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Top 5 Things to Know in the Market on Thursday, May 14th

2020-05-14 19:19:14

1. Global stocks follow U.S. down on second wave fears

Global stock markets tumbled, pulled lower by U.S. markets’ reaction on Wednesday to gloomy comments by Federal Reserve Chairman Jerome Powell on the outlook for the economy, and by signs of fresh outbreaks of the coronavirus in China and South Korea.

Europe’s benchmark Stoxx 600 fell 1.6% to a four-week low, with the U.K. FTSE 100 falling over 2% as the global concerns were compounded by fears of a looming trade shock when the post-Brexit transition period ends at the end of the year. Sterling also fell to a seven-week low against the dollar.

In Asia, meanwhile, Chinese stocks fell by around 1%, amid concerns that U.S.-China relations will be strained further by the pandemic fallout and the upcoming election campaign. President Donald Trump signed an executive order extending sanctions on Huawei through the end of next year late on Wednesday.

2. Jobless claims to slow but stay at painful high

Another 2.5 million people are expected to have filed initial claims for jobless benefits in the U.S. last week. If confirmed, that would represent the smallest number of initial claims since March, but would still be far from signalling any meaningful turnaround in the labor market.

Continuing jobless claims are expected to have risen to 25.10 million from 22.65 million last week, on course to push the nationwide jobless rate even higher.

Federal Reserve Chairman Jerome Powell noted on Wednesday that the job losses were hitting lower-paid segments of the workforce hardest. The Fed’s analysis showed that 40% of households earning less than $40,000 a year lost a job in March.

The Labor Department will release its figures as usual at 8:30 AM ET.

3. U.S. stocks set to open lower again

U.S. stocks are set to open mostly lower for a third straight day amid after Federal Reserve Chairman Jerome Powell’s comments on Tuesday.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was down 50 points or 0.2%, while the S&P 500 futures contract was down 0.1% and the Nasdaq 100 futures contract edged up 0.1%.

In particular focus will be Abbott Laboratories (NYSE:ABT), whose device that tests for the Covid-19 virus has reportedly been found to miss nearly half of positive cases. The prevalence of 'false negatives' means that many people suffering with the virus could continue to spread it through the community unchecked. Elsewhere, Swiss pharma giant Novartis (SIX:NOVN) warned that the race to develop a vaccine against the Covid-19 virus could take at least until the end of 2021.

4. Crude prices rise as IEA tones down the pessimism

Crude oil prices rose further after the International Energy Agency moderated its assessment of the supply-demand imbalance caused by the coronavirus pandemic.

By 6:30 AM ET, U.S. crude futures were up 4.6% at $26.46 a barrel, testing a new five-week high. The international benchmark Brent was up 3.6% at $30.25 a barrel.

The IEA said now expects oil demand to fall by an average 8.6% this year, slightly less than the decline it had previously forecast. The forecast follows data showing the first decline in official U.S. crude inventories since January last week.

Elsewhere, the Commodity Futures Trading Commission wrote to various exchanges on Wednesday warning them sternly that they were responsible for keeping trading orderly in the run up to the expiry of June futures contracts.

5. Uber-GrubHub deal still on

Uber Technologies' (NYSE:UBER) talks to acquire food delivery service GrubHub (NYSE:GRUB) and merge it with its own UberEats service are still on, according to The Wall Street Journal.

The WSJ reported that the two sides are now considering an exchange ratio of 1.9 Uber shares for each GrubHub share, after the ride-hailing company refused to pay the 2.15 initially demanded by GrubHub.

A merger would significantly ease competitive pressure in the U.S. delivery market for Uber, which is under pressure to stem losses at all of its operations. Both services have registered big increases in popularity as a result of lockdown measures that have closed restaurants across the country.

Top 5 Things to Know in the Market on Wednesday, May 13th

2020-05-13 18:22:19

1. Powell to speak after Trump chastisement; PPI eyed

Federal Reserve Chairman Jerome Powell will give an eagerly-awaited speech at the Peterson Institute in Washington at 9 AM ET (1300 GMT), a day after President Donald Trump agitated for the Fed to cut rates below zero to support the economy.

Half a dozen of Powell’s colleagues at the Fed have spoken so far this week and none has had a good word to say about negative rates. It would thus be a surprise if the chairman were to contradict a large bloc of fellow policy-makers.

However, the pressure on the Fed to do more isn’t going away. U.S. core consumer prices posted their first back-to-back declines in 38 years in April, and producer price inflation data due at 8:30 AM are also likely to show a steep drop in U.S. companies’ pricing power as demand collapses.

2. House Democrats publish $3 trillion spending package

Another factor putting pressure on the Fed is the apparent inability, or unwillingness, of Congress to put any further fiscal support in place in the near term.

House Democrats late on Tuesday unveiled a fresh package of economic support measures aimed largely at supporting state and local governments through the crisis, and also included a fresh round of direct checks to households.

The package, which carried a $3 trillion sticker price, was immediately dismissed by Senate Republicans. The administration, meanwhile, prefers for now to wait and see whether the states can reopen their economies successfully, The Wall Street Journal quoted White House advisor Kevin Hassett as saying.

3. Stocks set to open higher

U.S. stock markets are set to open higher, rebounding from their worst day since May 1, but still apparently range-bound until the U.S. economy can prove it’s past the worst of the pandemic.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 153 points, or 0.7%, while the S&P 500 Futures contract was up 0.6% and the Nasdaq 100 futures contract was up 0.7%.

European stocks, however, were down, playing catch up with Tuesday’s session in the U.S. and laboring under figures that showed the U.K. economy shrinking 5.8% in March. The STOXX 600 fell 1.4%, while the FTSE 100 fell 1.0%.

Asian markets bucked the trend, with Chinese equities all broadly advancing and India's Nifty 50 surging in response to Prime Minister Narendra Modi’s announcement late on Tuesday of stimulus package worth over 10% of GDP.

4. Freedom of movement returns to Europe

Germany said it will reopen its borders with France, Switzerland and Austria from June 15, lifting a ban on non-essential crossings by individuals.

The move comes against the backdrop of a steady improvement in the trend of new infections and deaths in most of Europe. Austria and France, in particular, had pressed to remove restrictions in time for the summer tourism season.

It’s a different story in China, where the city of Jilin in the north-east of the country has been locked down in response to a cluster of new cases.

5. OPEC report, EIA inventories data due as crude consolidates

The Organization of Petroleum Exporting Countries will release its monthly report on the oil market at around 7 AM ET with fresh estimates for global supply and demand for the rest of the year.

In addition, the U.S. government will release its weekly estimate of U.S. oil supplies at 10:30 AM ET.

Crude oil prices have eased off by nearly 1% overnight on the back of data from the American Petroleum Institute suggesting that U.S. stockpiles rose by more than forecast last week.

Elsewhere, International Energy Agency chief Fatih Birol said he expected oil demand to remain below 2019 levels for at least a year.

Top 5 Things to Know in the Market on Tuesday, May 12th

2020-05-12 19:22:21

1. Senate to hold hearing on reopening

The Senate will hear testimony from senior health officials – including Anthony Fauci, the country’s top expert on infectious diseases - on the implications of reopening the U.S. economy.

The hearing will take place via teleconference because both witnesses and senators are, in part, self-isolating after coming into contact with infected people.

The number of U.S. deaths fell for a fourth straight day on Monday to only 837, while the number of confirmed new cases also fell for a third straight day.

On Monday, President Donald Trump had said at a news conference that “we have prevailed” with regard to ramping up testing.

2. Global markets remain twitchy as mini-outbreaks flare

Global markets are still in cautious mode, afraid of the possibility of a second wave of infections after the discover of five new cases in Wuhan, China, and a new cluster of cases in South Korea linked to the nightclub district of the capital, Seoul.

In addition, Germany’s Robert-Koch-Institute said on Sunday that the reproduction rate of the virus had rebounded above 1 in the wake of lockdown restrictions being eased earlier in the month. The so-called r0 rate had fallen as low as 0.65 only last week but rebounded on an uptick of cases in slaughterhouses and care homes.

Elsewhere, Russian President Vladimir Putin has abandoned his nationwide lockdown even though the rate of new infections stayed above 10,000 for a 10th straight day. The lockdown has caused Putin’s approval ratings to plummet to their worst in over a decade, after exposing weaknesses in the country’s health system and social safety net.

3. Stocks set to open slightly higher; CPI, Fed speakers eyed

U.S. stocks are set to open modestly higher, amid a growing chorus from analysts and investors that the April relief rally had gotten ahead of itself.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 57 points or 0.2%, while the S&P 500 Futures contract and the Nasdaq 100 Futures contract were up in parallel. The three indices had been mixed on Monday.

The dollar, meanwhile, is strengthening after three top Federal Reserve officials each downplayed the likelihood of the Fed cutting the target fed funds range to below zero. Atlanta Fed President Raphael Bostic said negative rates were “one of the weaker tools in the toolkit”, while Charles Evans said he saw no use for them. CPI data for April at 8:30 will likely not change their view.

There will be a further barrage of Fed speeches starting with the St. Louis and Minnesota Fed Presidents James Bullard and Neel Kashkari at 9 AM ET, followed by Philadelphia’s Patrick Harker and top banking supervisor Randall Quarles at 10 AM.

Separately, the Fed will also start its flagged purchases of bond ETFs today.

4. Musk reopens Tesla plant

Elon Musk reopened Tesla’s plant in Fremont, daring Bay Area officials to arrest him.

The Tesla founder has expressed his frustration at the closure of the Fremont facility in increasingly forceful fashion in recent days, as Alameda County keeps the factory shut despite a broader relaxation of restrictions on manufacturing at the state level. Governor Gavin Newsom said he would defer to county officials.

The news comes after Tesla (NASDAQ:TSLA) stock hit its highest in over two months last week, supported by hopes of a revival in sales as the U.S. and European economies reopen.

5. Oil gains momentum after Saudi leads more output cuts

Oil prices resumed their recovery on the back of additional output cuts announced on Monday by Saudi Arabia, Kuwait and the United Arab Emirates.

The additional cuts will remove another 1.18 million barrels of oil a day from the global market from June 1, hastening the process of rebalancing a market still suffering from an unprecedented drop in demand. Saudi Arabia is cutting 1 million b/d, the UAE 100,000 b/d and Kuwait 80,000 b/d.

Elsewhere, BP (NYSE:BP) CEO Bernard Looney said the pandemic could bring forward the date when global oil demand peaks. Looney said he expected the impact on fuel demand to be long-lasting and, in some regards, permanent.

By 6:30 AM, U.S. crude futures were up 5.4% at $25.45 a barrel, while the international benchmark Brent was up 3.1% at $30.54 a barrel. The American Petroleum Institute will report its weekly analysis of U.S. oil supplies at 4:30 PM ET, as usual.

Top 5 Things to Know in the Market on Monday, May 11th

2020-05-11 20:06:52

1. Covid-19 in the White House

U.S. Vice-President Mike Pence missed a meeting with President Donald Trump at the weekend but is not in quarantine and will return to the White House on Monday, Bloomberg quoted a spokesman for Pence as saying.

Pence has tested negatively for the virus every day since his press secretary Katie Miller tested positive for the virus last week.

Two other members of the White House task force on Covid-19, headed by Pence, are self-isolating, while Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, is in a “modified” quarantine, according to reports.

The news comes after a valet for President Trump also tested positive for the virus last week. It comes against a mixed global backdrop: the U.K. said its lockdown measures will be relaxed slightly from Wednesday, while Disney's Shanghai theme park opened its gates again, but infection curves in countries from India to Russia and Brazil continued to rise steeply.

2. China promises more stimulus; car sales rebound

The Chinese central bank promised “more powerful” policies to counter the economic effect of the pandemic, indicating that the pressures on the world’s second-largest economy aren’t easing significantly, despite the anecdotal evidence that points to a gradual return to normal. However, the PBoC didn’t provide much detail of what those policies would be in a quarterly report published on Sunday.

There were strong signs of the authorities pushing liquidity out into the economy via the banking system in April. New loans rose by 1,700 billion yuan, compared to estimates of 1,300 billion, while M2 money supply and total social financing, the broadest measure of credit, also rose faster than expected.

China also posted its first year-on-year increase in auto sales in two years in April, with overall sales rising 5.5%.

3. U.S. stocks set to open lower; Tesla's lawsuit, sales in focus

U.S. stocks are set to open mostly lower on Monday amid unease at the mini-outbreak of the coronavirus in the West Wing, an uncomfortable reminder of the persistent risk of infection as the U.S. economy reopens.

By 6:30 AM ET, the Dow Jones 30 Futures contract was down 144 points, or 0.6%, while the S&P 500 futures contract was down 0.6% and the Nasdaq 100 contract was down 0.3%.

One stock likely to be in focus on Monday is Tesla (NASDAQ:TSLA), which is suing Alameda County in California for permission to reopen its only U.S. production plant in Fremont. Founder and CEO Elon Musk threatened over the weekend to relocate the plant to Texas, a move that would likely involve a costly if temporary disruption to production. Separately, Tesla also saw its Model 3 sales fall 64% in China in April.

4. Earnings season rolls on.

Earnings season is winding down but there are still a number of notable reports due in the course of the day.

Payments company Worldpay (NYSE:WP) and cell carrier Sprint Corp (NYSE:S) all report before the opening, along with hotel group Marriott, generic drug specialist Mylan, sports gear maker Under Armour and Coty.

IFF reports after the closing bell, along with mall owner Simon Property (NYSE:SPG) and Tencent Music Entertainment.

5. Fed speakers in focus amid negative rate speculation

With speculation on U.S. interest rates turning negative next year, there’ll perhaps be more attention than usual to two appearances from senior Federal Reserve policy-makers in the course of the day.

Atlanta Fed President Raphael Bostic is due to speak at 12 PM ET, while his Chicago counterpart Charles Evans will speak half an hour later. Their interventions come ahead of an eagerly-anticipated appearance by Fed Chairman Jerome Powell on Wednesday.

In addition to the PBoC, two members of the European Central Bank’s governing council – German board member Isabel Schnabel and Bank of France Governor Francois Villeroy de Galhau – both talked up the possibility of further monetary stimulus over the weekend.

Top 5 Things to Know in the Market on Friday, May 8th

2020-05-08 17:43:53

1. The worst payrolls number ever is coming

The Bureau of Labor Statistics will present the first monthly payrolls report to show the full impact of the lockdowns imposed in response to the coronavirus pandemic.

The U.S. economy is expected to have lost some 21 million nonfarm jobs in the month to mid-April, according to analysts polled by Investing.com. The figures will be released, as usual, at 8:30 AM ET (1230 GMT).

The freakish nature of the pandemic means that the report will throw up some odd-looking numbers: analyst point out that average earnings may spike, reflecting the fact that the job losses have been concentrated among more vulnerable, lower-paid workers. The jobless rate, meanwhile, will be colored by how many people are judged to have temporarily left the workforce by not even looking for a new job.

2. China, U.S. trade negotiators dial things down a little

Trade negotiators from the U.S. and China committed to implement the ‘phase 1’ deal agreed between the two countries in January, putting fears of a renewed trade war on the back burner – at least for now.

President Donald Trump had threatened earlier this week to abandon the deal if China – whose own economy has contracted sharply due to the pandemic – failed to buy the promised volumes of U.S. goods.

The two countries promised to enhance economic and public-health cooperation and create a favorable environment for implementing the agreement, Chinese state news agency Xinhua said.

Neither economy is well placed to absorb the reimposition of tariffs that would both choke off activity in China and raise final prices for American consumers.

3. Will the Fed go negative next year?

U.S. interest rate futures now imply that the market expects the Fed to cut official interest rates below zero next year, reflecting a sustained need for extraordinary levels of monetary support for an economy that should – by most forecasts – be bouncing back by then.

Fed funds futures traded as high as 100.025 in New York on Thursday, indicating expectations of a policy rate fractionally below zero. The yields on two- and five-year U.S. Treasury bonds have hit new new all-time lows overnight at 0.11% and 0.28%, respectively basis points. The dollar index fell by 0.2%.

The collapse in Treasury yields and expectations of a long period of expansive global monetary policy have been partly responsible for a rally in Bitcoin that took the cryptocurrency back above $10,000 for the first time in three months earlier. The rally was also supported by news that well-known hedge fund boss Paul Tudor Jones had taken a position in BTC futures, as well as by the impending slowdown in the creation of new bitcoin due to the so-called ‘halving’ of rewards for miners.

4. Stocks set to open higher

U.S. stocks are set to open higher, not least in response to the trade talks between the U.S. and China, even if they did little but generate some positive mood music for the weekend.

Expectations of more stimulus drove the Nasdaq Composite back into positive territory for the year on Thursday, and the Nasdaq 100 futures contract is indicating a further gain of 1.1% at the open. The Dow Jones 30 Futures contract and S&P 500 Futures contract are up in parallel.

European markets were also lifted by news of the rapprochement, albeit in reduced trade due to the public holiday in the U.K. The Stoxx 600 was up 0.7%.

5. Uber's shares soar as Khosroshahi promises jam tomorrow, again

Uber (NYSE:UBER) shares rallied sharply in after-hours trading after CEO Dara Khosroshahi promised further cuts in costs this year to contain losses, while reassuring investors- yet again - that the company would post an operating profit next year.

Losses in the first quarter widened sharply to $2.94 billion as the ride-hailing company wrote down a number of loss-making investments. The highlight of the release was a 52% rise in revenue for the Uber Eats business, although there were no details about whether that makes money.

Both Uber and Lyft (NASDAQ:LYFT) have said they saw healthy rebounds in ride volumes in the last couple of weeks as U.S. states have gradually reopened.

Top 5 Things to Know in the Market on Thursday, May 7th

2020-05-07 20:18:18

1. Initial jobless claims set to slow a bit further

Another 3 million Americans are expected to have filed initial claims for jobless benefits last week, according to analysts polled by Investing.com.

That would be a further slowdown from 3.8 million registered the previous week but still an indicator of extreme stress for the economy, following hard on the heels of ADP’s assessment that the private sector shed over 20 million jobs in April.

Continuing claims are expected to have risen by just under 2 million to 19.91 million.

The Department of Labor publishes its data at 8:30 AM ET (1230 GMT).

2. China's exports post surprise rebound

China’s exports posted a surprise 3.5% increase in year-on-year terms in April, confounding expectations for a decline of more than 15%.

However, the truer reflection of the state of the Chinese economy was in its import data, which fell by 14.2% on the year, more than expected.

The discrepancy is explained by a surge in exports of medical gear to the rest of the world against the backdrop of the Covid-19 pandemic. Another growth item, noted analysts at ING, was components for 5G telecom networks, something likely to raise hackles in the U.S. given its campaign against Huawei in particular.

President Donald Trump on Wednesday repeated his threat to abandon the ‘phase 1’ trade deal with China if it fails to buy the promised volume of U.S. exports. That deal preceded the collapse of Chinese import demand.

3. Stocks set to open higher; PayPal disappoints, Peloton's close to breakeven

U.S. stock markets are set to open higher, reversing Wednesday’s losses and shrugging off some mixed earnings reports late on Wednesday.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 320 points, or 1.4%, while the S&P 500 futures contract was up 1.5% and the Nasdaq 100 futures contract was up 1.6%.

In focus in early trade will be PayPal, which failed to cash in on the boom in e-commerce to the degree expected in the first quarter, and Square, which failed to break even, disappointing hopes for a quarterly profit.

By contrast, Twilio, Fox and Liberty Global (NASDAQ:LBTYA) all beat expectations, the last of these topping off the quarter by agreeing to merge its U.K. assets with Telefonica's (NYSE:TEF) in a $38 billion deal on Thursday – the biggest piece of M&A in Europe since the pandemic erupted.

Peloton (NASDAQ:PTON) stock is also set for a strong opening after it nearly broke even in the quarter thanks to a boom in working-out-from-home, while AB Inbev rose in Europe after reporting a rebound in Chinese sales.

4. Bank of England holds fire, Norway cuts

The British pound edged up after the Bank of England held off from increasing its quantitative easing program – although new Governor Andrew Bailey indicated that it may well do so in the future. Two of the BoE’s nine policymakers already voted for an increase at yesterday’s Monetary Policy Committee meeting. The BoE expects U.K. GDP to fall 14% this year.

The BoE also signaled it was cutting U.K. banks more slack as regards their capital ratios, pushing up the shares of the big four by between 1.2% and 3.5%.

Prime Minister Boris Johnson is expected to outline a timetable for easing lockdown restrictions later, two days after the U.K. overtook Italy to register the highest death toll in Europe from Covid-19, with over 30,000 deaths.

Elsewhere in Europe Thursday, Norway's central bank cut its key rate to zero but indicated it won't go below that level.

5. Turkish lira falls to new low as crisis looms

Turkey, one of the world’s largest emerging economies outside China and India, is spiraling towards a balance of payments crisis.

The dollar hit a new all-time high against the lira overnight at 7.2862, before retracing to 7.2668 by 6:30 AM ET.

The country is beset by wide budget and current account deficits, and its banks and corporations have to repay over $20 billion in foreign-currency debt next year. Meanwhile, central bank reserves have fallen sharply and many analysts suspect official reserves figures to be inflated by the borrowing of dollars from the local banking system.

Turkey, a NATO member and long-time U.S. ally, was conspicuously not among the countries granted a dollar swap line by the Federal Reserve in March. Relations with the U.S. have deteriorated sharply in recent years, not least due to President Erdogan’s decision to buy sophisticated air defense systems from Russia. That worsening relationship may also complicate its efforts to negotiate an IMF bailout, analysts say.

Top 5 Things to Know in the Market on Wednesday, May 6th

2020-05-06 21:16:58

1. Trump ramps up reopening talk as administration eyes closing down its virus task force

The White House is considering phasing out its Covid-19 task force, according to its head, Vice President Mike Pence.

The administration wants to shift to a different approach of handling the pandemic, now that its first wave appears to be subsiding.

President Donald Trump appeared to accept the risk of subsequent waves of infection on Tuesday, saying of his push to reopen the economy: ““Will some people be affected? Yes. Will some people be affected badly? Yes. But we have to get our country open and we have to get it open soon.”

Data from Europe suggest that those countries that have relaxed their lockdown requirements have generally seen a rise in new infections since.

2. Private payrolls, EIA inventories data due

Market optimism faces two more stiff challenges, with the release of ADP’s monthly report on private payrolls and the government’s report on U.S. oil stockpiles. Those data come ahead of weekly jobless claims data on Thursday and the official government labor market report on Friday.

Analysts polled by Investing.com expect the private sector to have shed over 20 million jobs in April due to statewide lockdown measures.

The EIA inventory data are expected to show a rise of 7.76 million barrels in crude stocks, a little less than the 8.4 million-barrel increase reported by the American Petroleum Institute on Tuesday. Attention will also be given to the rise in stocks at the Cushing hub (the API said 2.7 million barrels, more than indicated in an early report by consultancy Genscape), which faces looming capacity limitations. Traders will also be looking for evidence of a pickup in gasoline demand.

3. Stocks set to open higher

U.S. stock markets are set to open higher again, as investors continue to bet that the U.S. economy can reopen without triggering another rise in infections and fresh lockdowns.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 211 points, or 0.9%, while the S&P 500 Futures was up 0.9% and the Nasdaq 100 contract was up 0.8%.

Investors are having to look through some unrelentingly bleak corporate updates. In addition to Disney, which reported late on Tuesday (see below), unlisted AirBnb said it will cut 25% of its workforce, while Reuters reported that the U.S. airline industry is burning through $10 billion a month, citing draft congressional testimony from the Airlines 4 America industry group.

4. Grim forecasts for the euro zone; Germany to announce further reopening measures

The eurozone economy will shrink by 7.7% this year, the European Commission said in its spring economic forecasts. It also said that inflation will drop to 0.2%, as discretionary spending withers against a backdrop of reduced income.

The Commission said that the currency union’s southern periphery - Italy, Greece, Spain and Portugal – will be the hardest hit by the pandemic, something likely to sustain the north-south tension illustrated on Tuesday by Germany’s Constitutional Court ruling on the European Central Bank’s quantitative easing program. Eurozone sovereign yield spreads drifted a little wider on the news, while the euro fell two a two-week low of $1.0782.

The forecasts came after data showing the biggest ever drop in eurozone retail sales in March, and the sharpest monthly drop in German factory orders in at least 30 years.

On the brighter side, Germany is expected to announce a further easing of lockdown measures including, possibly, the resumption of its national soccer league.

5. Disney earnings slump

Walt Disney (NYSE:DIS) suspended its dividend after saying the Covid-19 pandemic had driven net profit down by over 90% in its fiscal second quarter, which ran through March.

The entertainment giant was hit not only by the closure of its theme parks but also by a sharp drop in box office receipts and in advertising at its TV stations. The company expects worse for the current quarter, given that the pandemic impacts only started to become evident relatively late in the past one.

One bright spot in an otherwise gloomy report was the spread of Disney+. The company said it now has 54.5 million subscribers. While that’s less than one-third of Netflix’s, it still makes Disney’s service the second-most popular service around.

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

2020-05-05 20:19:00

1. German court rules ECB QE partially unlawful

Germany’s top court threatened to stop German participation in the European Central Bank’s government bond-buying, ruling that that parts of its 2015 quantitative easing program went beyond its competence.

The ruling doesn’t affect the 750-billion-euro ($815 billion) Pandemic Emergency Purchase Program directly, but heavily implies that it would find that program unconstitutional, given that the ECB has abandoned its earlier restrictions on how much it can buy of an individual government’s debt.

While the court dismissed a suit to have the program declared illegal, its ruling was shot through with arguments sympathetic to the plaintiffs, threatening to revive German popular resentment of ECB policy, which had become more conciliatory since the Covid-19 pandemic erupted.

The euro and STOXX 600 weakened in response.

2. FEMA reportedly sees big rise in infections

The Federal Emergency Management Agency predicts that the U.S. death toll from Covid-19 will rise to 3,000 a day and an eight-fold rise in new infections to 200,000 a day by June 1, the NYT reported, citing an internal FEMA study.

The document, which is only one of a number of studies being considered by the federal government, highlights the risks of reopening the economy prematurely, the NYT said.

Separately, the Institute for Health Metrics and Evaluation at the University of Washington has revised its forecasts for the trajectory of the disease and now estimates there will be nearly 135,000 U.S deaths by the beginning of August, more than twice what it forecast in April.

3. Stocks set to open higher

U.S. stock markets are set to open higher, extending gains made on Monday amid signs that the acute imbalance in the global oil market is correcting itself.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 227 points, or 1.0%, while the S&P 500 Futures contract was up 0.9% and the Nasdaq 100 contract was up 1.0%.

The dollar index, which measures the greenback against a basket of developed market currencies, was up 0.3%, thanks largely to gains against the euro. It was mixed against emerging market currencies, against a backdrop of concern that Argentina will default on its sovereign debt later in the month. That would be the country’s ninth default.

4. Disney, games makers lead earnings roster

Walt Disney leads Tuesday’s earnings roster. Its report will show to what extent the new income stream from Disney+ can offset the massive losses in revenue from closed theme parks, suspended cruises and cancelled advertising against live sports on ESPN.

Long-time Disney bull Michael Nathanson of MoffattNathanson downgraded his recommendation for the stock to neutral on Monday, saying that the market underestimated the long-term threat to the key parks business from the coronavirus.

Also reporting Tuesday are games publishers Electronic Arts and Activision Blizzard, two stocks expected to gain from lockdown orders across the globe that have pushed more consumers towards video games.

Beyond Meat will also update after the closing bell, at a time when the pandemic is threatening the supply chain of traditional meat companies.

5. Oil extends rally; API data eyed

Crude oil prices extended a vigorous rebound amid signs that shut-ins at U.S. producers are easing the short-term imbalance between supply and demand.

By 6:30 AM ET, U.S. crude futures were up 10.3% at $22.49 a barrel, while the international benchmark Brent was up 7.7% at $29.30, its highest in three weeks.

Futures had rallied on Monday after a report by data company Genscape indicated that inventories at the national hub at Cushing, Oklahoma had risen by only 1.8 million barrels last week. If confirmed by American Petroleum Institute data later Tuesday and government data on Wednesday, that would represent a sharp drop in stockbuilding from the trend of recent weeks.

Reports from individual companies continue to add to evidence of the taps being turned off. Centennial Resource Development, Parsley Energy (NYSE:PE) and Diamondback (NASDAQ:FANG) all announced sharp cuts in production for the current quarter in their updates on Monday, adding to bigger cuts announced by Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) on Friday.

Top 5 Things to Know in the Market on Tuesday, May 5th
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Top 5 Things to Know in the Market on Monday, May 4th

2020-05-05 19:38:53

1. Trump, Pompeo lash out at China as death toll rises

U.S. President Donald Trump revived the prospect of further trade measures against China to punish it for perceived shortcomings in its handling of the Covid-19 outbreak. He also threatened to rip up last year’s trade deal with China if it failed to honor its commitment to buy U.S. goods in the promised volumes.

“They took advantage of our country. Now they have to buy and, if they don't buy, we will terminate the deal,” Trump said in a virtual town hall meeting with Fox (NASDAQ:FOX) News.

Both Trump and Secretary of State Mike Pompeo (the latter talking to ABC) repeated accusations that the virus had originated in a laboratory in Wuhan. Neither presented fresh evidence to support the claim, which China denies.

2. Springtime in Europe (Russia not included)

Lockdowns in Europe eased further as the death toll from the Covid-19 virus fell to its lowest in two months in most of the region’s biggest economies.

Italy, the worst-hit country, reopened its parks and restaurants and lifted a ban on personal visits. Spain also eased its lockdowns while German churches reopened on a weekend when the government also announced plans to reopen playgrounds and other outdoor spaces.

The outlier to the trend in Europe is Russia, where the number of new infections continued to rise sharply at the weekend. The Russian ruble, which is stull laboring under the impact of low oil prices, fell to its lowest against the dollar in nearly two weeks.

3. Stocks set to open lower; dollar strengthens

U.S. stocks are set to open lower under the impact of the administration’s comments on China at the weekend, coupled with Trump’s further admission that the U.S. death toll could reach 100,000.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 240 points, or 1.0%, extending losses after the abrupt sell-off on Friday. The S&P 500 Futures contract was down 0.8% and the Nasdaq 100 futures contract was down 0.7%..

The dollar, meanwhile, weakened against the yen but rose against higher-yielding currencies. The dollar index that tracks the greenback against a basket of developed market currencies rose 0.4% to 99.42. Gold futures rose 1.1% to $1,718.95 an ounce while Treasury yields fell and European sovereign spreads widened, amid concern over a German court ruling on Tuesday on the legality of the ECB’s bond purchases.

4. Buffett dumps airline stocks

Legendary investor Warren Buffett backed the U.S. and world economy to avoid a worst-case scenarios outlined by others earlier in the year as the Covid-19 pandemic erupted. He cited “the American magic”.

At the annual meeting of his company Berkshire Hathaway (NYSE:BRKa), Buffett said it had sold all its airline stock in the last quarter, fearful that the long-term outlook for the industry has changed for the worse. American Airlines (NASDAQ:AAL) and Southwest (NYSE:LUV) were both down over 7% in premarket trade on the comments, while United Airlines (NASDAQ:UAL) and Delta (NYSE:DAL) were both down over 9%.

Buffett also had to defend himself against criticism for a lack of deal-making, despite a wholesale sell-off in markets.

“We haven’t seen anything attractive,” Buffett said. Berkshire has been stung by a couple of big bets that have turned sour in recent years, notably its acquisition of Kraft Heinz (NASDAQ:KHC) with Brazil’s 3G, and its support for Occidental (NYSE:OXY) Petroleum’s debt-funded acquisition of Anadarko last year.

5. Tyson Foods, Oaktree lead earnings roster

Earnings season resumes on Monday with Oaktree Capital, the investment firm of Buffett’s fellow investment guru Howard Marks.

Other updates of interest will include Tyson Foods, the closure of whose meat plants led to presidential intervention last week to keep them open, and Sprint, ahead of its planned merger with T-Mobile later this year. There are also earnings due from insurance giant AIG (NYSE:AIG) and Chinese Netflix-wannabe IQIYI, whose accounting practices were recently attacked by short seller Muddy Waters (NYSE:WAT) Research.

Top 5 Things to Know in the Market on Monday, May 4th

2020-05-04 19:12:32

Top 5 Things to Know in the Market on Friday, May 1st

2020-05-01 18:04:42

1. Tech disappoints; Amazon (NASDAQ:AMZN) shareholders should “take a seat”

It’s not all shiny and bright in Silicon Valley, as a couple of tech giants disappointed the market after the bell on Thursday.

Amazon stock slumped almost 5% in after-hours trade after stating it would spend its entire second-quarter profit, seen at around $4 billion, on Covid-19 related expenses.

“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” said Amazon CEO Jeff Bezos said in a statement explaining the hefty jump in expenses.

Apple (NASDAQ:AAPL) stock fell 2.6% after hours despite reporting a slight uptick in revenue for its latest quarter as its services business picked up the slack caused by the coronavirus denting iPhone sales in China.

However, Chief Executive Officer Tim Cook pointed to an uncertain future, saying it was impossible to forecast overall results for the current quarter because of uncertainty created by the virus.

This was the first time Apple omitted an earnings forecast in more than a decade.

Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) had offered up stellar earnings earlier this week.

2. Manufacturers have little to smile about

The latest dismal economic number is likely to come Friday from the Institute of Supply Management, which will issue its April purchasing managers’ index at 10:00 AM ET (1400 GMT).

The ISM manufacturing PMI is expected to have dropped to 36.9 last month from 49.1 in March, according to economists’ forecasts compiled by Investing.com, rapidly approaching the record low below 30 in 1980.

Earlier, the British equivalent saw its manufacturers suffering the biggest fall in output and orders for at least three decades in April.

April's final IHS Markit/CIPS Manufacturing Purchasing Managers' Index fell to a record-low 32.6 from March's 47.8, broadly in line with the earlier flash estimate of 32.9 released on April 23.

3. Stocks set to open lower; Trump hints at another trade war

U.S. stock markets are set to open lower, coming off the best April for the Dow Jones Industrial Average and the S&P 500 in 82 years. Threatening rhetoric from President Donald Trump about another trade war with China will likely weigh on the market ahead of the release of ISM manufacturing PMI data at 10:00 AM ET.

Late Thursday Trump made it clear that his concerns about China's role in the origin and spread of the coronavirus were taking priority for now over his efforts to build on an initial trade agreement with Beijing.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 414 points or 1.7%, while the S&P 500 Futures contract was 53 points or 1.8% lower and the Nasdaq 100 futures contract was down 207 points or 2.3%.

In Asia, with many markets closed, the benchmark Nikkei index fell 2.8%, while Australian shares fell 5%, their most in five weeks.

In Europe, most markets are closed for a May 1 public holiday, but the FTSE 100 in London dropped over 2%.

4. Pain of airlines plain to see

Ryanair (LON:RYA)announced Friday it would ground more than 99% of its flights until July and said it had begun negotiations with Boeing (NYSE:BA) about cutting the number of aircraft deliveries over the next 24 months.

Europe's largest low-cost carrier said it would take at least two years for passenger demand to return to normal, which could result in the loss of up to 3,000 mainly pilot and cabin crew jobs.

Lufthansa (DE:LHAG) is negotiating a 10 billion euro ($10.98 billion) bailout that would result in Germany taking a 25.1% stake in the airline, according to reports Friday.

Meanwhile, the fate of Norwegian Air Shuttle (OL:NWC) was in the balance on Friday after a deadline passed overnight for bondholders to vote on a rescue package for the transatlantic budget airline.

Late Thursday, United Airlines (NASDAQ:UAL) announced a loss of $1.7 billion in the first quarter, as it attempted to manage “the most disruptive global crisis in the history of aviation.”

5. U.S. oil giants in the spotlight

Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), the two largest U.S. oil producers, are set to report first quarter earnings Friday.

Exxon had already been facing quizzical glances before Covid-19 hit, because of its high capital expenditure at a time when most oil companies were cutting back. It is set to report earnings of 4 cents per share, down from 55 cents per share in the year-ago period, on revenue of about $54.8 billion, and has to explain how it can successfully navigate these tricky waters while maintaining its healthy dividend.

Chevron looks to be in a stronger position. It is set to report earnings of 65 cents per share on $29.80 billion in revenue, and has already announced that it would be halting share buybacks and lowering its capital spending by 20%.

Top 5 Things to Know in the Market on Thursday, April 30th

2020-04-30 12:11:17

1. Tech to the Rescue

Silicon Valley powerhouses continued to churn out stronger-than-expected results after the bell on Wednesday.

Facebook stock surged 8% after its quarterly update showed advertising spending stabilized in April, albeit at lower rates, as gaming and other stay-at-home-focused companies took advantage of a bump in user face time.

Microsoft also reported a 15% rise in sales and a net profit of $10.75 billion, driven largely by burgeoning demand for its Azure cloud computing service.

Tesla also reported a surprise profit of $1.24 a share, compared with forecasts for a loss of 28c, pushing its shares up 8%. However, the results were more notable for CEO Elon Musk’s tirade against lockdown measures, which threaten to keep the company’s only U.S. factory closed through May. The company didn’t reiterate its full-year guidance

Amazon and Apple round off the earnings season for megacaps after the close.

2. ECB meets as data show Covid-19 toll on Europe

It’s Europe’s turn to dish out the dismal economic data, as the European Central Bank hunkers down for its regular policy meeting. Analysts say an expansion of the ECB’s Pandemic Emergency Purchase Program – the 750 billion-euro scheme ($815 billion) it announced in March – is possible.

The euro zone economy contracted by 3.8% quarter-on-quarter, according to Eurostat data. That’s a much bigger decline than the U.S. equivalent (which was annualized, rather than QoQ), because eurozone countries were quicker to impose lockdown measures.

France’s GDP fell 5.8%, while Spain’s fell 5.2% - both much bigger declines than expected. Italy’s fell 4.7%.

Meanwhile, Germany’s jobless figures rose by a comparatively modest 373,000. That’s because German firms rushed to avail themselves of a government wage subsidy program. Over 10 million workers were enrolled in the so-called Kurzarbeit scheme in April – although not all will have actually used it, said Oxford Economics’ Oliver Rakau.

3. Stocks set to open mixed; Jobless claims, McDonald’s, Comcast (NASDAQ:CMCSA)'s earnings eyed

U.S. stock markets are set to open mixed, after solid gains on Wednesday in response to some reassuring rhetoric from the Federal Reserve and signs of progress in finding a drug capable of treating the Covid-19 virus. The mood will be tested by the release of initial jobless claims data at 8:30 AM ET.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 42 points or 0.2%, while the S&P 500 Futures contract was flat and the Nasdaq 100 futures contract was up 0.3%.

In addition to the tech giants, there’ll be earnings reports before the opening from Visa, McDonald’s, Comcast, ConocoPhillips (NYSE:COP) COP), Kraft Heinz and Altria , among others.

4. Shell’s historic day

Royal Dutch Shell (AS:RDSa) cut its quarterly dividend to 16c a share from 47c - the first time since the Second World War that it’s taken such a step. The move implicitly accepts that the company won’t be able to generate the kind of returns in future that its investors have become used to.

Shell CEO Ben van Beurden said the cut was a “resetting” of dividend policy. The company reported a 46% drop in underlying profit and expects worse to come, as it’s forced to lower production.

The move raises questions for other ‘supermajors’, all of whom have so far resisted taking the same step. Shell had already suspended its share buyback program.

5. Renewables the bright spot in energy outlook

Global energy demand is set to contract by 6% this year as a result of the Covid-19 pandemic, the International Energy Agency said.

Oil demand is expected to drop by some 9% on average, pushing consumption down to an eight-year low. Coal and gas demand are also likely to be hit by a similar magnitude.

The bright spot, the IEA said, is that global carbon dioxide emissions will also likely fall by 8%, while renewable electricity will be the only source of energy to show growth in both supply and demand.

U.S. crude futures rose another 17.5% to $17.66 a barrel as the market priced in an easing of the near-term glut, while Brent futures rose 9.2% to $26.45 a barrel.

Top 5 Things to Know in the Market on Wednesday, April 29th

2020-04-29 14:14:16

1. Trump orders meat plants to stay open

President Donald Trump signed an executive order forcing meat processing plants to continue operating, so as to guarantee food supply.

The order was criticized by the United Food and Commercial Workers International Union, which noted that 20 meatpacking and processing workers have died from coronavirus, and at least 6,500 have been affected. At least 22 plants processing various meats have been closed at some stage due to the disease.

The tension between health and economic policy continues to play out unevenly across the world. In the U.S., Tennessee and Wisconsin on Wednesday will become the latest states to allow certain smaller businesses to reopen.

Overnight, China eased border restrictions on its citizens, while Poland became the latest European state to relax its lockdown. On Tuesday, French President Emmanuel Macron had bowed to pressure from businesses to announce his country’s lockdown would be mostly lifted on May 11, despite stern warnings of renewed community spread.

2. Fed meeting ends, Powell press conference, GDP data eyed.

The Federal Reserve will conclude a two-day policy meeting at 2 PM ET. No changes to interest rates are expected, given previous statements largely rejecting the notion of negative rates. However, the further tweaks to the central bank’s liquidity operations and quantitative easing program are not ruled out, and the market will also respond to Chairman Jerome Powell’s comments at his press conference at 2:30 PM.

Powell will be able to comment on the first reading for first-quarter GDP, which is expected to have contracted by an annualized 4%, the steepest drop since 2009. The number is highly likely to be revised in subsequent readings and will in any case be dwarfed by the contraction expected for the second quarter.

3. Stocks set to open higher

U.S. stocks are set to open higher after losing momentum late on Tuesday’s session.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 102 points or 0.4%, while the S&P 500 Futures contract was up 0.6% and the Nasdaq 100 futures contract was up 0.9%.

The Nasdaq (NASDAQ:NDAQ) contract in particular was supported by a well-received quarterly update from Alphabet (NASDAQ:GOOGL) after the closing bell on Tuesday, which showed its Internet advertising business holding up well.

European and Asian markets overnight had struggled with some mixed reports from the likes of Samsung (KS:005930) and Airbus but were still mostly higher. U.S. markets face early tests of strength from Boeing (NYSE:BA) and General Electric (NYSE:GE), both of which are due to report before the open.

4. Tech earnings to flood in

It’s another heavy day for tech earnings, with Microsoft, Facebook and Qualcomm all set to report after the bell.

However, the spotlight is likely to be hogged by Tesla, whose stock has whipsawed this week on the back of reports that it is trying to reopen its Fremont factory, even though lockdown restrictions are still being widely applied in California.

Tesla rivals Daimler (OTC:DDAIF), Volkswagen (DE:VOWG_p) and Nissan (OTC:NSANY) all issued updates of varying doom and gloom overnight, although the two German companies’ stocks both rose on indications that they both expect to stay profitable at an operating level this year.

5. Oil recovers; Inventory data due

Crude oil prices extended their recovery after the American Petroleum Institute reported that U.S. oil stocks rose fractionally less than expected last week.

The API’s estimate of a 10 million-barrel build in crude stocks was slightly less than the 10.6 million expected from today’s data from the government, which are due at 10:30 AM ET.

By 6:30 AM ET, the June contract for West Texas Intermediate was up 13% at $13.94 a barrel, while the international benchmark Brent was up 2.7% at $23.36 a barrel, as reports continued to dribble in of OPEC countries reining in output, in line with the recent deal to cut supply.

Top 5 Things to Know in the Market on Tuesday, April 28th

2020-04-28 20:56:35

1. Oil tumbles on USO's repositioning

Crude oil prices tumbled again as the exchange-traded fund that concentrates much retail speculative interest in crude was forced to adjust its positioning by the Chicago Mercantile Exchange.

The United States Oil Fund, LP (NYSE:USO) said in an SEC filing on Monday that its positions in the first three contracts of the U.S. crude futures strip had been capped, and that it would consequently move its exposure further out along the strip.

As a result, the spread between the front-month June contract (down over 7% at $11.88 a barrel) and the July contract was widened to over $7 a barrel, while the December contract likewise trades some $9 above July.

The international benchmark Brent was also pressured by the arbitrage. It dipped briefly below $20 before rebounding vigorously to $23.48 by 6:30 AM ET (1030 GMT).

2. Europe's banks post big jump in provisions

Europe’s biggest banks put out a largely negative set of results for the first quarter, with loan loss provisions leaping at both HSBC (NYSE:HSBC) and Santander (MC:SAN).

HSBC, whose net profit halved due to it booking $3 billion of provision, also said it would put its plan to cut 35,000 jobs on hold due to the pandemic in an expensive gesture of social solidarity. Santander posted 1.6 billion euros of provisions as profit fell 82%, due largely to its U.K. unit, and the reduced value of its operations in Mexico and Brazil.

The big outlier was Swiss bank UBS (NYSE:UBS), whose net profit rose by 40% year-on-year as the pandemic triggered exceptional levels of activity in its wealth management division, the world’s largest.

3. Stocks set to open higher as more states eye reopening

U.S. stock markets are set to open higher, extending Monday’s gains after Texas and Ohio became the latest states to announce dates for gradually easing lockdown.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 301 points, or 1.3%, while the S&P 500 futures contract and the Nasdaq 100 contract were both up 1.1%.

The dollar was lower across the board as risk appetite improved. The dollar index, which tracks the greenback against a basket of developed market currencies, was down 0.5% at 99.45, while gold futures drifted slightly lower.

4. Earnings galore - Alphabet, Ford, Starbucks and more

It’s a huge day for corporate earnings, with Alphabet the biggest company to report – and also one of the last, coming after the closing bell.

Pepsico (NASDAQ:PEP) has already got the ball rolling with a surprise 4% drop in first-quarter earnings and the now familiar routine of dropping guidance for the year. Industrial heavyweights Caterpillar and 3M are among those next up, as are UPS (NYSE:UPS) and pharma giants Pfizer (NYSE:PFE) and Merck (NYSE:MRK).

Joining Alphabet after the bell are Starbucks, Mondelez (NASDAQ:MDLZ), Ford Motor (NYSE:F) and Brazilian mining giant Vale (NYSE:VALE).

In Europe overnight, oil giant BP (LON:BP) said net profit fell by two-thirds but the company chose to borrow heavily rather than cut its precious dividend. Gearing rose to a whopping 36%.

5. Fed meeting starts, consumer sentiment and house price data due

The Federal Reserve starts a two-day meeting later, although its conclusions won’t be out until Wednesday.

Sweden’s central bank earlier resisted the temptation to go back to negative interest rates although it hinted that it may have to in the coming months. The krona hit a seven-week high against both the euro and dollar.

The Conference Board’s consumer sentiment index is released at 10 AM, along with the Richmond Fed business survey and the Texas services sector survey. Before that at 8:30 AM the trade balance for March will be out, while the Case-Shiller house price index is released at 9 AM.

Top 5 Things to Know in the Market on Thursday, April 23rd

2020-04-23 21:43:56

1. Jobless claims due; Europe's PMIs slump again

The U.S. will report its weekly jobless claims data at 8:30 AM ET, the indicator that has been the most current and potent expression of the economic damage inflicted by the coronavirus pandemic.

Analysts polled by Investing.com expect 4.2 million initial claims for last week, down from 5.245 million the week before, and down some 50% from the spike at the start of April. Continuing claims are expected to rise to 16.48 million from 11.98 million last week.

New home sales, due at 10 AM ET, are expected to have fallen 15% on the month in March, while the Kansas City Fed’s business survey at 11 AM is likely to follow the trail blazed by the Empire State manufacturing index and Philly Fed survey earlier in the month.

Earlier, purchasing manager surveys for Europe were even worse than expected, hitting all-time lows across the board as respondents grew less optimistic about the pace of the economic rebound.

2. ECB to lend against junk collateral; sovereign spreads narrow

The European Central Bank loosened its collateral rules to ensure that it can still lend to Italian banks if – as seems likely – the Italian government loses its last investment-grade credit rating. The move led to bank stocks in the eurozone periphery outperforming on Thursday in early trading, while sovereign risk premiums fell.

The ECB’s action came ahead of an EU summit via teleconference later Thursday, which is expected to approve some expansion of borrowing by the European Commission to help fund the region’s recovery from the pandemic. It’s highly unlikely that leaders will approve any joint debt issuance by the euro zone, as wanted by Spain, France and Italy.

German Chancellor Angela Merkel told the Bundestag on Thursday, however, that Germany may have to make “much higher contributions” into the EU budget in future.

3. Stocks set to open higher

U.S. stocks are set to open mixed, consolidating Wednesday’s gains that came on the back of a stabilization in oil prices.

By 6:25 AM ET (1025 GMT), the Dow Jones 30 Futures contract was down 24 points or 0.1% at 23,333 points, while the S&P 500 futures contract was up 0.1% and the Nasdaq 100 futures contract was flat.

A conspicuous feature of after-hours earnings releases on Wednesday was the resilience of CSX (NASDAQ:CSX) stock and Kinder Morgan (NYSE:KMI) stock, which held up despite predictable declines in their current business.

Las Vegas Sands (NYSE:LVS) stock, meanwhile, rebounded 7.6% in premarket trading despite evidence from its Macau business that casinos may face one of the greatest challenges of all businesses in returning to normal after the pandemic.

4. Oil extends rebound on saber-rattling, for now

Oil prices extended their recovery, which started with President Donald Trump’s attempts to inject a bit of geopolitical risk premium on Wednesday with a threatening tweet in the direction of Iran.

Iran, which needs higher oil prices every bit as much as Texas, was happy to play along earlier Thursday, warning of a “swift response” to any U.S. provocation.

By 6:25 AM ET, U.S. crude futures were back at $15.39 a barrel, up 11.7% from late Wednesday, while the international benchmark Brent was up 7.4% at $21.88.

Analysts say that saber-rattling is unlikely to offer any sustained support, given the vast imbalance between supply and demand. Wednesday’s weekly report from the Energy Information Administration showed that spare storage capacity at Cushing, the delivery point for the NYMEX futures contract, is down to less than 18 million barrels. Given that Cushing stocks rose by 4.8 million barrels last week, the risk of prices returning to zero at the next contract expiry does not seem to have gone away.

5. Blackstone, Intel, Eli Lilly to report

Earnings season continues with reports from Blackstone Group, Eli Lilly and Union Pacific all figuring prominently before the bell, and chipmaker Intel, Domino’s Pizza and E-TRADE due after the bell.

Intel’s report comes after some weak data out of South Korea suggesting the recovery for the semiconductor industry will be slow and hard, while Domino’s and E-TRADE have both enjoyed tailwinds from lockdowns and financial market volatility, respectively. E-TRADE rival TD Ameritrade reported late on Wednesday and avoided Interactive Brokers’ mishap with the crude oil expiry earlier this week, but its figures were still hurt by the price war that saw most online brokers cut trading commissions to zero earlier in the year.

Top 5 Things to Know in the Market on Tuesday, April 21st

2020-04-21 19:58:10

1. Oil – Good news and bad news

The good news is – the May futures contract for U.S. crude, which expires later, has shrunk to insignificance as market participants complete the process of rolling futures positions into longer-dated contracts.

The rest of the news is mostly bad. The June futures contract, where the open interest and volume is concentrated, is down 17.5% at $16.86 a barrel as of 5:50 AM ET (0950 GMT), albeit that's off a low of $11.89. The Brent June contract is down 14.6% at $21.89 a barrel.

In other words, while the extraordinary collapse in U.S. prices was indeed exaggerated by short-term factors, the reality of crushing oversupply (the IEA suggested a drop of 26 million barrels in May from year-earlier levels) is still with us for at least a few weeks.

The American Petroleum Institute’s weekly inventories data for last week are due at 4:30 PM ET (2030 GMT). After Monday’s events, even the 5.7 million barrel rise expected for the government’s data on Wednesday may be a relief to some.

2. Things look dim for Kim

The South Korean won weakened after a CNN report indicating that North Korea’s leader Kim Jong-Un was critically ill after heart surgery earlier this month.

Speculation about Kim’s health had started when he skipped a ceremony last week celebrating the birthday of Kim Il-Sung, the founder of the Communist dynasty that has ruled North Korea since its creation in the 1950s.

The dollar rose as much as 1.8% against the won to its highest in over two weeks, amid fears that a power vacuum could create greater short-term instability. North Korea had fired a series of missiles into the sea off its east coast a week ago, the latest in a series of military maneuvers that observers had initially guessed were aimed at diverting attention away from a coronavirus outbreak.

3. Energy woes weigh on global stocks; U.S. to open lower

U.S. stock markets are set to extend Monday’s losses when they open later, as the volatility in oil prices acts as a sobering reminder of the collapse of economic activity.

By 6:40 AM ET (1040 GMT), the Dow Jones 30 Futures contract was down 357 points, or 1.5%, at 23,151 points, while the S&P 500 futures contract was down 1.1% and the Nasdaq 100 futures was down 0.6%.

European stocks were also lower and even Asian stocks were also dragged lower by developments in energy, as fear about the macro backdrop outweighed any suggestion that cheaper energy was a net benefit to importers.

A rebound in the German ZEW sentiment index to 28.2 from -49.5 in March failed to improve sentiment much, not least because the current conditions sub-index fell to -91.5. The Stoxx 600 was down 2.0%, while the FTSE 100 was down 1.9%.

4. IBM reverts to type; Netflix may do better

IBM returned to its familiar path of falling revenue in the first quarter, thwarting hopes that it had turned a quarter at the end of 2019 with its first annual rise in sales in years.

Revenue at Big Blue fell 3.4%, while earnings per share fell 18%, leading the company to withdraw its guidance for the year in its release after the bell on Monday.

Equifax (NYSE:EFX) joined IBM in pulling its guidance, but its stock still rose in after-hours trading after its first-quarter results beat expectations.

Coca-Cola (NYSE:KO) also beat forecasts when it kicked off the day’s deluge of reports. Lockheed and others follow before the bell.

Netflix is arguably the most hotly-awaited set of results on Tuesday, but they’ll come after the close, as will Texas Instruments (NASDAQ:TXN) and Chipotle Mexican Grill (NYSE:CMG).

5. Deja vu in the euro zone

Eurozone sovereign bond spreads widened again after Goldman Sachs (NYSE:GS) warned that Italy may be downgraded to junk status if it doesn’t get help from the EU to rebuild its economy after the Covid-19 crisis passes.

Fears that a sharp recession and the lack of an adequate central response from EU and eurozone bodies have caused sovereign bond yield spreads to widen to the most in over a month in the last two sessions. Comments by German Chancellor Angela Merkel that she could envisage an expanded EU budget in the future did nothing to change that.

The spread between Italian and German 10-year bonds widened to 248 basis points, while the Greek spread widened to 264 basis points and the Portuguese one widened to 153. The euro fell 0.3% to $1.0833.