underpinned by strong demand during the summer driving season and a pause in talks to revive the Iran nuclear deal that could indicate a delay in resumption of supplies from the OPEC producer.

Brent crude futures rose 0.1% to $73.56 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.1% to $71.74 a barrel.

(Reporting by Ritvik Carvalho; Additional reporting by Kevin Buckland in Tokyo; Editing by Catherine Evans and Peter Graff)

UK’s FirstGroup Clashes with Top Investor Over Divestment

By Yadarisa Shabong

Coast Capital, which holds nearly 14% of the transport operator, late on Monday urged fellow shareholders to vote against the proposed disposal of the “crown jewel assets”, unless the terms of the proposal were “rapidly and substantively improved”.

FirstGroup said the sale “followed a comprehensive and competitive process in order to seek the best possible price for First Student and First Transit, which was well publicised for more than a year”.

Analysts at RBC Capital Markets believe the sale price is above its valuation of FirstGroup’s North American assets.

Activist investor Coast Capital, however, criticised the portion of proceeds that shareholders stand to receive from the deal.

FirstGroup last month agreed the sale of the assets and said it planned to use the proceeds to pay down debt, contribute to its UK pension schemes and return money to shareholders.

It said on Tuesday it will consider making additional distributions to continuing shareholders on top of the 365 million pounds ($518 million) it earmarked last month.

Shares of the FTSE 250 company, which will hold a general meeting on May 27 to vote on the proposed divestment, were up 3.2% by 1236 GMT.

FirstGroup, which had net debt of nearly 3 billion pounds at the end of September, said it was committed to keeping the balance sheet position of the retained group under review.

FirstGroup will focus on its First Bus and four train contracts in Britain after the deal as well as on finding a buyer for its Greyhound intercity coach service.

Coast Capital in 2019 pushed for a review of the company’s U.S. assets and sought a demerger of the group’s North American businesses in 2020.

($1 = 0.7040 pounds)

(Reporting by Yadarisa Shabong in Bengaluru; editing by Amy Caren Daniel and Jason Neely)

Reopening Optimism Pushes European Stocks Closer to Record High

The pan-European STOXX 600 index rose 0.7% by 0716 GMT, trading just shy of its record high hit last week, with economy-linked cyclical sectors like miners and automakers leading the gains.

The German DAX rose 0.8% to hit a record high, while Italy’s FTSE MIB added 0.8% to fresh pre-pandemic highs.

Milan-listed shares of Stellantis gained 1.3% ahead of the announcement of ties with Foxconn.

The world’s biggest maker of hearing aids Sonova Holding surged 8.5% after predicting strong growth this year due to a market recovery and new products.

Meanwhile, Vodafone fell 7.2% after the UK mobile operator reported a 1.2% drop in full-year adjusted earnings as COVID-19 hit roaming revenue and handset sales.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)

British Midcaps Hit Record High; Equiniti Group Shines

By Devik Jain

The British outsourcer jumped 13.8% after U.S. private equity firm Siris Capital tabled a 624.3 million pounds ($864.59 million) bid in an all-cash deal.

The blue-chip index edged 0.1% higher in choppy trading, with gains being capped by a 0.8% decline in heavyweight energy shares as they tracked lower oil prices. [O/R]

AstraZeneca rose 0.4%, and was among the biggest boost to the FTSE 100 after the Philippines said it will resume administering drugmaker’s COVID-19 vaccine to people below 60 years of age.

The domestically focussed mid-cap FTSE 250 index also gained 0.4% to touch a record high.

“Markets are back to being a bit dull for now but pretty buoyant,” Deutsche Bank strategist Jim Reid wrote in a note.

“It’s a lighter week ahead, with the main highlight likely to be at the end of the week with the flash PMIs for April … And there’ll be particular attention on the price gauges as well as investors stay attuned to any signs of growing inflationary pressures.”

With the FTSE 100 gaining 8.7% year-to-date and UK vaccine rollout continuing to progress, markets will have a chance to gauge the impact on the economy as employment data, retail sales, CPI, PPI, and flash April PMIs are all due this week.

Meanwhile, homebuilders added 0.6% after property website Rightmove said advertised prices for homes in Britain hit a record high after finance minister Rishi Sunak stoked the market again by extending a tax-cut for home-buyers last month.

Johnson Matthey rose 0.9% after the chemicals company signed a long-term agreement with Russian metals producer Nornickel for the supply of nickel and cobalt to produce materials used to make electric vehicle (EV) batteries.

(Reporting by Devik Jain in Bengaluru; editing by Uttaresh.V)

Stocks Keep Spirits up Before Fed Meets

By Ritvik Carvalho

European shares extended a rally that began on Wall Street on Monday and continued into Asia, with the pan-region STOXX 600 index up 0.5%. On Monday, the index touched its highest level in more than a year before ending flat.

Britain’s FTSE 100 index rose 0.7%, Germany’s DAX 0.6%, France’s CAC 40 0.2% and Italy’s FTSE MIB index 0.6%.

E-mini futures for the S&P 500 hit a record high before trading flat on the day.

MSCI’s All Country World Index, which tracks stocks across 49 countries, rose 0.2% to its highest levels since Feb 25.

An index of Asia-Pacific share markets excluding Japan gained 0.65%, led by a 0.8% jump in Australia’s benchmark S&P/ASX 200 index.

Japan’s Nikkei 225 gained 0.5% to just below the 30,000 mark. The broader Topix added 0.65%.

China’s blue-chip CSI 300 index climbed 0.87% and Hong Kong’s Hang Seng gained 0.67%.

“The stock markets have kept their spirits up ahead of tomorrow’s important Fed announcement,” said Karl Steiner, chief quantitative strategist at SEB.

On Monday, the S&P 500 and Dow Jones Industrial Average both soared on gains in travel stocks as mass vaccinations in the United States and congressional approval of a $1.9 trillion aid bill fueled investor optimism.

Longer-term U.S. Treasury yields slipped further on Tuesday, as the market looked ahead to government debt auctions and the Fed’s two-day policy meeting, which will conclude on Wednesday.

The benchmark 10-year yield, which reached a more than one-year high of 1.642% last week, was back at 1.6004%.

The earlier surge in yields stemmed from investors speculating that rising inflation expectations could prompt the Federal Open Market Committee to signal it will start raising rates sooner than expected.

“We think the FOMC will have a hard time expressing concern about asset markets with the S&P at an all-time high on 12 March, despite 10Y U.S. Treasury yields at post-February 2020 highs,” said analysts Steve Englander and John Davies at Standard Chartered.

“Focus has been on the FOMC ‘dot plot’ in recent days, but if the FOMC and Fed Chair (Jerome) Powell do not push back against current yield levels, investors are likely to take yields higher as better data arrives.”

Fed policymakers are expected to forecast that the U.S. economy will grow in 2021 by the fastest rate in decades, as it recovers from a coronavirus-stricken 2020.

The Bank of England also meets this week on Thursday and the Bank of Japan wraps up a two-day meeting on Friday.

On Wall Street, the Dow Jones Industrial Average rose 174.82 points, or 0.53%, to 32,953.46, the S&P 500 gained 25.6 points, or 0.65%, to 3,968.94 and the Nasdaq Composite remained unchanged.

Airline shares rose as the companies pointed to concrete signs of an industry recovery as vaccine rollouts help spur leisure bookings.

The outlook for post-pandemic recoveries continued to diverge between the U.S. and Europe.

President Joe Biden’s order to make vaccination available to all adults by May 1 contrasted with stuttering rollouts in Germany, France and elsewhere, where use of the AstraZeneca vaccine has been suspended amid concern over possible side effects.

However, Kyle Rodda, an analyst at IG Markets, said the prospect of a slower economic recovery in Europe didn’t appear to be a major handicap for investors.

“It doesn’t seem to be the view that this is a real risk,” he said. “Investors are wary, but not worried.”

In currencies, the U.S. dollar held small gains from overnight, with caution evident ahead of the central bank meetings.

The dollar was largely flat at 109.19 yen, after rising as high as 109.365 on Monday for the first time since June.

The euro was little changed at $1.1930, holding for an eighth session below the $1.20 level.

Bitcoin halted its slide from a record high of $61,781.83 reached on Saturday, last trading 1% higher on the day around $56,250.

U.S. West Texas Intermediate crude for April changed hands at $64.74 a barrel, down 1%. Brent crude futures for May stood at $68.22 a barrel, losing 1%.

(This story corrects U.S. 10-year Treasury yield to 1.6004%)

(Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland and Kane Wu in Tokyo; editing by Larry King)

USD/JPY Fundamental Weekly Forecast – Traders to Weigh June US Non-Farm Payrolls Against New COVID-19 Cases

The Dollar/Yen closed higher last week as weaker global equity markets drove investors into the safety of the U.S. Dollar. The catalysts behind the weakness in demand for higher risk assets were rising COVID-19 cases which threatened to derail the global economic recovery.

Technically, enough buyers came in last week at 106.074 to trigger a potentially bullish weekly closing price reversal bottom. If confirmed, this could lead to the start of a 2 to 3 week counter-trend rally. However, if the selling resumes and the main bottom at 105.987 is taken out then we could see the start of a steep sell-off.

Last week, the USD/JPY settled at 107.221, up 0.348 or +0.33%.

The price action last week was choppy and two-sided despite the higher close. The highlight of the week took place on June 23 when buyers and sellers produced a wickedly volatile outside move.

USD/JPY traders were spooked at the start of the trading session by comments from White House Trade Advisor Peter Navarro, who said that the trade deal between the United States and China is “over”. But he quickly backtracked his statement afterwards, claiming that his comments were taken out of context. U.S. President Donald Trump also said that the Phase One trade deal remains in place in a tweet.

Last week’s economic data was relatively tame, triggering little response from traders. The flash headline au Jibun Bank Japan Manufacturing Purchasing Managers’ Index fell to 37.8 in June from 38.4 in May instead of rising to 39.5 as analysts had predicted. The reading for the au Jibun Flash Japan Services Business Activity Index jumped to 42.3 from 26.5. The Bank of Japan reported that the core Consumer Price Index was unchanged in May. Market participants were expecting the same 0.1% decline as in April.

Bank of Japan Summary of Opinions

The BOJ’s summary of opinions from its latest policy-setting meeting suggests it may wait to see the effects of its recent measures to help companies affected by the coronavirus.

As the bank’s virus-response measures have been introduced almost in full, “it is desirable to carefully confirm and examine their effects for the time being,” one of the bank’s nine policy board members was quoted as saying in the summary of the June 15-16 meeting.

There was also an opinion calling for the bank to prioritize securing employment through supporting corporate financing, while maintaining cooperation between fiscal and monetary policies.

At the June meeting, the bank left key interest-rate targets unchanged. It said the total amount of its support for corporate financing would reach 110 trillion yen ($1.033 trillion) from an earlier total of Y75 trillion, in line with an expansion in government programs that the central bank is supporting.

Weekly Forecast

It’s a holiday shortened week in the U.S. so trading volume could be light, but that doesn’t mean we won’t see volatility. The main focus for traders will be risk sentiment. The catalyst that could trigger volatility in the equity and Forex markets will be the COVID-19 numbers. Another week of surging cases could drive up demand for the safe-haven U.S. Dollar.

There are plenty of economic reports to watch, but most eyes will be on the testimony of Federal Reserve Chairman Jerome Powell on Tuesday and Thursday’s U.S. Non-Farm Payrolls report.

As far as the jobs data is concerned, investors want to see if last month’s surprise gains in the headline number and the drop in the unemployment rate were real or a fluke.

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

Dow Futures Plunge Nearly 900 Points Amid Concerns Over Resurgence of Coronavirus Infections

European stocks and the major U.S. stock indexes are poised to open lower Monday amid concerns over a resurgence of the coronavirus in Asia, particularly Beijing, and the U.S. as lockdowns are eased.

London’s FTSE is seen 34 points lower at 6,054, Germany’s DAX is expected to open 96 points lower at 11,835, France’s CAC 40 is seen 42 points lower at 4,783 and Italy’s FTSE MIB is seen 278 points lower at 18,675, according to IG.

Futures on the Dow Jones Industrial Average dropped 778 points, implying a drop of more than 850 points at the Monday open. S&P 500 and NASDAQ-100 futures also pointed to Monday opening declines for the two indexes.

States Reporting Rise in Daily New Coronavirus Cases

Reuters wrote that states in the reopening process including Alabama, California, Florida and North Carolina are reporting a rise in daily new coronavirus cases. Texas and North Carolina reported a record number of virus-related hospitalizations Saturday.

Meanwhile, Governor Andrew Cuomo warned New Yorkers against triggering a second wave of the coronavirus.

CDC Warns of Second Coronavirus Wave as States Lift Lockdowns

States may need to lock back down if coronavirus cases spike, the CDC is warning.

“If cases begin to go up again, particularly if they go up dramatically, it’s important to recognize that more mitigation efforts such as what were implemented back in March may be needed again,” Jay Butler, the agency’s deputy director for infectious diseases, told reporters Friday.

However, the second wave of lockdowns could be accomplished on a local, rather than state-wide level, Butler said.

“Right now, communities are experiencing different levels of transmission occurring as they gradually ease up onto the community mitigation efforts and gradually reopen,” he said.

Beijing District in ‘Wartime Emergency’ after Virus Spike Shuts Market

A district of Beijing was on a “wartime” footing and the capital banned tourism on Saturday after a cluster of novel coronavirus infections centered around a major wholesale market sparked fears of a new wave of COVID-19, Reuters reported.

Concern is growing of a second wave of the pandemic, which has infected more than 7.66 million people worldwide and killed more than 420,000, even in many countries that seemed to have curbed its spread.

Chu Junwei, an official of Beijing’s southwestern Fengtai district, told a briefing on Saturday that the district was in “wartime emergency mode”.

Shutting Down US Economy is Not an Option

Despite the spike in US COVID-19 cases and the warning from the CDC, Treasury Secretary Steven Mnuchin told CNBC that shutting down the economy for a second time to slow COVID-19 isn’t a viable option as it will “create more damage.”

“We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin said in an interview with CNBC’s Jim Cramer on “Squawk on the Street.”

“And not just economic damage, but there are other areas and we’ve talked about this:  medical problems and everything else that get put on hold,” he added. “I think it was very prudent what the president did, but I think we’ve learned a lot.”

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

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.

Quadruple Witching Drives Stocks Higher, Equity Indices To Post The Second Day Of Gains, Viral Threat Continues To Spread

The U.S. Equities Move Higher

U.S. equity futures are higher in premarket trading after another volatile overnight session. Down more than 200 points at one time the Dow is now indicated to open higher by 3.20%. The NASDAQ leads early gains with an advance of 3.55% after hitting the limit-up 5% barrier earlier in the electronic session. The S&P 500 trails with a gain of 2.65% but is still moving higher for the second day. This makes the first two-day advance in many weeks and may signal a bottom has been reached.

Now that lawmakers are close to passing a sweeping spending bill to keep the U.S. economy afloat traders will be turning to the data. The first indications of economic impact came this week with the Empire State Index and jobless claims. The Empire State Index fell to -21.5%, its lowest recording ever, while jobless claims surged by 70,000. Next week, investors should be alert for another massive uptick in jobless claims that may top the 1 million mark.

Virus Threat Is About To Peak

California took bold steps to contain the spreading coronavirus. The governor ordered citizens to stay at home for two weeks effectively shutting the entire state down. Essential services will still function but business activity will come to a standstill. The number of cases is now over 253,000 globally with more than 10,000 dead. The U.S. has over 14,000 cases with 216 dead. Globally, more than 89,000 have fully recovered.

WTI is rebounding in early trading. The price for black gold is up more than 7.0% on Friday after posting its biggest one-day surge on Thursday. Thursday action has energy prices up nearly 20% at the high of the day. Although a good sign for the energy sector, prices remain low at $25.32 and are unlikely to stage a major rally until after the viral threat has passed. When the virus passes the demand for oil will spike and may cause WTI and Brent to move sharply higher.

Quadruple Witching To Drive Price Action

Today is quadruple witching, an event that may spark volatility in today’s trading. Quadruple witching is when equity options, single-stock futures, index options, and index futures expire on the same day. With the market having undergone a correction, and with high-volatility, there is likely to be a bit of unwinding for traders to do.

Stocks on the move include Tiffany, Nike, Tesla, and Walmart. Tiffany reported better than expected earnings on strong comps. LVMH, who recently agreed to buy Tiffany & Co, says it may choose to buy the stock on the open market. The stock is trading well below the agreed-upon price providing quite an opportunity for savings.

Nike got an upgrade from Bank of America. BoA analysts see the company gaining market share in the viral environment. Tesla says it will close two more plants in the fight to contain the virus. Musk says the company should have enough cash to weather the storm. Walmart, contrary to expectations for massive layoffs elsewhere in the economy, is planning to hire another 150,000 people to handle the viral-driven demand.

Volatility Rising, Labor Data Worsens Under Viral Impact, Analysts Fear Dark Times Ahead For Wall Street

Equity Markets Whipsaw In Overnight Action

The U.S. equity futures whipsawed in overnight action but did not trigger a limit-up or down event. The Dow Jones Industrial Average was down more than 3.0% in the earliest electronic trading, turned positive in the early AM hours, and then fell back to negative territory before the open of the session.  At last check, the major indices are all down about -2.5% but that could change at any time. Price action is driven in part by fear, in part by hope, and in part by forced liquidations in margin accounts. So far, the S&P 500 has shed a little more than 30% putting many levered accounts deep into the red.

Ray Dalio, head of Bridgewater Associates, estimates the loss to corporate America over $4 trillion. To combat the effect, the FOMC has lowered its interest rate to 0.0% and initiated a number of liquidity facilities aimed at propping up business. The latest move is a backstop for money market ETFs and comes in tandem with an emergency move from the ECB. The ECB has maintained its interest below 0.0% for many years so its tools are limited. What they’ve decided to do is begin the Pandemic Emergency Purchasing Program. The PEPP is worth nearly $820 billion in bond purchases.

Markets On The Move

Shares of automakers are moving lower in early trading following massive losses on Wednesday. GM is down more than -4.0% in early Thursday trading, it fell more than 17% on Wednesday. The reason is major automakers are shuttering their plants at the request of the UAW. The shut down is scheduled for two weeks but may extend if the virus threat lingers. BMW reported earnings this morning and show strength leading up to the pandemic. The company reported a 7.6% increase in YOY revenue that will not be matched this year. Shares of the stock are up slightly in early trading.

Restauranter Darden Restaurants Inc reported this morning and beat on the top and bottom line. The company says comps were strong across all brands and helped by traffic and pricing. Outlook for the coming year is dark, the board cut the dividend, full drew-down its credit facility as a precautionary measure, and pulled guidance.

The Labor Market Catches Cold

The initial claims data shows a surprisingly sharp uptick in first-time claims. The analyst’s consensus was only 220,000 despite knowledge of viral-induced shutdowns so the 281,000 reported should not have been a surprise. In my view, the increase is less than expected but surely foreshadows high numbers in the weeks to come. The dollar continues to move higher and is now trading at three-year high levels.

Scared Markets Crash Again, Volatility At Record High, Airlines Need Bailout Or Disaster Looms

Equity Futures Trigger Limit-Down Circuit-Breaker

The U.S. equity markets rebound from the lowest levels in over a year Tuesday but the gains did not hold. Efforts to prop up the economy were not enough to satisfy investors running scared from uncertainty. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite all shed -5.0% in overnight electronic trading to trip the limit-down circuit-breaker once again. The trading in the S&P 500 ETF SPY is down about -6.0% and indicated a pause is likely at the open of today’s session.

Treasury Secretary Steven Mnuchin asked Congress for over $1 trillion aid on Tuesday. The money is intended to aid small businesses, individuals, and industries hurt worst by the viral-induced shutdown.  Part of the package will likely include checks mailed directly to U.S. citizens to help them navigate these troubled times. Mnuchin says that unemployment could hit 20% if Congress doesn’t act fast because many small businesses are already on the brink of collapse.

Virus Threat Still Spreading

The number of infected persons topped 200,000 on Wednesday. The good news is that China only reported 13 new cases showing that containment efforts can work. Italy is the hotbed of infection outside of Asia with over 2,500 infected. The U.S. has over 6,400 cases and 100+ dead from the illness.

Economists are estimated GDP growth could fall to only 3.0% for the Asia-Pacific region this year. The outlook includes a short, sharp contraction in the first and second quarters of the year followed by a rebound in the second half.

Energy prices are in freefall because of the viral threat and its impact on demand. WTI shed more than 6.25% in the early hours of the morning and is trading at a 20-year low. Energy companies around the world are scrambling to hoard cash and many of them will fail if prices don’t rebound soon.

Volatility At Record Highs, No Sign Of Recession In The Housing Data

The VIX retreat a bit in early morning trading but is still trading at the highest levels since 2008. At current levels, without some mind-bending good news, it will be weeks if not months before the market is fully calm again. Traders should expect the broad equities market to continue making large, wild swings in day to day trading action.

The economic data is still good and shows fundamental strength in the core U.S. economy. Housing Starts and Permits both fell from the previous month but there are mitigating factors. Both starts and permits for the previous month were revised higher to 13 or near-13 year highs. This month’s retreat leaves housing activities at the highest level since before the housing bubble burst. This activity will underpin the economy in 2020 and likely get a boost from the low-interest environment.

Futures Rebound, Mnuchin To Request Spending Package, Alarming Viral Threat Continues To Grow

Futures Trading Is Volatile In The Overnight Session

The U.S. futures are indicating a positive open on Tuesday following a volatile evening of trading. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are looking to open with gains in the range of 2.5%. Earlier in the session, trades on all three major indices hit their limit-up triggers of +5.0%. The moves come a day after the major indices posted their largest declines of the selloff. The Dow posted its third-worst decline ever while the NASDAQ set a record.

The S&P 500 is down about 30% from its most recent high and may be nearing a bottom. Another 3% or so will put the index at the lows of 2018 and what many traders consider critical support.  If the index moves below this level it could signal a much deeper decline for U.S. stocks.

Overnight, President Donald Trump tweeted the U.S. will support the industries hurt worst by the virus. This morning’s news includes rumors Treasury Secretary Steve Mnuchin will ask Congress for an aid package worth $850 billion. If passed, the bill would provide emergency funding for key industries as well as U.S. workers.

The Threat To U.S. Economy Is Spreading

The number of cases globally has risen to over 170,000. The number of cases in the U.S. now tops 4,280 with over 70 dead. All 50 states report a growing number of cases and intensifying efforts to control the spread. Businesses like McDonald’s are closing their dining rooms while ramping up take-out services. eCommerce giant Amazon says it needs to hire 100,000 new workers to meet the rising demand.

Shares of Regeneron are moving higher in early trading. The company is speeding up the timeline for its Covid-19 therapy/vaccine and sees it entering human trials by late spring. Shares of the stock, among other healthcare equities, have been holding up well during the crisis and moving higher by 10% today.

Retail In Focus This Morning

Retail sales were reported this morning and show a net-decline in sales for February. The headline figure came in at -0.5% versus an expectation for increase. At the core-level, retail sales are down but the YOY comparisons are much better. YOY, retail sales are tracking 4.3% higher than last year. Sales for the three-month period ending February 2020 are up 4.9% from last year.

In stock news, retailer Land’s End reported this morning. The seller of specialty outdoor clothing reported a 9.4% increase in revenue that beat consensus estimates. Shars of the stock are moving lower despite the beat due to the worsening outlook for discretionary spending.

Panic Selling Grips Market, Futures Trigger Circuit Breakers, Coronavirus Spread Threatens Global Economy

Panic Selling Sends Equities Down 10%

The U.S. futures are indicating a sharply lower open on Monday morning as panic begins to grip the market. The futures all fell more than 5.0% triggering circuit breakers that only allow trades above the -5.0% cutoff limit. The SPY, an ETF that tracks the broad market S&P 500, becomes a better gauge of the market in this circumstance, it is down about -9.0%. At this level the SPY will trigger a 15-minute pause at the open, if it falls more than -10% it will trigger another circuit breaker.

The fall is due to the coronavirus. The number of cases has risen to near 170,000 globally with rising death tolls worldwide. There are now 3,775 cases in the U.S. with 69 dead. Large portions of the U.S. economy are being shut down in an effort to contain the spread. States of emergency exist at the national and state levels that include a shut down of most public school systems. Shortages exist in many product verticals as prepping and hoarding for an extended period of “social distancing” begins.

Stimulus Abounds

The threat to global economies is very real and highlighted by moves made by several central banks in the overnight session. The FOMC began with another emergency preemptive rate cut, this time over 100 bps, bringing the U.S. benchmark to 0.0%. This is the lowest level since 2015 and includes the resumption of $700 billion in QE purchases. The Bank of Japan and RBA both engaged stimulus efforts following the move.

The IMF made headlines this morning. The IMF says it will make it’s $1 trillion loan capacity available to aid ailing nations during the crisis. Market activity perked up on the news but did not sustain a rebound. Futures were back to the lows of the session soon afterward. On the economic front, the Empire State Manufacturing Survey came in at -21.5 for March and the lowest level since 2009. Analysts had expected a reading closer to 3.5.

Stocks On The Move

Shares of Apple are down -11.0% but not the hardest hit. Apple says it will close all of its U.S. stores to fight viral impact. The company estimates its China closures could impact revenue by 10% in the 1st quarter. This shut down could impact revenue another 10% over the course of the 1st and 2nd quarters this year. Airlines are falling the worst, down -10% to -15%, after capacity schedules were slashed.

Later this week traders will be looking for some important EPS announcements from retailers as well as retail sales figures. Reports are due from consumer staples giant General Mills as well as a host of retailers. Guess, Five Below, Cato and Tiffany are likely to report misses and give negative virus-related guidance.

Equity Markets Are Rebounding, The Circuit Breakers Sound Alarm Again, Expect Volatility In Friday 13th Trading

Equities Rebound On Friday the 13th

The U.S. equities are in rebound mode once again. Traders are scooping up bargain stocks in earnest even though bear market conditions have set in. Yesterday’s action saw the largest single-day declines in over a decade and left the S&P 500 down more than 25%. Today’s action has the Dow Jones, S&P 500 and NASDAQ up 5.3% to 5.65% but traders should expect volatility. Today is Friday the 13th and there has been a full moon, two triggers for market psychology that should not be discounted.

Early action saw the futures indicating a loss of nearly 700 points for the Dow. Positive news from Capitol Hill sparked a reversal that sent the blue-chip index up more than 1,100 points. The rebound was so strong it triggered the market circuit breakers for the third time this week but this time to the upside. Yesterday, talks between Democrats and Republicans appeared to break down on the subject of economic stimulus. This morning, the word is most differences have been resolved and a deal is close at hand. When and if announced such a deal could send the indices up to trigger the second circuit break at 7%.

Stimulus Actions Are Spreading Faster Than The Virus

The number of cases continues to grow globally although China appears to have peaked. Apple reports it is opening 42 of its branded stores, a sign the threat is largely passed. In the meantime, central banks around the world are scrambling to shore up financial systems to aid economic activity during the crisis.

The FOMC increased its repo operations on Thursday, today word from the Bank of Norway and Bank of Korea offered further support for battered markets. The Bank of Norway cut its key rate by 50 basis points while the Bank of Korea indicates it may do the same.

In the U.S., the signs of an economic slowdown are growing. What investors need to remember is the slowdown is only occurring in certain industries. Travel and tourism remain the most heavily impacted and that impact is growing. The NBA, NCAA, and NHL have all canceled seasons and major events the would normally drive in billions in consumer spending.

Earnings Season Mostly Over

The 4th quarter reporting season is all but over. Today’s news includes a report from Oracle that shows business was still strong in the first two months of 2020. The company beat on the top and bottom line due to strength in the cloud segment. Shares are up 10.5% in early trading. Overstock.com is also up sharply in early trading, +14%, after it reported solid earnings and outlook. Gap Stores, another retailer in transition, beat top and bottom-line earnings, provided positive guidance, and saw shares rise 7.5%.

The Bear Market Begins, Travel Ban Spooks Traders, Scare Of Viral Fallout Is Rising

Stocks Futures Plunge After Trump Speech

The U.S. stock futures are down hard in early Thursday trading. The futures indicate a loss of nearly -4.75% for most major indices. The overnight plunge is so severe it triggered a market-circuit breaker for the second time this week. If the market opens at the current level it will only have to fall another -2.5% to trigger another halt to trading. The circuit breakers are built into the market to help traders reassess the situation and calm the market down. So far they are working as intended, there is no sign of a breakdown in market mechanics.

Last night President Trump made a lackluster speech from the Oval Office. He says they are fighting the spread of the virus, that there is nothing to worry about, and that travel from Europe is restricted for the next 30 days. The news did not appease investors looking for concrete details on the President’s plans. Trump has floated the idea of a payroll tax-cut but so far there is no word on what is actually to be done. The FOMC meets next week and is expected to deliver a 50 to 74 basis point cut to the benchmark rate.

The Virus Is Still Spreading

The global count of infected topped 124,000 in the overnight hours, the total dead is 4,589. Governments around the world are cracking down on travel and public gathering in an attempt to slow the spread. Regardless of their success, the restrictions will have a negative impact on economic activity. The impact could become bad enough to send the world into a recession. The silver lining is that fundamental conditions remain bullish, once the virus threat passes economic activity should be able to rebound.

Italy continues to crack down hard in its attempts to slow the virus. Italy closed all stores except pharmacy and grocery stores effectively shutting the economy down until further notice. In the U.S., the NBA announced it would suspend its season indefinitely after a player tested positive for the sickness.

Economic Data Is Still Favorable

Today’s economic calendar includes jobless claims and PPI, both remain favorable to the market. Jobless claims fell for first and second-week claims showing not near-term impact from the virus yet. The PPI figure came in weaker than expected, probably due to supply chain hiccups, at -0.6%. Economists had been expecting about half that. The YOY read is also light at 1.3%.

Stocks on the move include Dollar General. Dollar General beat on the top and bottom line in the 4th quarter. The company delivered strong comps and will likely do so again because of viral-driven hoarding. The risk for this and other companies is a viral-induced supply chain hiccup as most products are made overseas.

U.S. Stock Futures Crash Again, Viral Threat Growing, Stimulus Uncertainty Raises Fear

Stock Futures Fall In Early Trading

The U.S. stock futures are down again in early trading. The spreading coronavirus has severely damaged economic stability and traders are looking for the government to step in. On Tuesday, President Donald Trump floated the idea of a 0% employment tax through the end of the year, raising the market’s hopes. His staff caused confusion stating no decision had been made and uncertainty about what might be done was still present.

The number of cases of coronavirus continues to spread worldwide. The last WHO report has the number of cases at over 113,000 globally but that number is sure to have changed in the last 24 hours. The U.S. counts more than 1,000 cases with reported outbreaks in more states.

Italy and the UK both got a shot in the arm from their governments but the news was bitter medicine. Italy says it will increase spending to aid the economy while hinting at new travel restrictions. In the UK, the BOE slashed rates by 50 basis points in an emergency move that has GBP backed trading pairs on the move. The FOMC meets next week and is expected to deliver another 50 to 75 basis point cut to its benchmark rate.

Economic Data Is Strong

The economic data remains strong. Today’s news includes mortgage data and the Consumer Price Index. On the housing front, the number of refinancing request jumped 79% from the previous as interest rates hit record lows. The average homeowner is expected to save thousands over the life of their loans and that savings should support consumer spending.

The CPI came in at 0.1% month to month and 2.3% up from last year, both reads slightly better than expected. At the core level, ex-food and energy, CPI rose 0.2% and 2.5% making the 24th month of gains greater than 2.0%.

Stocks On The Move

Travel related stocks are among today’s hardest hit. The travel and leisure complex is taking a big hit. Mounting travel restrictions that have them cutting back on flights and occupancy outlook. Air carriers American, Delta, and Jetblue are all down about -2.0% in early trading. Cruise ships Norwegian Cruise Lines and Carnival are down -4.5% and 7.0%. Carnival is down the most because of its international presence and high exposure to the virus.

Oil is down again in early trading and having an impact on the energy complex. WTI is down about -4.5% following Tuesday’s rebound and indicates more downside is likely. The yield on the Ten Year Treasury, an indication of market fear, is still trading below 1.0%. It is likely to remain there until this threat has passed.

Global Equities Rebound Sharply, Trump Offers Stimulus Package, Coronavirus Risks Remain High For Markets

Stock Futures Point To Higher Open On Wall Street

The U.S. equity futures are indicating a sharply higher open on Wall Street. The move comes a day after the broad market S&P 500 posted its biggest one-day loss in a decade. The SPX and Dow Jones are both up about 3.5% in early trading while the NASDAQ leads with a rise of 3.6%. Markets are buoyed by Trump’s pledge to pass some form of economic relief package although there are no details forthcoming. Trump suggested a payroll tax cut that would impact both employer and employee income, a press conference is expected later today.

Today’s bounce is good news for the market. The S&P 500 was down as much as 19% from its high on Monday putting it close to bear-market territory. The caveat is that volatility remains high and coronavirus risk is still present so more selling may ensue. The major indices had been up as much as 5.0% in early premarket trading but gave up some of their gains as market participants digested the day’s news.

Coronavirus Risk Is Still High

The total number of cases of the Covid-19 virus has topped 115,000 and still growing. The number of deaths reported globally is ow over 4,000. In the U.S., there are 755 known cases with 26 dead. Cruise ships remain a major risk to travelers as another enters quarantine due to the virus. Iran is still a hotbed of infection, the number of cases grew by 18% overnight with a rising death toll. Iran is the hardest hit in the Middle East and faces a severe economic impact from travel and work restrictions. Italy is also proving highly vulnerable to the disease.

The airlines are rising in today’s action although the number of flight reductions continues to grow. Delta, United and American Air Lines are all up between 3% and 6% on hopes of a rebound later in the year. Delta announced this morning it would cut its international flights by 25%, domestic by 19%, while American and United make similar cuts. Delta’s CEO says he expects the crisis to worsen. The CEO of Southwest is taking a 10% pay cut to offset the decline in bookings but the move is mostly show.

Stocks News Impacting Markets

Shares of Dick’s Sporting Goods are up more than 11% after reporting earnings. The sporting goods company beat comps as foot traffic and ticket averages came in above consensus. The company also provided positive guidance for 2020. Shares of Stitch Fix are moving in the opposite direction after beating estimates. The company says promotional activity is hurting its revenue outlook and lowered full-year guidance.

Alarming Crash In Equity Markets, Oil Markets Crash, The Coronavirus Is Virus Still Spreading

Equities Crash After OPEC Cuts Its Oil Sales Price

The global equities markets crashed in overnight Monday trading following news in the oil patch. Saudi Arabia has drastically cut its oil selling price for the next month sparking an all war with former partner Russia. The group labeled OPEC+ met last week to discuss what they might do to prop up oil prices this year. The group had a falling out on Friday that split the group and caused Saudi Arabia to change its tack. The leader of OPEC is now seeking to maintain market share in a low-price environment and will put pressure on suppliers around the world.

The risk to the market from low oil prices is wide-ranging. At face value, oil producers will have a much harder time making money. Digging a little deeper, it will become clear the U.S. shale-oil producers will not be able to operate because $28 oil is far below the break-even price. The consensus for near-term oil prices has fallen to near $20 so there is a high risk for the shale oil industry. Looking at oil, energy, and earnings from the broader perspective, the decline in prices means the S&P 500 will likely see average EPS growth come in negative for the year.

Equity Indices Down More Than -7.0%

The major U.S. equity indices fell more than -7.0% in early Monday trading. The move triggered a market circuit-breaker that will pause trading for 15 minutes. Safe have assets like gold and U.S. treasuries are also on the move but in the opposite direction. The yield on the ten-year treasury hit a new all-time low below 0.50% while spot gold moved up through resistance to set a new seven-year high.

The coronavirus is still having a negative impact on trading which is adding to today’s worry. The number of cases globally is now over 110,000 with more than 3,800 dead. States New York, California, and Oregon have all declared states of emergency and more are sure to follow. Norwegian Cruise Lines announced this morning it was relaxing its cancellation policy. Customers can now cancel up to 48 hours before their cruise and get a 100% credit for a future date.

Rate Cuts Ahead

The FOMC is now expected to cut interest rates by 75 basis points at the March meeting. The meeting is scheduled for next week and will be a high-impact event. This week, the economic calendar is fairly light. There is no data today and only a few the remainder of the week. Economic releases include the NFIB small business index, CPI, PPI, initial claims, and consumer sentiment.

Equities Plummet, Virus Fear Is Rising Fast, The Earnings Outlook Is In Jeopardy

The U.S. Futures Are Down Hard

The U.S. futures are down hard in early trading as rising fear of economic fallout from the coronavirus grips the market. The Dow Jones and S&P 500 are both down about -2.80% in early trading while the NASDAQ Composite leads with a loss of -3.10%. The NASDAQ Composite is getting hit hardest due to its overweigthing in technology and internationally-based companies.

The global tally of infected has now topped 100,000 and rising. The number of dead was last reported at 3387 with 12 dead in the U.S. New York revealed their case tally has risen to 12 while California continues to crack down with its state of emergency. Internationally, Egypt is the latest to report new cases as viral spread in the Middle East accelerates. Iran and Italy remain the hardest hit outside of Asia but they may change any day.

The risk from the virus isn’t the illness itself, it is the impact on activity. The illness is less harmful than flu although much more contagious. At the current rate, we can expect it to have moved through the world’s population within the next two to three months. Until then, traders are eyeing impediments to businesses that will have an impact on future earnings.

Stocks On The Move

Today’s action is being led by travel and leisure stocks as well as the energy sector. Shares of air-carrier American Airlines and Connoco-Phillips are both down more than -5.0% while Las Vegas Sands trails at only -4.5%. Starbuck’s is the first to warn of an impact to 2nd quarter earnings but not the last. With earnings pressure extending to the 2Q, we can be sure the sell-off isn’t over yet.

In other news, Costco reports they are “beyond busy” as stockpiling and hoarders ramp up demand. Customers are preparing for extended stays at home and the possibility of mandatory quarantines.

The Labor Data Is Strong

Today’s data is dominated by a blow-out labor report. The employment situation summary, also known as the NFP, came in at a mind-bending 277,000 and 100,000 above consensus. Along with that, the unemployment rate fell to 3.5%, wages rose 0.3% MOM, and upward revision to previous data padded the report.

Regardless the data, the dollar continues to fall. The DXY is down hard over the past few days due to the FOMC’s surprise rate cut. The FOMC is expected to cut rates again as soon as two weeks at the March meeting in an effort to fight the economic impact of the virus.