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Top 5 Things to Know in the Market on Tuesday, June 9th

2020-06-09 14:33:08

1. U.S. is in recession - official

The economic downturn in the U.S. triggered by the social distancing measures adopted to combat the Covid-19 virus has been officially declared a recession, which started in February - bringing to an end the longest period of economic expansion in U.S. history.

The National Bureau of Economic Research, the body which acts as the arbiter for determining U.S. business cycles, said late Monday "the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions."

The designation has not come as a surprise, after all U.S. gross domestic product fell 4.8% annualized in the first three months of the year and the next quarter is expected to be much worse. At the same time, the unemployment rate rose from a record low of 3.5% in February, hitting 14.7% in April and 13.3% last month.

This puts the spotlight on the two-day meeting of the Federal Reserve, concluding Wednesday, for signs of more stimulus ahead.

2. Global output faces 5.2% coronavirus hit in 2020

The Covid-19 outbreak may be past its peak. New York City, regarded as the epicenter of the outbreak in the U.S., started the slow process of reopening for business on Monday.

But it’s important not to forget the damage caused, with over seven million having been infected and more than 400,000 dead to date.

And there’s also the economic impact.

Global economic output is set to contract by 5.2% in 2020 due to the coronavirus, the World Bank said on Monday, in its latest Global Economic Prospects report.

Advanced economies are expected to shrink 7.0% in 2020, the report said, while emerging market economies will contract 2.5%, their first since aggregate data became available in 1960.

These forecasts predict a deeper slowdown than the estimates released in April by the International Monetary Fund, which predicted a 3.0% global contraction in 2020.

3. Stocks set to open lower, after bull market confirmation

U.S. stock markets are set to open lower, with investors set to take profits after Monday’s gains confirmed a bull market in the tech-driven Nasdaq Composite index.

By 6:30 AM (1030 GMT), theDow Jones 30 futures contract was down 316 points or 1.2%, while the S&P 500 futures contract was down 1% and the Nasdaq 100 futures contract was 0.6% lower.

The Nasdaq has climbed over 40% from its March 23 bottom, making a new high and confirming a bull market, which is considered to have begun at the index's low, just 16 weeks after the coronavirus outbreak pushed the U.S. economy into recession.

The S&P 500 also ended in positive territory for the year, but remains about 4.5% below its record high close, while the Dow is about 6.7% below.

Stocks in focus Tuesday include spirits maker Brown Forman (NYSE:BFb), which is expected to report fiscal fourth-quarter earnings of 28 cents a share on revenue $695 million. The company makes liquor brands including Jack Daniel's and Finlandia. And online pet food and grooming product supplier Chewy (NYSE:CHWY) is scheduled to report profit of 18 cents a share on revenue of $1.5 billion.

4. Oil prices retreat; More losses ahead?

Crude oil prices have sold off Tuesday, retreating from the three-month highs achieved after a group of major producers agreed to extend a deal on record output cuts to the end of July.

And more losses look likely going forward, according to Goldman Sachs.

"This rebound has been fueled by a macro risk-on backdrop and a policy induced Chinese crude import binge, yet fundamentals are turning bearish," Goldman said.

With demand expectations running ahead of a more gradual and still uncertain rebound, the oil market faces a big challenge of normalising a billion barrels of excess inventories, analysts at the bank wrote.

The investment bank expects Brent prices to reach $35 per barrel in the short term.

By 6:30 AM ET, U.S. crude futures were down 2.3% at $37.30 a barrel, while the global benchmark Brent was down 1.8% at $40.06 a barrel.

5. Vroom to start trading after IPO

Online used-car seller Vroom (NASDAQ:VRM) is set to start trading Tuesday after pricing its initial public offering at $22 a share late Monday, above its previous range of $18-$20.

The company is offering about 12.25 million shares, for a market capitalization of around $2.48 billion.

Vroom has not been profitable since its start in 2012, but is looking to benefit from the shift to online shopping accelerated by the pandemic. That said, the car industry, as a whole, has been suffering and Vroom has already had to cut prices and its profit margins have shrunk.

Investors will be watching this deal carefully, given the week is expected to see eight IPOs launched, raising about $2 billion,

Top 5 Things to Know in the Market on Monday, June 8th

2020-06-08 18:50:10

1. ECB head Lagarde faces questions

All eyes will be on European Central Bank head Christine Lagarde later Monday as she testifies, via satellite link, before the European Parliament Economic and Monetary Affairs Committee.

Lawmakers will have the opportunity to ask questions about the reasons behind the ECB’s larger-than-expected increase in its emergency bond buying stimulus program. Investors will be looking for clues on whether the ECB plans to ease monetary policy even further.

The ECB padded its emergency bond-buying fund by another 600 billion euros ($680 billion) at its meeting last Thursday, and it’s easy to see why given the depth of the region’s slowdown illustrated by the almost 18% slump in Germany’s industrial production data in April.

However, she could face some tricky questions over this additional stimulus after the German top court ruling that the European Central Bank abused its power in earlier bond purchases.

2. Talk of mega-healthcare merger

AstraZeneca (NYSE:AZN), the British-Swedish pharmaceutical giant, approached U.S. rival Gilead Sciences (NASDAQ:GILD) about a potential tie-up last month, according to a report by Bloomberg over the weekend.

Such a deal would result in the biggest healthcare merger to date, creating a partnership worth around 200 billion pounds ($250 billion).

The two companies are among a host of firms racing to develop a vaccine for Covid-19, while Gilead’s antiviral drug Remdesivir is seen as a leading treatment for patients suffering from the effects of the virus.

Both companies have declined to comment on the report, but doubts exist as to the likelihood of this tie-up now as AstraZeneca’s valuation could soar given its collaboration with researchers at Oxford University put it at the forefront of the search for a vaccine.

3. OPEC+ agrees extension to record production cuts

Crude oil prices pushed higher Monday after a group of major producers agreed to extend a deal on record output cuts to the end of July.

Sentiment in the oil market has changed sharply since the Organization of the Petroleum Exporting Countries and its allies, including Russia - collectively known as OPEC+ - agreed in April to cut supply by 9.7 million barrels per day during May-June to prop up prices that collapsed due to the coronavirus crisis.

On Saturday, the group agreed to extend the deal by a third month to the end of July.

The extension had been delayed by the worries of some of the bigger producers, namely Saudi Arabia and Russia, that other countries were playing fast and loose with compliance.

Iraq and Nigeria exceeded production quotas in May and June, but they have agreed to slightly deeper cuts to compensate for their failure to the original agreement.

Investor sentiment also got a boost from Sunday’s Chinese customs data which indicated that the country’s crude imports soared to 11.34 barrels a day, 15% more than April, a positive indication of China’s recovery from the Covid-19 virus.

By 6:30 AM ET, U.S. crude futures were up 0.8% at $39.68 a barrel, while the global benchmark Brent was up 1.2% at $42.82 a barrel.

4. Stocks set to open higher, continuing recent gains

U.S. stock markets are set to open higher, continuing to push higher as optimism grows about the rebounding of the economy from the shutdown needed to combat the Covid-19 virus.

By 6:30 AM (1030 GMT), the Dow Jones 30 futures contract was up 141 points or 0.5%, while the S&P 500 futures contract was up 0.4% and the Nasdaq 100 futures contract was up 0.1%.

The Dow Jones Industrial Average and S&P 500 cash indices are now trading at 3.5 month highs, having posted gains for three straight weeks, while the NASDAQ Composite posted an all-time intraday high on Friday.

Friday’s shock gain in payrolls has boosted hope of a V-shaped economic recovery. Adding to the positive news is that New York City, seen as the epicenter of the virus outbreak in the U.S., is to begin its phase one reopening Monday.

This all puts the spotlight on the U.S. Federal Reserve's monetary policy announcement on Wednesday.

5. Musk doubles down on SpaceX

Elon Musk is in the spotlight again.

Fresh from his SpaceX company launching astronauts for the first time just a few days ago, Musk has urged his SpaceX employees to accelerate progress on its next-generation Starship rocket “dramatically and immediately,” in a company-wide email seen by CNBC.

Musk’s goal is to make Starship fully reusable, becoming more like a commercial airplane with short turnaround times between flights, making it more commercially viable.

This is all very exciting, but is there a danger Musk loses focus regarding his Tesla (NASDAQ:TSLA) electric car company?

Economic Calendar - Top 5 Things to Watch This Week

2020-06-07 16:37:19

1. Fed meeting
The U.S. central bank's monetary policy announcement on Wednesday will be the first since April when Fed Chair Jerome Powell said the U.S. economy could feel the weight of the economic shutdown for more than a year.

Investors will be keen to hear the Fed's views on the economic outlook in the wake of Friday’s U.S. employment report which showed that the economy unexpectedly added jobs in May after suffering record losses in the prior month.

The report offered the clearest signal yet that the worst of the downturn triggered by the coronavirus crisis is probably over, fueling a rally in stocks and a selloff in Treasuries.

2. Steepening yield curve
Friday’s U.S. jobs report added fuel to a dramatic sell-off in U.S. government bonds from their recent record highs, pushing the yield curve to its steepest level since March.

The steepening -- when longer-dated yields rise faster than short-dated ones -- signals a brighter growth outlook. But too fast a rise in borrowing costs can strangle the economic recovery.

While the Fed could introduce yield-curve control measures to target short-term rates, fund managers say they expect yields will need to rise significantly to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the economic rebound can support the rise in yields.

3. U.S. economic data
This week’s calendar also features updates on U.S. jobless claims, a key indicator of the health of the economy, along with consumer price inflation and consumer sentiment.

Claims have declined since hitting a record 6.8 million in late March, falling below 2 million last week for the first time since mid-March. The report suggested the worst is over for the labor market, combined with Friday’s nonfarm payrolls report.

Meanwhile, CPI should continue to ease given the lack of demand in the economy, while the University of Michigan’s consumer sentiment index should continue to rise amid the re-openings and rally in stock markets.

4. Lagarde testimony, euro zone data
On Monday, ECB President Christine Lagarde will testify, via satellite link, before the European Parliament Economic and Monetary Affairs Committee. Lawmakers will have the opportunity to ask questions about the reasons behind the ECB’s larger-than-expected increase in its emergency bond buying stimulus program.

On the data front, Germany is to release industrial production data for April on Monday followed by France and the wider euro zone later in the week. Germany, the euro area’s largest economy, is facing the prospect of its deepest recession since World War Two as the coronavirus pandemic takes its toll, even though lockdown restrictions are now being eased.

5. China growth fears
Chinese trade data on Sunday indicated that global demand for goods produced by the world’s second-largest economy remains weak.

Chinese exports contracted in May as global coronavirus lockdowns continued to devastate demand, while a sharper-than-expected fall in imports pointed to mounting pressure on manufacturers as global growth stalls.

The data could reinforce expectations that China may not have any growth this year. Investors will be watching to see how bullish stock markets will react as the unstoppable force of Chinese production runs into an impregnable global downturn.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Thursday, June 4th

2020-06-04 20:07:21

1. Initial jobless claims set to fall below 2 million

The U.S. gets its weekly check on the state of the labor market at 8:30 AM ET (1230 GMT), with the market looking for further evidence that the situation is improving after the pandemic-driven collapse in April. The numbers are essentially the most up-to-date data the market has on the job situation, given that both ADP’s and the Labor Department’s payrolls reports this week only cover the period through the middle of the previous month.

Analysts expect 1.8 million initial jobless claims for last week, which would be the first time it had fallen below 2 million since late March. The continuing claims number is expected to fall by 1 million to just over 20 million.

The U.S. will also publish its trade balance data for April, which will likely show continued drops in both exports and imports.

2. ECB expected to add stimulus; Germany approves 130 billion euro support package

The European Central Bank is expected to increase the size of at least one of its bond-buying programs at its regular governing council meeting, providing further support to a Eurozone economy that it expects to shrink by at least 8% this year.

Analysts expect the bank to add another 500 billion euros to its 750 billion euro ($840 billion) Pandemic Emergency Purchase Program, which it has used to cap sovereign spreads and ensure overall market liquidity since March. Some also think it possible that the ECB will expand its asset purchases to include junk-rated corporate debt, following the Federal Reserve’s step in that direction.

The decisions are due at 7:45 AM ET, with President Christine Lagarde’s press conference following at 8:30 AM.

The euro zone got an indirect boost overnight as the German government agreed a 130 billion-euro stimulus package that will include cuts on value-added tax but no wholesale car scrappage scheme. The euro edged lower to $1.12, having risen ahead of the news.

3. Stocks set to open lower, consolidating after strong gains

U.S. stocks are set to open lower, consolidating after a breakneck rally driven largely by the fear of missing performance benchmarks as cyclical stocks recover from the oversold levels of March.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 128 points or 0.5%, while the S&P 500 Futures was down 0.5% and the Nasdaq 100 Futures contract was down 0.2%.

The ongoing relief rally has brought the Nasdaq to within a couple of percentage points of its all-time highs, on perceptions that the pandemic has accelerated the economy’s structural long-term shift towards online and remote business. That didn’t stop Cloudera (NYSE:CLDR) stock from falling sharply in after-hours trade on Wednesday after its results missed elevated expectations.

Of interest after the bell will be results from retailer Gap (NYSE:GPS) and chipmaker Broadcom (NASDAQ:AVGO).

4. U.S. protests continue as Esper, Mattis rebuke Trump

A second night of relative calm in U.S. cities was overshadowed by a public rupture between President Donald Trump and both the serving Defense Secretary and his predecessor.

Defense Secretary Mark Esper disagreed on Wednesday with Trump’s threat to invoke the 1807 Insurrection Act and send combat troops to patrol American cities, saying the National Guard was better placed to restore order on the streets.

Meanwhile, James Mattis, who served as Defense Secretary from 2017 to January 2019, wrote in The Atlantic that “We must reject and hold accountable those in office who would make a mockery of our Constitution.” He wrote that the majority of protesters were seeking Equal Justice Under Law, as provided for by the constitution, and that “we must not be distracted by a small number of lawbreakers.”

A Monmouth University poll carried by the Wall Street Journal suggested that Trump had slipped further behind his presumptive rival in November’s election, Joe Biden, in the course of the week.

5. Oil slips as Russia protests Iraqi quota-busting

Oil prices slipped as Saudi Arabia and Russia put pressure on quota-cheats to put their houses in order before committing to an extension of the current deal on output restraint.

By 6:30 AM, U.S. crude futures were down 1.5% at $36.72 a barrel, while Brent futures were down 0.7% at $39.51.

An initiative to move up next week’s scheduled ‘OPEC+’ meeting appears to have run into the sand, given the failure of Iraq to agree to rein in its overproduction. Saudi Arabia and Russia, the two most important players in the OPEC+ bloc, have signalled they only want to extend the current deal by one month, rather than the three months that some in the market had hoped for.

Top 5 Things to Know in the Market on Wednesday, June 3rd

2020-06-03 20:20:59

1. Markets rally, dollar eases on recovery hopes, quieter protests

Global markets rallied as some of the heat went out of the protests in the U.S., allowing investors to focus again on the pace of economic reopening.

By 6:30 AM ET, the Dow Jones 30 futures contract was up 0.7% and closing in on the 26,000 level for the first time since March, while the S&P 500 futures contract was up another 0.5% at just under 3,100. The Nasdaq 100 futures contract was up 0.4%.

The appetite for risk was also visible in foreign exfchange markets, where the dollar index fell to its lowest in nearly three months, due largely to gains by the euro and sterling. Money is also flooding out of the dollar and into emerging currencies, with the Russian ruble, Indonesian rupiah, and Mexican and Chilean pesos all gaining more than 3% against it in the last week.

2. Surveys show economic improvement in May in China, Europe

Economic data from the developed world still looks grim, although higher-frequency releases continue to strengthen hopes that the economy has bottomed. That contributed to another blow-out 10-year government bond auction in Italy, which attracted 85 billion euros in bids.

European purchasing manager indices released earlier confirmed a modest bounce from April’s lows, although they remained deep in contraction territory.

China’s Caixin services PMI, however, returned to signalling growth, with an index reading of 55. At the same time, Australia’s economy – often seen as a rough proxy for Chinese demand -- confirmed it had fallen into recession for the first time in 30 years with a second straight contraction in the first quarter.

3. ADP (NASDAQ:ADP) to release private payrolls survey; factory orders data also due

Payrolls processor ADP will release its monthly report on hiring in the U.S. economy at 8:15 AM ET. Analysts expect the economy to have shed another 9 million jobs through the middle of May, after a disastrous April in which over 20 million jobs were lost.

The numbers come a day ahead of the more closely-watched weekly data for jobless claims, and the official government labor market report for May on Friday.

Before then, there will be weekly numbers for mortgage applications, and later in the day, there will also by the May ISM non-manufacturing survey and factory goods orders data for April.

4. Zoom lives up to the hype

Zoom Video Communications (NASDAQ:ZM), the teleconferencing company that has come to symbolize the structural changes being forced upon the economy by the Covid-19 virus, lived up to its hype with its first-quarter results after the bell on Wednesday.

The company reported revenue rose 169% from a year earlier, while net profit was $27 million, rather than the $2 million expected. Its top-tier premium customer numbers rose by 90%, while total paying customers rose four times.

The only fly in the ointment was a drop in the company’s gross margin due to higher costs for all the data it needs. Margins fell from 80% to just under 70%, still respectable by the standards of the times.

Zoom Video stock rose 0.2% in premarket trading, having risen some 25% in the last week to value the company at $59 billion.

5. London oil futures back at $40 on hopes for extended output cuts

Crude oil prices hit their highest in three months as speculation strengthened that OPEC, Russia and other major exporters will extend their current deal on output restraint for another three months, rather than starting to taper it as originally envisaged.

The current deal takes 9.7 million barrels a day in output off world markets, but that number was supposed to ease to 7.7 million at the end of the month through the end of the year.

Algeria, which holds OPEC’s rotating presidency, has proposed moving up a meeting planned for next week to this Thursday. However, newswire reports suggest opposition from Russia and others, due to suspicions that some signatories are already producing above their quotas.

U.S. crude prices rose 0.1% to $36.84 a barrel, while Brent Futures rose as high as $40.52 a barrel before falling back to trade at $39.39.

The U.S. releases official crude inventory data at 10:30 AM ET. The American Petroleum Institute’s data on Tuesday indicated a slight draw in stocks last week.

Top 5 Things to Know in the Market on Tuesday, June 2nd

2020-06-02 20:06:54

1. U.S. cities hit by more violence

U.S. cities were rocked by another night of protests triggered by the killing of an unarmed black man by Minneapolis police. Two separate autopsies conducted on George Floyd came to the conclusion of homicide, but offered different causes.

The protests were marked on the one side by outbreaks of looting, and on the other by violence against both media and peaceful protestors as well as violent ones. President Donald Trump threatened in a call with state governors to send in combat troops if they failed to bring the situation in their states under control.

New York Governor Andrew Cuomo said New York would face another curfew tonight after widespread violence and looting in lower Manhattan overnight. The protests threaten to derail the reopening of much of the U.S. economy, which analysts have repeatedly said depends heavily on consumer and business confidence rebounding.

2. China goes slow on farm goods purchases

Chinese government officials told major state-run agricultural companies to pause purchases of some U.S. farm goods including soybeans, Bloomberg reported, in a move that appears to undermine Beijing’s previous promises to increase purchases under the ‘Phase 1’ trade deal signed in January.

State-owned traders Cofco and Sinograin were ordered to suspend purchases while Chinese officials also told state-buyers to halt American cotton and corn imports, Bloomberg reported. It also noted that some pork purchases have been delayed.

The move is the latest development to reflect worsening relations between Beijing and Washington after the enactment of a new security law that the U.S. said ended the autonomy and freedoms of Hong Kong.

3. Stocks set to open higher, eye on reopenings

U.S. stock markets are poised to open higher, shrugging off the almost nationwide rioting and accompanying ballyhoo.

Markets are focusing more on the lifting of restrictions on the normal operation of businesses as efforts to mitigate the Covid-19 pandemic get a helping hand from the start of summer.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 178 points, or 0.7%, while the S&P 500 futures contract was up 0.6% and the Nasdaq 100 futures contract was up 0.6%.

One stock in focus later will be Apple (NASDAQ:AAPL), which has cut prices for its iPhones in China in an attempt to revive flagging sales in the wake of the pandemic.

4. Germany pulls Europe higher with new stimulus package

The German stock market hit a three-month high, pulling European markets in its wake, amid reports that the government will debate a further stimulus package to the economy Tuesday.

Local media reports put the size of the package at between 80 and 100 billion euros (($89 to $111 billion), and said much of it will be aimed at the auto industry, which supports over 12% of the country’s jobs directly and indirectly.

Elsewhere in Europe, the EU and U.K. begin their last round of talks on trading relations after the current post-Brexit transitional phase lapses at the end of the year. The U.K. government has said it won’t seek an extension of the transition, which has kept conditions for businesses effectively unchanged since the U.K. formally left the bloc earlier this year.

5. API oil inventories due as Russia, OPEC mull extension of output deal

Oil prices surged again on hopes that OPEC and Russia will extend their agreement on output restraint, which is due to lapse at the end of June.

The Russian government is scheduled to discuss the issue at a meeting Tuesday, according to local media reports, with at least one suggesting that Russia’s preference is for an extension of only one month.

In the U.S., the American Petroleum Institute will report its weekly data on U.S. inventories of crude and refined products at 4:30 PM ET as usual.

By 6:30 AM, U.S. crude futures were up 2.6% at $36.40 a barrel, while Brent futures were up 2.9% at $39.42.

Top 5 Things to Know in the Market on Monday, June 1st

2020-06-01 20:30:23

1. U.S. on edge; protests turn violent

What started as a peaceful demonstration against police killings of black people after the death of George Floyd as he was restrained by Minneapolis police officers has turned into violent protests that have ravaged cities from Philadelphia to Los Angeles and flared near the White House.

Pressure is mounting on President Donald Trump, as he faces accusations of inciting racial violence as he appeared to call on his supporters to counter-protest outside the White House. He has also said the U.S. will designate the far-left Antifa group a 'terrorist organisation'.

The turmoil was a fresh setback for the economy which was only just emerging from a downturn akin to the Great Depression. Following poor data on spending and trade out on Friday, the Atlanta Federal Reserve estimated economic output could drop a staggering 51% annualised in the second quarter.

2. Trump pulls back from the edge with China, for now

Financial markets tuned in nervously to President Trump’s response Friday to China’s decision to impose a national security law on Hong Kong. In the end, the president said he would strip Hong Kong of its special status with the U.S., but didn’t renounce the recently signed trade deal with China, as the market had feared.

Still, relations between the two economic superpowers are particularly tense, and such a move can’t be ruled out in the future, especially as the U.S. presidential election draws nearer.

Bloomberg reported Monday that Chinese government officials have told major state-run agricultural firms to pause purchases of some American farm goods, including soybeans, as Beijing looks to evaluate the recent escalation in tensions between the two nations.

“If Trump wants to increase his chances of beating Biden in November, then he needs to turn even tougher than China than he currently is,” said analysts at Nordea, in a research note.

3. Stocks set to open lower; Goldman turns more positive

U.S. stock markets are set to open a little lower, after posting a positive month in May. Continuing disturbances throughout the country on top of heightened tensions with China will likely weigh on the market ahead of the release of ISM manufacturing PMI data.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was down 26 points or 0.1%, while the S&P 500 futures contract was down 0.2% and the Nasdaq 100 futures contract was down 0.4%.

Still, on a more positive note, Goldman Sachs has abandoned its call for another steep sell-off.

The investment bank has rolled back its prediction that the S&P 500 would slump to the 2,400 level -- over 20% below Friday’s 3,044 close -- and now see downside risks capped at 2,750. The U.S. equity benchmark could even rally further to 3,200.

“The powerful rebound means our previous three-month target of 2,400 is unlikely to be realized,” the strategists wrote. “Monetary and fiscal policy support limit likely downside to roughly 10%. Investor positioning has oscillated between neutral and low and is a possible 5% upside catalyst.”

In Asia, the benchmark Nikkei index gained 0.8%. In Europe, with Germany closed for a June 1 public holiday, the FTSE 100 in London and the CAC 40 in Paris both rose 1%.

4. ISM Manufacturing PMI on the data slate

This week will see little of Federal Reserve officials as they are now in the traditional blackout period ahead of their next policy meeting later this month, but there will be plenty of economic data to study.

Friday sees the important nonfarm payrolls release, but ahead of that comes ISM Manufacturing Purchasing Managers Index for May, at 10 AM ET.

This is expected to show an improvement in sentiment in the manufacturing sector, with the index expected to climb to 43.0 from 41.5 in April, as parts of the U.S. economy started to emerge from the lockdown.

However, an improvement isn’t a given. Nordea said, in a research note, that it wouldn’t be a surprise to see an even weaker reading in May, citing a disappointing Weekly Economic Index release from the New York Fed as well as the April index having not dropped as much as had been expected.

The news from Europe wasn't particularly encouraging, as although manufacturers in the euro zone appear to have passed their nadir, activity is still contracting sharply.

5. OPEC meeting this week?

Oil prices have been on the tear of late, with the front-month Brent and WTI contracts posting their strongest monthly gains in years in May as crude production by the Organization of Petroleum Exporting Countries and its allies, a grouping known as OPEC+, dropped to its lowest level in two decades.

To solidify this change in sentiment, Algeria, which currently holds the OPEC presidency, has proposed that an OPEC+ meeting planned for June 9-10 be brought forward to this Thursday.

One of the topics of discussion will likely be an extension of the current cuts of 9.7 million barrels a day for between one to two months. Under the current deal, the group is scheduled to reduce the scale of cuts to 7.7 million barrels a day from July.

“A shorter period may make an extension more palatable to the Russians, who were not keen to extend current cuts through until the end of this year, which was reportedly suggested by other members of the deal,” said ING, in a research note to clients.

Economic Calendar - Top 5 Things to Watch This Week

2020-05-31 20:12:04

1. U.S. unemployment seen soaring to near 20%
Friday's U.S. jobs report is expected to show that the unemployment rate rose to 19.7% last month with employers forecast to have cut 8.25 million jobs, compared with the record 20.5 million jobs lost in April.

While some encouraging signs in the employment picture have emerged in recent weeks as some workers rejoin jobs with businesses starting to reopen in the second half of the month, these changes are unlikely to be reflected in the May data.

Any positive surprise, however, is likely to be cheered by stock market bulls eager to grasp at signs of a rebound from the coronavirus induced economic slump.

2. Jobless claims, ISM data
While Federal Reserve officials are now in the traditional blackout period ahead of their next policy meeting in June the calendar this week features ISM manufacturing data Monday, Thursday’s jobless claims report and reports on factory orders and private sector hiring.

In the euro zone investors will be looking at figures on German factory orders for April while the UK calendar has the final manufacturing PMI on Monday and then the final services PMI on Wednesday.

3. U.S.-China standoff
The standoff between the worlds two largest economies over Beijing’s new security legislation for Hong Kong, which investors fear could erode the city's freedoms, looks set to continue this week.

U.S. President Donald Trump has vowed to end Hong Kong's special status if Beijing imposes new national security laws on the on the Asian financial center, but China's state media has pushed back, saying this would hurt the United States more than China.

Whether Trump goes so far as to scrap his Phase 1 trade deal with China or merely takes some symbolic steps around sanctions and visas for Hong Kong citizens could determine how long the latest global stock market rally will last.

4. ECB to boost stimulus program
While on the face of it the announcement of the 750 billion euro EU plan to prop up economies hit by the coronavirus pandemic has eased some pressure on the ECB, officials are still expected to unveil fresh stimulus on Thursday.

The EU recovery fund will take time to set up and will likely face hurdles on the way and the ECB is burning through its emergency asset purchases, which will likely run dry by October - unless expanded.

The ECB is widely expected to announce a 500 billion-euro ($555 billion) increase to its Pandemic Emergence Purchase Program and extend is duration until mid-2021.

The central bank will also publish updated economic projections which could confirm President Christine Lagarde’s assessment that the bloc’s economy is in the midst of a much-deeper downturn than initially believed.

5. Brexit talks
Another round of Brexit talks get underway on Tuesday ahead of the June 18-19 EU summit by which time London needs to make up its mind about asking for an extension to the transition agreement.

There's not much time left until the December 31 Brexit deadline, when the two sides will part ways - with or without a trade deal in place.

Negotiators have not made much progress and the EU has urged Britain to make a bigger effort and be more realistic about what it can achieve in talks.

The resulting uncertainty has pinned sterling close to its lowest levels in almost 30 years. And as if a potentially messy Brexit was not enough, the British currency is also battling with the prospect of negative interest rates and a prolonged recession.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Wednesday, May 27th

2020-05-27 21:27:12

1. Yuan falls to nine-month low

The dollar hit its highest level since September against the Chinese yuan as events threaten to escalate the political conflict between the U.S. and China. The yuan fell as low as 7.1773 in the offshore market, which is less tightly controlled by Beijing – within 0.5% of last September’s record low.

The House of Representatives is set to vote on a bill Wednesday that would sanction Chinese officials for human rights violations in the western – mainly Muslim - province of Xinjiang. The bill, which has already passed the Senate, would raise U.S. pressure on China without adding immediately to the economic pressure of a simmering tariff war.

The vote comes after two days of often violent skirmishes between protesters and police in Hong Kong against a new security law that would make it easier for Beijing to clamp down on opposition there.

2. Euro breaks $1.10 as EU proposes $825 billion recovery fund

The European Commission laid out its proposals for a 750 billion-euro ($825 billion) European Recovery Fund that greatly expands the ability of the EU to borrow against its own budget resources.

The Commission intends to distribute two-thirds of the fund as grants, rather than loans, in what represents a big step towards a more centralized European budget, with formalized transfers of wealth between member states. Its plans still face opposition from at least four member states – the Netherlands, Austria, Finland and Sweden – but has the crucial support of Germany, the biggest contributor to the bloc’s budget.

The euro broke through $1.10 for the first time since the end of March in response to the news, on perceptions that it will remove fat tail risks from eurozone member states such as Greece and Italy, who no longer seem economically strong enough to grow out of their current debt problems.

3. Stocks set to open higher; Chinese markets fall again

U.S. stocks are set to open higher again, extending a rally on Tuesday that was driven by increased faith in the strength and speed of the recovery from the Covid-19 lockdowns.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up another 347 points, or 1.4%, while the S&P 500 Futures contract was up 1.2%. With cyclical stocks increasingly returning to favor, the Nasdaq 100 Futures again underperformed with a 0.8% gain.

European stocks were also higher on the back of the European Commission’s proposals. The Stoxx 600 rose 0.8% to its highest in nearly three months.

However, mainland Chinese markets and the Hong Kong Hang Seng both fell again, amid the negative newsflow out of the two former British colonies.

4. Business surveys to give reality checks to rally

The U.S. markets will get some more up-to-date reality checks in the course of the day, with the Johnson Redbook retail survey at 8:55 AM ET and regional business surveys for May from both the Richmond and Dallas Federal Reserve Banks at 10 AM and 10:30 respectively.

The Fed’s own Beige Book survey of business conditions then comes out at 2 PM ET.

In between those events, the St. Louis Fed President James Bullard will speak at 12:30 PM.

5. Oil consolidates ahead of API data

Oil prices are consolidating, as the unrest in Hong Kong and the political rumblings between the U.S. and China prompt a little caution, after a week of sharp gains.

By 6:30 AM ET, U.S. crude futures were down 1.0% at $34.01 a barrel, while the international benchmark Brent was down 1.4% at $35.65 a barrel.

At 4:30 PM, the American Petroleum Institute will publish its weekly survey of U.S. crude inventories. Data published earlier in the week by the consultancy Seevol suggest another big draw on crude stocks ahead of the Memorial Day weekend.

Elsewhere, the International Energy Agency said in a report that it expects investment in the U.S. shale sector to fall by 50% this year in response to the earlier price collapse and the uncertain outlook for a recovery.

Top 5 Things to Know in the Market on Tuesday, May 26th

2020-05-26 20:18:34

1. Stocks, currencies, commodities rise, havens fall as virus recedes

There’s a broad risk-on move in global markets as institutional investors scramble to react to signs that the worst of the coronavirus has passed in the U.S. and Europe.

Treasury bonds, gold and other havens – notably the dollar – are all down, while industrial commodities, emerging market currencies and equities are almost all higher.

Over the weekend, Japan lifted its national state of emergency, while Spain announced its tourism sector – one of Europe’s largest – would reopen from July. German press reports suggest the country will drop its travel warning from next month, after already agreeing in principle with its neighbors over a reopening of borders for non-essential travel.

2. Pound rallies as government undermines its own lockdown rules

The pound strengthened as expectations grew that the government will be forced into lifting lockdown measures, amid public outrage at a senior government advisor who flouted the rules that he himself had argued for.

Prime Minister Boris Johnson has refused to fire his senior aide Dominic Cummings, the architect of the successful Vote Leave campaign in the 2016 Brexit referendum, who drove over 250 miles while both he and his wife were ill with the coronavirus, defying government instructions banning non-essential travel.

Separately, the Office for National Statistics said on Tuesday that some 47,000 people had died of the virus, nearing the 50,000 that was the government’s worst-case estimate in April.

Sterling rose by 1.1% against the dollar and by 0.5% against the euro, helped also by reports that the EU was softening its position in the ongoing talks over post-Brexit trading relations.

3. Stocks set to surge at open; consumer confidence eyed

U.S. stocks are set to open with a bang on Tuesday, caught in a wave of optimism over economic reopenings in the U.S. and Europe.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 498 points or 2.0%, while the S&P 500 was up 1.9% and the Nasdaq 100 contract was up 1.8%.

The market will get a reality check at 10 AM ET with the publication of the Conference Board’s consumer confidence index for May. Confidence plunged to a record low in April as tens of millions of Americans lost their jobs in response to lockdown orders across the country.

Data released earlier showed the analogous indicator in Europe’s largest economy, Germany, rising from April’s low, albeit not by as much as expected.

4. WHO warns of second wave

Despite the exuberance shown in the northern hemisphere as the virus recedes, the World Health Organisation in refusing to sound the all-clear.

The UN-backed body warned on Monday that a second wave of the virus is more than possible if discipline on social distancing is relaxed too soon.

“We cannot make assumptions that just because the disease is on the way down now that it's going to keep going down,” WHO executive director Mike Ryan said.

The comments come after a Memorial Day weekend which generated scenes of crowded beaches at popular U.S. holiday spots, where few holidaymakers appeared to be wearing masks.

5. Oil gains but struggles to make new highs; supply cut extension eyed

Oil prices gained but struggled to make new post-Covid highs even as equities and metals marched higher.

By 6:30, U.S. crude futures were at $34.08 a barrel, up 2.5% on the day, while Brent futures were up 1.4% at $36.04.

Reports earlier suggested that Russia’s government is meeting with national oil companies later to coordinate an extension of the supply cuts agreed last month with OPEC and other major exporters. The cuts have been one element of a sharp rebalancing of the oil market in the last two weeks, along with recovering fuel demand.

Data on the U.S. market from the American Petroleum Institute will only be published on Wednesday due to the Memorial Day holiday. Further afield, there were fresh signs of a recovery in demand as India allowed domestic flights to resume.

Top 5 Things to Know in the Market on Monday, May 25th

2020-05-25 17:21:56

1. Hong Kong protests flare up again

Protesters took to the streets of Hong Kong in force to oppose the introduction of a new security law that they say threatens the foundations of the city’s liberties and privileges. Police responded by using tear gas, water cannon and pepper spray to disperse the protesters, making over 100 arrests.

The demonstrations came a day after the U.S. Commerce Department added 33 more Chinese entities to a blacklist stopping U.S. firms from dealing with them. It alleged they were complicit in human rights violations in the mainly Muslim western province of Xinjiang. China expressed “strong dissatisfaction” as analysts warned of a further drift towards a new cold war between the two powers.

Chinese stocks were mixed but the dollar rose another 0.1% against the yuan in Hong Kong to over 7.15.

2. Spain tries to rescue Europe's tourist season

Signs of lockdown easing in Europe came thick and fast over the weekend, with Spain – one of the countries worst hit by the Covid-19 pandemic - announcing it would reopen its beaches and hotels to foreign tourists from July.

The news offers one of Europe’s most popular vacation destinations the chance to salvage something from a summer season that had already been largely written off. Travel and hotel stocks soared across the continent, with Spain’s biggest hotel company Melia Hotels (MC:MEL) rising by nearly a quarter.

Elsewhere, Japan also lifted its nationwide state of emergency. Italy, meanwhile, reopened most of its gyms and swimming pools. France is due to update on the next phase of reopening by the middle of the week

3. Stock markets closed for Memorial Day; Futures higher on reopening news

With the U.S., U.K., Indian and Singaporean stock markets closed for public holidays, it’s been a relatively quiet session in global stocks so far, in which the prospect of economic reopenings has battled with concern over U.S.-China tensions for the upper hand.

By 6:30 AM ET (1030 GMT) , the Dow Jones 30 futures was up 224 points or 0.9%, while the S&P 500 futures and the Nasdaq 100 futures contract were also both up 0.9%. The European benchmark Stoxx 600 was up 0.8%, while Japan’s Nikkei rose 1.7% and Korea’s KOSPI rose 1.2%.

4. German business confidence shows signs of life, despite recession

Economic indicators are also starting to show signs of life in Europe as the continent moves into the second half of a quarter that is widely expected to mark the low-point for the economy.

The closely-watched German Ifo business climate index rebounded to 79.5 in May from a record low of 74.2 in April, driven entirely by a recovery in expectations. One company planning for better times is airline Lufthansa, which said it will ramp up services in June, aiming to have 20% of its planes flying by late June.

Businesses’ assessment of their current conditions worsened on the month, however, defying hopes for a stabilization.

Earlier, data had confirmed that Germany had met the technical definition of a recession already in the first quarter, with gross domestic product shrinking by 2.2% after a 0.1% decline in the final three months of 2019. Ifo economist Klaus Wohlrabe said the think-tank still expects a drop of more than 10% in German GDP in the second quarter.

5. Hertz files for chapter 11, Tuesday Morning may be next

The chapter 11 drumbeat continues. Car rental firm Hertz Global Holdings (NYSE:HTZ) filed for bankruptcy protection after the close on Friday, with debts of some $19 billion.

The company, backed by activist investor Carl Icahn, had been largely unable to use its fleet of 700,000 vehicles in the past three months as anti-Coronavirus lockdowns spread across the world.

Separately, The Wall Street Journal reported that retailer Tuesday Morning intends to file for chapter 11 protection on Tuesday, joining other home-goods retailers Pier 1 (NYSE:PIR) and Art Van Furniture, as well as department stores Neiman Marcus and JC Penney (NYSE:JCP), all of whom have been forced into similar steps by the pandemic.

Economic Calendar - Top 5 Things to Watch This Week

2020-05-24 22:14:32

1. Covid-19 vaccine hunt heats up
Governments and investors are focusing their hopes on a vaccine as it’s unlikely economic activity can resume fully without one.

So the race is on and it has already driven up prices for some pharmaceutical stocks. Hopes for a treatment have sparked outsize rallies in the shares of companies such as Moderna (NASDAQ:MRNA) and Inovio Pharmaceuticals (NASDAQ:INO).

AstraZeneca (NYSE:AZN) has vaulted into the position of the most valuable British company after receiving a U.S. pledge for up to $1.2 billion for its experimental vaccine.

The U.S. also has vaccine development deals with Johnson & Johnson (NYSE:JNJ) and Sanofi (PA:SASY). But many others companies, both large and small, are in the race: Imperial College, Gilead Sciences (NASDAQ:GILD), Roche, China’s CanSino Biologics and India’s Glenmark to name just a few.

2. Flare up in U.S.-China trade tensions
With the global economy in an unprecedented downturn, fears over the prospect of a renewed trade conflict between the worlds two largest economies are difficult to discount.

In the past week, U.S. President Donald Trump has ramped up his rhetoric against Beijing over its handling of the pandemic, the Senate passed a bill that could result in barring some Chinese companies from listing shares on U.S. stock exchanges and a retirement-savings plan for federal workers delayed plans to invest in some Chinese companies.

China’s proposal for a tougher national security regime in Hong Kong looks set to open a new venue for Sino-U.S. tension, with the U.S. already warning of a tough response.

3. U.S. data, Fed view on economy
After Monday’s Memorial Day public holiday, the U.S. calendar is set for a busy week. Thursday’s weekly jobless claims report continues to be the highlight and will indicate whether there is any let up in layoffs as states continue efforts to reopen their economies.

Fed Chair Powell will appear in a webcast discussion on Friday to discuss the state of the economy and the central bank's efforts to stabilize it. The Fed publishes its Beige Book on Wednesday and revised figures on U.S. first quarter growth will show if the economy suffered a bigger hit than initially reported. There will also be reports on consumer sentiment, durable goods and personal spending.

4. Pivotal week for euro zone economic response plan
Clashes in the euro zone over how to handle the economic impact of the COVID-19 crisis raised fears for the bloc’s future, but a Franco-German proposal aimed at helping the worst-hit states represents a pivotal moment. The markets want to see details so all eyes will be on the European Commission this Wednesday when it presents its pandemic recovery plan.

Other events to watch this week include German Ifo data on Monday, which is expected to show that German companies remain pessimistic and what are expected to be some subdued inflation numbers for May.

European Central Bank President Lagarde and Chief Economist Philip Lane are both due to speak this week and they will likely reiterate the message that more action from governments in the form of fiscal stimulus will be needed to get the bloc’s economy back on track.

5. NYSE floor to reopen, retail earnings wind down
The New York Stock Exchange trading floor is set to partially reopen after the Memorial Day holiday on Tuesday, over two months after it shut down amid widespread measures to control the spread of the coronavirus.

First quarter earnings season is continuing to wind down with retailers again the main companies reporting this week. Costco (NASDAQ:COST), Dollar General (NYSE:DG), Nordstrom (NYSE:JWN), Ulta Beauty (NASDAQ:ULTA) and Burlington Stores (NYSE:BURL) are among some of the companies reporting earnings.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Friday, May 22nd

2020-05-22 20:16:05

1. China signals HK crackdown

China signalled an imminent crackdown on dissent in Hong Kong with a draft proposal for a new security law for Special Autonomous Region.

The move threatens to revive pro-democracy protests in the former U.K. colony, which had ebbed at the worst of the coronavirus pandemic but had started to pick up again in recent weeks.

It also threatens a further deterioration of relations with the U.S.: President Donald Trump promised retaliation if Hong Kong’s existing privileges were ended, while the U.S. Senate proposed a bill, with bipartisan backing, threatening sanctions on officials who implement any crackdown.

The Hang Seng stock index fell 5.6%, while mainland Chinese indices fell over 2% and the yuan weakened.

2. Beijing drops its growth target for 2020, hitting oil and metals prices

The second major development out of the annual National People’s Congress in Beijing was that the Communist Party dropped its official target for Gross Domestic Product growth this year, the first time it has done so in 30 years.

The shift in communication was taken as a warning that the economy will take longer than thought to recover from the coronavirus pandemic (around 100 million people are still locked down in China’s north-eastern regions after signs of a fresh wave of infections).

Industrial commodity prices – ripe for some profit-taking after a strong week - took the news particularly badly. U.S. crude futures fell 6.0% by 6:30 AM ET (1030) to $31.89 a barrel, while copper futures fell 2.2% to $2.38 a pound and nickel futures fell 1.7%.

3. Stocks set to open lower on Chinese news

U.S. stocks are set to open lower on the back of the news out of China, amid concern that Beijing has resigned itself to worsening relations with the U.S. and that last year’s trade war will return in a new and more potent form.

By 6:30 AM ET, the Dow Jones 30 Futures contract was down 78 points or 0.3%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 contract was down 0.4%. All three indices are still on course to end the week with gains of between 2% and 3%, and to achieve their highest weekly close since early March.

4. Nvidia's profit surges on demand for gaming, data-center chips; Alibaba's earnings eyed

Among the stocks in focus on Friday will be chipmaker Nvidia, which handsomely beat expectations in its quarterly report after the closing bell on Thursday.

The company’s earnings per share more than doubled on the year to $1.88, as pandemic-related lockdowns led to strong sales of gaming and data-center chips.

The company has profited from two of the major trends triggered by the pandemic, as lockdowns have driven redirected entertainment spending and accelerated the growth of demand for Cloud-based services from businesses, especially online retailers.

Alibaba’s earnings before the opening Friday will also be parsed for similar trends.

5. More job cuts coming down the line

The pandemic’s effects on other parts of the economy continues to be felt, however, with announcements of job cuts seemingly accelerating across the world.

The Japanese news service Kyodo reported Friday that Nissan plans 20,000 job cuts to bring supply into line with long-term expected demand.

IBM meanwhile announced it, too, would make permanent job cuts – the first under new CEO Arvind Krishna. While it didn’t say how many of its 350,000-odd workforce would go, The Wall Street Journal said it would be “several thousand”.

Hewlett Packard Enterprise also announced a $1 billion program of cost cuts on Thursday. It isn’t clear whether the company will be permanently cutting jobs as a result.

U.K. aero engine maker Rolls Royce (LON:RR) had announced 9,000 planned cuts on Wednesday.

Top 5 Things to Know in the Market on Thursday, May 21st

2020-05-21 20:49:26

1. Trump doubles down on China criticism

U.S. President Donald Trump showed no signs of easing back on his criticism of China, launching another stinging attack on its handling of the pandemic overnight, blaming Beijing for "mass worldwide killing."

In a series of tweets, he accused China of spreading “pain and carnage” around the world, and appeared to single out President Xi Jinping personally in saying that “it all comes from the top.”

While these attacks could be seen as being politically motivated, in offering up a scapegoat for the American electorate to blame for their economic hardship ahead of November’s presidential election, they are also fuelling concerns that the trade deal agreed last year between the two sides could crumble.

2. Virus tops five million

The number of people infected worldwide has now reached five million, according to data collated by Johns Hopkins University.

The grim milestone has been reached less than two weeks after the world hit the four million mark.

The number of deaths caused by the virus currently stands at over 328,000.

While a number of European countries and U.S. states are starting to scale back their social distancing measures, the pandemic has picked up speed in other parts of the world.

The World Health Organization warned that the coronavirus pandemic is a long way from being over, stating Wednesday the number of newly reported coronavirus cases worldwide hit a daily record this week with more than 100,000 new cases over the last 24 hours.

3. Stocks set to sell off

U.S. stock markets are set to open lower, amid concerns that the escalating Sino-U.S. tensions could lead to further trade disruptions.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was down 154 points or 0.6%, while the S&P 500 futures contract was down 0.6% and the Nasdaq 100 futures contract was down 0.6%.

In focus later will be Ford (NYSE:F), after the car manufacturer had to shut down two separate factories because employees tested positive for Covid-19. Both plants - one in Chicago and the other in Dearborn, Michigan - restarted only on Monday after suspending production for about two months because of health concerns.

AstraZeneca (LON:AZN) will be watched after it said it had concluded the first agreements for at least 400 million doses of the University of Oxford's Covid-19 vaccine and has secured total manufacturing capacity for one billion doses so far and will begin first deliveries in September 2020.

Best Buy (NYSE:BBY) is set to continue the retail sector reporting season, offering up its quarterly earnings before the open.

4. Jobless claims on the data slate

Investors will focus on the weekly jobless claims figure, at 8:30 AM ET (12:30 GMT), with economists looking for a dip from last week, but a slight one as companies are still forced to shed jobs.

Claims for first-time unemployment benefits are expected to come in at 2.4 million, compared with nearly 3 million the week before, according to forecasts compiled by Investing.com. Continuing claims are expected to have risen to nearly 24.8 million.

The economic data released earlier Thursday was downbeat.

In Asia, Japan’s trade data showed exports in April plunging 21.9% as compared with a year earlier, while a trade report from South Korea, a bellwether for global commerce, showed exports may be set to drop more than 20% in May for a second month.

The news from Europe was slightly more positive, showing economies crawling off the floor. The composite PMIs from both Germany and France rose in May from record lows the month before, but both measures remained in contraction territory.

5. Oil on record positive run

Oil prices have continued to push higher, heading for a sixth consecutive day of gains - the longest positive run in 15 months - after the U.S. government’s official data confirmed a drop in crude stockpiles.

EIA data showed Wednesday a draw of 4.98 million barrels last week, the most since December. This was very similar to the American Petroleum Institute estimate that crude stocks fell by 4.8 million barrels last week – the first decline since March and the biggest one since January.

Crude has risen more than 80% this month as production cuts have kicked in and demand has started to return.

Top 5 Things to Know in the Market on Tuesday, May 19th

2020-05-19 18:13:04

1. Powell, Mnuchin to testify before Senate

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will testify (remotely) before the Senate Banking Committee on their handling of some $500 billion of emergency lending programs.

The two are likely to face questions on whether, how, and under what circumstances existing programs could be expanded if necessary to provide further support to the economy.

The two men’s appearance comes less than a week after Powell suggested that the Federal Government may need to provide further fiscal stimulus. The administration and the GOP-controlled Senate have indicated they don’t think more stimulus is needed immediately, and have so far ignored the new $3 trillion package of measures passed by the Democrat-controlled House of Representatives last week.

2. Euro rises, spreads tighten on Franco-German borrowing plan

The euro strengthened and eurozone sovereign bond yield spreads tightened further after France and Germany took a big step towards expanding joint borrowing to fund the region’s coronavirus response.

Paris and Berlin had signaled for the first time on Monday they were prepared to allow a proposed 500 billion-euro ($546 billion) European Recovery Fund distribute grants, rather than loans, to the bloc’s weaker members. Under their plan, the funds would be raised through the EU’s budget, spreading the debt load across the region.

The proposals are tied to broader negotiations on a complex multi-year budget package, which will inevitably complicate the plan becoming reality. The Stoxx 600 succumbed to profit-taking, falling 0.9%.

Even so, the yield spread between Italian and German 10-year debt – a rough proxy for eurozone breakup risk – narrowed to its lowest in over a month, along with spreads of other countries from the eurozone’s southern periphery.

3. Stocks set to open lower

U.S. stock markets are also set to open a lower on profit-taking. That follows an exuberant reaction to what are still only preliminary test results for a possible vaccine, being developed by Moderna (NASDAQ:MRNA) Inc., to treat the Covid-19 virus.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was down 120 points, or 0.5%, while the S&P 500 futures contract was down 0.4% and the Nasdaq 100 futures contract was down 0.2%.

The market didn’t seem unduly upset by comments from U.S. President Donald Trump that he was taking hydroxychloroquine, an anti-malaria drug whose benefits he has repeatedly touted, as a preventive measure against Covid-19. There is no peer-reviewed medical evidence to suggest the drug is effective in preventing the vaccine, while the FDA has warned that it may increase the risk of death through heart disease.

4. Car sales collapse, joblessness soars in Europe

The challenge faced by the world’s auto industry was underlined starkly as European car sales fell 76% from a year earlier in April.

“With most showrooms across the EU closed for the entire month, the number of new cars sold fell from 1,143,046 units in April 2019 to 270,682 units last month,” industry body ACEA said. In Spain and Italy, the EU countries worst hit by the pandemic, sales fell by over 97%.

The U.K., which has registered more deaths from the pandemic than anywhere except the U.S., posted a similar decline. The U.K. also saw ongoing jobless claims jump by 70% in April to over 2 million.

Elsewhere, the German ZEW economic sentiment indicator improved sharply to 51 from 32 in May, although the sub-index for current conditions failed to improve as expected, falling to -93.5 from -91.5 in April.

5. Walmart, Home Depot's earnings due, along with housing market data

Walmart is set to report its quarterly earnings for three months through April, a period that will give a more complete reflection of the impact of lockdowns than the reports that only covered the first quarter of the calendar year.

Analysts expect revenue to have risen to $130.9 billion from $123.9 billion, thanks to stockpiling of essentials by consumers. Earnings per share are seen up less than 1% at $1.14.

Home Depot earlier reported its earnings for the quarter, missing expectations for earnings per share by nearly 10%.

National data on the housing market are due at 10 AM ET (1400 GMT), with both housing starts and building permits.

Top 5 Things to Know in the Market on Monday, May 18th

2020-05-18 21:28:35

1. Powell puts a rocket under gold

Federal Reserve chairman Jerome Powell told CBS that the U.S. economy should recover steadily through the second half of the year but warned that a full recovery may take until the end of 2021. He argued that for consumer confidence to return to its pre-pandemic levels, a successful vaccine will need to be widely available.

Powell also repeated that the Fed still has plenty of ammunition left to protect the economy but repeated the Fed’s opposition to negative interest rates.

His comments helped propel gold prices to a seven-year high overnight, as investors placed ever more bets on real – i.e. inflation-adjusted – rates staying low for a long period of time.

The short-term struggles of the world economy, meanwhile, remained apparent as Japan’s economy recorded a second-straight quarterly contraction, its first recession in over 4 years.

2. WHO annual meeting begins as Navarro targets China

The World Health Organization began its two-day annual meeting against a backdrop of mistrust and antagonism amongst its biggest members. The meeting will focus on the origins of and responses to the coronavirus pandemic.

However, the WHO has not invited Taiwan, which boasts the world’s most successful pandemic response, having recorded fewer than 500 confirmed cases and only seven deaths due to its aggressive testing and contact tracing. Taiwan is not a member of the UN body due to its lack of international recognition as a state. China, pointedly, has not dropped its opposition to Taiwanese attendance, for all that the island state might have something useful to tell the world.

Over the weekend, Peter Navarro, an economic advisor to the White House, had accused China of ‘seeding’ the pandemic by continuing to allow outbound flights to the rest of the world while it concealed its full knowledge of the Covid-19 virus.

3. Stocks set to open higher; Europe soars as short-selling bans are lifted

U.S. stock are set to open higher after a weekend in which the lifting of lockdowns across the developed world appeared to gather pace.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 357 points, or 1.5%, while the S&P 500 futures contract was up 1.5% and the Nasdaq 100 futures contract was up 1.2%.

In Europe, the benchmark Stoxx 600 index was up 2.0%, due not least to a sharp rise in mining stocks as investors placed bets on a rebound in industrial activity as well as on gold producers. A number of European regulators lifted the bans on short-selling that they had announced at the outbreak of panic in March.

Stocks in focus on Monday may well include Boeing (NYSE:BA), Citigroup (NYSE:C), Facebook (NASDAQ:FB), Disney (NYSE:DIS) and Bank of America (NYSE:BAC). The Saudi sovereign wealth fund has taken a stake in all of them, reports over the weekend said. Additionally, Goldman Sachs (NYSE:GS) stock will be under the microscope after Berkshire Hathaway (NYSE:BRKa) revealed it sold most of its position in the bank.

4. Oil rallies amid signs of rebalancing

Crude oil prices hit their highest since mid-March amid evidence of the market rebalancing, with gasoline demand recovering in major markets and with both official and private producers having shut in production in line with their public statements.

By 6:30, U.S. crude futures were up 7.3% at $31.67 a barrel, while the global benchmark Brent was up 5.8% at $34.37 a barrel.

Data from the private consultancy Seevol suggested that crude storage at the U.S. national hub in Cushing, Ok., had fallen by 5.5 million barrels on the week. If the figures are confirmed by American Petroleum Institute and government data over the next three days, belief in a rapid rebalancing of supply and demand could strengthen even further.

Elsewhere Monday, Total (NYSE:TOT) said it was pulling out of a deal to buy Occidental (NYSE:OXY) Petroleum’s assets in Ghana. Instead, it’s buying some gas and power assets in Spain, in another reflection of the energy industry’s changing priorities.

5. Sterling, gilt yields tank as Bank of England eyes negative rates

Sterling fell to its lowest since late March after the Bank of England’s chief economist Andrew Haldane told the Sunday Telegraph that the BoE’s policy-making committee is reconsidering the issue of negative interest rates.

The BoE had under the last governor, Mark Carney, rejected negative interest rates as ineffective, but Haldane said the bank is now looking at the issue “with greater immediacy”, given the sharpness of the economic contraction.

By 6:30, the pound was at $1.2130, up only marginally from an intraday low of $1.2085. U.K. government bond yields are now implying a high probability of the BoE taking that step: two-year Gilts now yield -0.04%.