1. Jobless claims expected to ease a little
Are you ready?
Another 5.1 million Americans are expected to have filed initial claims for unemployment benefits last week, down from 6.65 million the week before. Ongoing claims are expected to rise to 13.5 million from 7.46 million a week earlier, according to analysts polled by Investing.com.
The numbers are due out at 8:30 AM ET (1230 GMT).
Wednesday saw the biggest-ever monthly drop in U.S. retail sales and the sharpest fall in industrial production since 1946, as lockdowns to contain the spread of the Covid-19 virus took effect across the country.
2. Trump to issue new guidelines on reopening the U.S. economy
President Donald Trump said he will issue new guidelines for reopening the economy later Thursday, saying that “the data suggests that, nationwide, we have passed the peak on new cases.”
He pointed to declines in new cases in New York city and New Orleans, while the growth of new cases in Detroit and Denver has flattened out. Trump also noted “progress” in Washington DC, Baltimore and St. Louis.
“New U.S. cases per million will soon be at the levels which prompted easing lockdowns in Italy, Spain and Austria, said Pantheon Macroeconomics chief economist Ian Shepherdson.
Meanwhile, The Wall Street Journal reported that business leaders had urged Trump on a conference call not to hurry the reopening of the economy, saying that people will need much greater access to testing before they have confidence to resume normal patterns of working and socializing.
3. Stocks set to open higher; Morgan Stanley (NYSE:MS) earnings due
U.S. stocks are set to open cautiously higher in response to Trump’s comments after falling on Wednesday in reaction to the drops in retail sales and industrial output.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 Futures contract was up 115 points or 0.5%, while the S&P 500 Futures was up 0.7% and the Nasdaq 100 Futures contract was up 1.0%. Morgan Stanley is set to round off a bank earning season characterized by $25 billion in loan-loss provisions but some stellar numbers for trading revenue.
Havens remain in demand: the dollar index was consolidating above 100 after the U.S. data triggered a fresh bout of safe haven buying of the world’s reserve currency. Treasury bond yields were mostly unchanged after sharp falls on Wednesday. Gold futures were steady above $1,750 an ounce.
4. U.K. extends lockdown as Germany flags gradual reopening
Sterling slipped and U.K. stocks underperformed, as the U.K. extended its lockdown measures for another three weeks.
Meanwhile, Japan extended its state of emergency to nationwide status in response to stubborn increases in new cases across the country. Emergency measures had previously been restricted to Tokyo and a couple of other metropolitan areas.
Germany registered its highest rate of new infections in five days, although daily calculations everywhere have been vulnerable to distortion over the Easter week. Europe’s largest economy on Wednesday said it will reopen smaller shops and all auto dealerships from next week, and intends to partially reopen its schools from May 3rd. Large-scale public events and gatherings will, however, remain banned until the end of August.
5. Oil prices rebound; OPEC report eyed
Crude oil prices rebounded again from the $20 level as traders attempted to guess the pain threshold of key producers.
Goldman Sachs (NYSE:GS) analysts have argued that anything below $20/bbl is below the cash costs threshold of many producers and thus unlikely to last for long. However, the near-term glut remains acute, with physical cargoes of Russian Urals blend reportedly being quoted at $14 a barrel on Thursday.
Bloomberg reported overnight that the U.S. administration is examining the possibility of paying oil companies not to produce oil. However, that is likely to be blocked by a Democrat-dominated House of Representatives who blocked provisions to spend $3 billion filling the Strategic Petroleum Reserve last month.
The Organization of Petroleum Exporting Countries is due to release its monthly oil market report at 7 AM ET, although its forecasts – at least on supply – are likely to tally closely with the calculations that were behind last weekend’s output cut deal.
By 6:35 AM, U.S. crude futures were up 1.8% at $20.23 a barrel, while Brent was up 3.0% at $28.52 a barrel.
1. Airline bailout agreed
The U.S. government agreed to inject some $25 billion into the airline industry to cover payroll costs through the Covid-19 crisis.
American Airlines (NASDAQ:AAL) and Delta Air Lines (NYSE:DAL) are the biggest recipients of aid, receiving $5.8 billion and $5.4 billion respectively. Southwest (NYSE:LUV) will receive $3.2 billion. JetBlue (NASDAQ:JBLU) and other airlines have also signed up for the aid, most of which is being disbursed as a grant, with the rest coming in the form of low-interest loans and stock warrants.
The conditions attached to the aid mean that the airlines won’t be allowed to furlough staff or cut pay until the end of September, while buybacks and dividends will be banned until September 2021 and executive pay will be limited for another six months beyond that.
2. U.S. data horror show - new episodes out at 8:30 AM ET
More hard data from the U.S. is on the way to flesh out the economic damage from Covid-19 and the associated lockdowns.
Retail sales for March are due at 8:30 AM ET (1230 GMT), while industrial production and manufacturing output will follow at 9:15 AM. As states shut down at different speeds during the month, the data may be hard to interpret holistically, warned Paul Donovan, chief economist of UBS Global Wealth Management, in a morning note.
There’s also the New York Empire State Manufacturing index at 8:30, which will shed a light on the state that has – so far – been the worst hit of all in the U.S.
3. Germany expected to extend lockdown another two weeks; India relents
German Chancellor Angela Merkel is expected to agree an extension of Germany’s current lockdown with state governors on a telephone call later.
The news agency Deutsche Presse Agentur reported that Merkel wants to keep Europe’s largest economy locked down until May 3. Some state governors are agitating to at least reopen their schools before then (neighboring Denmark reopened its kindergartens and primary schools Wednesday).
Elsewhere, Indian Prime Minister Narendra Modi agreed a partial lifting of the lockdown announced earlier this week, acknowledging that the government had no effective way of mitigating its effect on poorer parts of Indian society.
4. Stocks set to open lower; Fed's Daly strikes pessimistic note
U.S. stock markets are set to open lower on Wednesday, after a rally on Tuesday that threatened to get ahead of economic reality.
By 6:40 AM ET (1040 GMT), the Dow Jones 30 Futures contract was down 422 points or 1.8%, while the S&P 500 Futures contract was down 1.9% and the Nasdaq 100 contract was down 1.4%.
The International Monetary Fund on Tuesday had forecast a 3% drop in world GDP in 2020 – the worst contraction since the 1930s – including a 5.9% drop in U.S. GDP.
San Francisco Fed President Mary Daly told The Wall Street Journal that she expects the recovery to be uneven and slow.
“I don’t expect a sharp V-shaped recovery, I expect something more like negative quarters of growth throughout 2020, and then a gradual return to positive growth in 2021,” Daly said.
Elsewhere, Covid-19 has all but done for what was likely to be the biggest IPO of 2020. Airbnb said late on Tuesday that it had raised another $1 billion in senior debt, only days after raising the same amount in subordinated debt and equity warrants from private investors. The money didn’t come cheap. The Financial Times reported the company will pay 7.5% for the senior debt, having paid 10% for the more junior tranche last week.
5 Oil tumbles on IEA warning
Oil prices tumbled again after the International Energy Agency warned that the global deal to cut supply, agreed at the weekend, wouldn’t be enough to stop the world running out of storage capacity “within weeks.”
By 6:40 AM ET, U.S. crude futures were trading down 3.5% at $19.41 a barrel, having earlier tested and bounced from the year’s low of $19.27. The international benchmark Brent contract was down 4.2% at $28.37 a barrel.
The IEA said it expects global oil demand to be 29 million barrels a day below year-earlier levels in April, easing to 26 million b/d in May and 15 million b/d in June. If producers cut as expected (the IEA forecasts non-OPEC+ supply to drop by 3.5 million b/d on average this year), and if countries such as China and the U.S. buy for their strategic reserves as agreed, then the physical market could start to draw down record high commercial stocks in the second half, the IEA said.
1. Europe's big 3 set to extend lockdowns as Spain, Italy start reopening
The European countries worst hit by the Covid-19 outbreak, Italy and Spain, started to lift their restrictions on non-essential business amid signs that the virus has peaked there. Both economies, however, remain largely closed.
Europe’s three biggest economies, however, are set to remain in near total lockdown for at least a couple more weeks, however. France extended its quarantine order through May 11 on Monday, and German Chancellor Angela Merkel is expected to do likewise after a teleconference with state governors on Wednesday. The U.K., meanwhile, is preparing to extend its lockdown for another three weeks on Thursday, according to The Times of London.
Prime Minister Narendra Modi also extended India’s lockdown for another two weeks, until May 3, while Russia posted its biggest daily rise in new cases and deaths to date.
2. Trump raises pressures on governors to restart economies
President Donald Trump urged U.S. state governors to speed up their preparations to reopen their economies, giving a veiled warning that he would try to overrule them if they didn’t.
Trump told his daily news briefing that he had “total authority” as regards economic management of the pandemic, but failed to give an answer when challenged that the Constitution grants the presidency no such power explicitly – and that all powers not conferred on the federal government remain with the states.
Two groups of states, on both the east and west coasts of the U.S., have said they will work on coordinating the lifting of lockdown measures.
3. Stocks set to open higher; dollar falls, gold rises
U.S. stocks are set to open higher, reversing the losses they made in relatively thin trade on Monday while European markets were closed.
By 6:15 AM ET (1015 GMT), the Dow Jones 30 Futures contract was up 297 points, or 1.3%, while the S&P 500 Futures contract was up 1.1% and the Nasdaq 100 futures contract was up 1.4%.
European markets reopened higher after the Easter holiday but pared gains to trade mixed by midday in Europe. Chinese and Japanese markets rose broadly, helped by data showing that Chinese exports and imports fell by less than expected in March.
Elsewhere, the dollar index edged down below 100 as markets continued to digest the Fed's pre-Easter stimulus package. That's also supporting gold futures, which are on course for their highest close in nearly eight years.
4. Get ready for a wild Q1 earnings season
JPMorgan and pharma giant Johnson & Johnson (NYSE:JNJ) kick off what could be the weirdest earnings season ever, reflecting the challenges of portraying the state of a business in the middle of the pandemic.
Both companies’ earnings will be largely historical, given that the virus didn’t start to affect the U.S. economy until March, so all eyes will be on their assessment of more short-term developments.
JPMorgan in particular will be scrutinized for how much it sets aside in provisions against loans that have either gone bad already or that are expected to go bad in the coming months. That number will also, inevitably, be a judgment on the efficacy of government and monetary measures to support the economy.
5. Oil prices fall amid doubts over effectiveness of supply cuts
Crude oil prices faltered as the deal cobbled together over the Easter weekend to cut global supply paled in comparison to ongoing reports showing the extent of demand destruction.
OPEC and its allies agreed to cut some 9.7 million barrels a day of output for the next two months, but the methods used to calculate the cut suggested that actual reductions in day-to-day output from current levels would be smaller.
By 6:10 AM ET, U.S. crude futures were down 2.4% at $21.85 a barrel, while the international benchmark Brent was down 1.2% at $31.36. The differential between the two blends, at nearly $10 a barrel, has rarely been wider.
Additionally, noted Saxo Bank strategist Ole Hansen, dated Brent (for immediate delivery) is trading $5.15 below the June futures contract. “The OPEC++ deal has done little to alleviate the stress in the market. Also shows that it is oil with its weak demand outlook, not FED pumped stocks, that gives the correct take on the current global economy,” Hansen said.
1. Jobless Claims Set to Spike Again
Weekly jobless claims, which have become the go-to economic indicator to capture the latest impact of the virus, come out before the bell tomorrow.
The Labor Department will report on claims for first-time unemployment benefits at 8:30 AM ET (12:30 GMT).
Economists are expecting that claims eased off a little from the huge number the week before, but will still post a rise of 5.25 million, according to forecasts compiled by Investing.com.
Continuing claims are seen coming in at a staggering 8 million, eclipsing the level of more than 6 million seen in 2009 during the financial crisis.
At 10:00 AM ET, the University of Michigan will release its preliminary measure of consumer confidence for April.
The consumer sentiment index is expected to sink to 75 from 89.1 in March.
But economists also think consumers are, like President Donald Trump said, starting to see light at the end of the tunnel. The preliminary April consumer expectations component is seen rising to 88.2 from 79.7 the month before.
The Labor Department will also release the latest numbers on wholesale inflation at 8:30 AM ET.
The producer price index (PPI) is expected to have dropped 0.4% in March. The core PPI, which excludes volatile food and energy prices, is forecast to have risen 0.1%.
Still, whether all these indicators are as valuable as they were before these unprecedented times is debatable.
“The economy has never changed this fast before,” University of Michigan economics professor Justin Wolfers tweeted. “The unemployment rate is moving as much every two days as it typically moves in a year. So we need economic indicators that can tell us what's happening across the whole economy, day by day.”
2. OPEC+ to Meet, With Cuts Expected
Oil ministers will be brushing up on their video conference skills tonight.
OPEC+ will hold its virtual meeting Thursday that many (bulls) are hoping will result in production cuts to stabilize the market.
WTI futures spiked 11% in late trading as Algeria revved up expectations, saying “massive” output cuts were on the cards, which could be around 10 million barrels per day.
That added to enthusiasm about Russia planning to offer cuts of 1.6 million barrels, Reuters reported, citing a Kremlin source.
U.S. participation could be the key to whether a deal goes through. But the world’s largest crude producer signaled it will contribute about 1.2 million bpd at most in cuts that would be market driven, not an official reduction.
3. Powell Hosts Webinar
The Federal Reserve minutes from its March meetings out today revealed that in its worst-case scenario the central bank believed that the U.S. economy would not recover from the coronavirus damage until next year.
How much has the Fed’s thinking changed? Investors can hear from Fed Chairman Jerome Powell tomorrow when he participates in a webinar at the Brookings Institution think tank at 10:00 ET (14:00 GMT).
“In an online-only discussion, Powell will talk about the current state of the economy, the Fed’s response to the crisis, and what lies ahead,” Brookings said.
Powell will take questions from the audience and viewers via e-mail and Twitter (#COVID19Economy).
1. Trump eyes partial restart of economy within weeks
U.S. President Donald Trump talked up the possibility of reopening parts of the U.S. economy, as the Covid-19 outbreak in the country showed mixed signs of slowing down. The number of U.S. cases has doubled to 400,000 in the last week, but grew only 8.1% on Tuesday, a fifth straight daily decline.
“We’re looking at the concept where we open sections of the country and we’re also looking at the concept where you open up everything,” Trump told Sean Hannity of Fox News on Tuesday.
Trump’s top economic advisor Larry Kudlow told Fox earlier that parts of the economy may reopen within four to eight weeks, although it isn’t clear what degree of support the plans could count on among governors and mayors across the country.
Trump’s comments came after another press conference plagued by mixed messaging, in which he first announced, then walked back, a suspension of U.S. contributions to the World Health Organization. The president had criticized the WHO earlier for its “China centric” communication, implying that it helped the Chinese government cover up the true scale of the Covid-19 disaster.
2. Euro zone fails to agree on crisis response funding as recession hits hard
European sovereign bond spreads widened to the most in three weeks after eurozone finance ministers again failed to agree on how to fund the currency union’s fiscal response to the Covid-19 crisis. The meeting was suspended until Thursday, after talks broke down over demands – led by Italy, Spain and France - for joint debt issuance, known as ‘coronabonds’.
German Finance Minister Olaf Scholz, one of those opposed to coronabonds, told reporters nonetheless that a deal is near.
The news came amid clear evidence of the recession hitting Europe. The Bank of France estimated that French GDP shrank by some 6% in the first quarter, while Germany’s leading economic research institutes forecast that German GDP will shrink by 9.8% in the second quarter, after a 1.9% contraction in the first three months of the year.
The virus, meanwhile, claimed its highest number of victims in Spain in four days, frustrating hopes for a clearer sign of peaking.
3. Stocks set to open mostly higher
U.S. stock markets are set to open mostly higher after a two-day rally ran out of steam in late trading on Tuesday to leave benchmark indices marginally lower on the day.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 Futures contract was up 85 points or 0.4%, while the S&P 500 Futures contract was up 0.4% and the Nasdaq 100 Futures contract was up 0.5%.
The dollar index was 0.2% higher at 100.14, thanks largely to gains against the euro after the Eurogroup’s failure and the alarming GDP headlines from France and Germany. European stock markets were also mostly lower, with the Stoxx 600 falling 1.1%.
4. Oil prices perk up on fresh hope ahead of OPEC+ meeting
Oil prices stayed volatile a day ahead of the OPEC+ meeting at which Russia, Saudi Arabia and others are aiming to agree a cut of around 10 million barrels a day in output. U.S. crude futures were up 3.6% at $24.48 a barrel while Brent futures were up 0.6% at $32.05.
Crude futures had tumbled late on Tuesday amid pessimism that even a 10 million barrel-a-day cut would not fix an oversupply problem, given that global demand has fallen by even more.
The U.S. government’s weekly report on oil stocks is due at 10:30 AM ET and is likely to corroborate – broadly - another huge rise in stocks reported on Tuesday by the American Petroleum Institute. The 11.9 million barrel rise reported by the API was above market forecast for a 9.3 million barrel increase in official stocks.
Separately on Tuesday, the Energy Information Administration cut its forecast for U.S. oil output by 1.2 million barrels a day for 2020, and by 1.6 million barrels a day for 2021. The U.S. government will likely argue that the projections are proof that it is sharing the burden of output discipline, when G20 energy ministers attempt to wrap up a binding deal on Friday.
5. And finally, China lifts Wuhan lockdown; mass exodus expected
After 10 weeks, China ended the lockdown on Wuhan, the city where the virus first emerged. Reports suggested a mass exodus from the city was likely in the near term.
Elsewhere in Asia, Japan finally declared a state of emergency after an interrupted debate in its parliament, something that paves the way for bigger economic support packages from Tokyo.
South Korea, meanwhile, unveiled economic support measures worth some $45 billion, including cheap loans for exporters. The dollar rose 0.1% against the yen and 0.5% against the won.
1. Gold hits highest since 2012
Gold prices hit their highest in nearly eight years, as a wave of money continued to flood into exchange-traded funds, bars and coins on expectations of a prolonged period of low or negative interest rates.
Gold futures for delivery on the Comex exchange hit a high of $1,742.20 a troy ounce overnight before retracing to hold just above $1,702 an ounce by 6:35 AM ET (1035 GMT). The premium over spot gold prices in London widened to almost $50 an ounce, amid further reports of trouble in sourcing enough physical gold to cover all the claims of U.S.-registered ETFs.
The latest surge came on the back of reports on Monday that the U.S. is preparing a fourth economic support package that could be worth around $1.4 trillion.
The sharp widening of budget deficits in the U.S. and Europe to fund the response to the Covid-19 crisis has encouraged heavy betting on currency debasement – even though most economists agree that the near-term effect of the crisis is more likely to be deflationary, rather than inflationary.
2. Oil rises further on hopes of output restraint deal
Crude oil prices rebounded again amid hopes that the world’s major producers will somehow cobble together an agreement to cut supply at a virtual meeting on Thursday. U.S. crude futures rose 3.1% to $26.91 a barrel, while Brent rose 2.4% to $33.83.
Reuters quoted sources within the OPEC+ format (which includes Russia) as saying that an agreement is likely, as long as other countries - most of all, the U.S. – join in.
Other reports suggested that the OPEC+ countries also want cuts from Canada and Brazil.
The inability of the U.S. government to impose a nationwide output cut has led some analysts to suspect that the deal will aim to target a price that is still low enough to squeeze marginal U.S. shale producers into bankruptcy. Some have observed that the current use of drilling rigs is consistent with a drop in U.S. production of 1 million barrels a day by the third quarter.
A meeting of G20 energy, which would include all the countries relevant to the discussion except Norway, is scheduled for Friday.
3. Stocks set to open higher as U.S. support package, European virus data lift spirits
U.S. stocks are set to open markedly higher again, supported by the reports of a fourth economic support package that broke in the U.S. afternoon on Monday.
The news, which helped to allay doubts about holes in the packages announced so far, drove one of the biggest ever rallies in the Dow Jones Industrials on Monday, pushing all the benchmark indices over 7% higher.
By 6:35 AM ET, the Dow Jones 30 Futures was up 804 points, or 3.6%, while the S&P 500 futures contract was up 3.1% and the Nasdaq 100 futures contract was up 2.9%.
European and Asian markets have also rallied, taking their lead from the U.S. and from increasing data points in Europe that suggest the Covid-19 epidemic is peaking. Spain posted four straight days of declining deaths, while Italy and Germany announced further falls in new infections, and Denmark joined Austria in planning to lift some of its lockdown restrictions.
4. Johnson remains in intensive care
U.K. Prime Minister Boris Johnson remains stable and conscious in intensive care, after being hospitalized on Sunday evening in London.
Against a backdrop of growing doubt about the reliability of information being provided by the government Cabinet Minister Michael Gove insisted on Tuesday that the Prime Minister was not on a ventilator and promised a full statement in case his situation gets any worse.
Sterling and U.K. stocks were equally unfussed by the episode, joining in a broad risk-on rally in European markets. European Union finance ministers are due to hold another conference call about their pandemic response later Tuesday.
5. Fed moves to ease EM squeeze with $60 billion repo line to Indonesia
The Federal Reserve agreed to provide a $60 billion repo line to Indonesia, whose financial markets have suffered some of the worst stress in the emerging world as the Covid-19 virus has spread across one of Asia’s most important economies.
The country has been criticized for its relatively low level of testing for Covid-19 among its population of over 200 million. The official death toll of 221 is widely believed to understate the actual number (as in many countries, due to the exclusion of victims who do not die in hospitals).
The dollar had risen by some 20% against the Indonesian rupiah since the virus exploded in January. It has made similar, if less dramatic gains against many other emerging currencies, as markets price in a sudden stop of capital flows due to the looming recession. According to data from the International Institute for Finance in Washington, investors pulled some $83 billion from emerging markets in March alone.
1. Crude prices fall on doubts about production cut deal
Crude oil prices fell as doubts emerged over whether the world’s biggest producers will agree to cut production.
President Donald Trump’s meetings with U.S. oil industry bosses failed to generate any consensus regarding cuts to U.S. output, something that both Saudi Arabia and Russia believe to be a precondition for any cuts on their part.
As such, a meeting of the OPEC+ format, which includes both Saudi and Russia, was postponed to Thursday from Monday. Trump on Saturday raised the possibility of protecting U.S. oil producers by raising import tariffs on foreign oil.
By 6:25 AM ET (1025 GMT), U.S. crude prices were down 4.1% on the day at $27.19 a barrel, while Brent futures were down 3.5% at $32.91.
2. U.S. braces for worst week
President Donald Trump said there was a light at the end of the Covid-19 tunnel, pointing to slowdowns in the rate of new infections in some of the virus hotspots in the U.S. Infections in New York City, Detroit and New Orleans are expected to peak in the next few days, according to various reports.
The U.S. Surgeon-General Jerome Adams, meanwhile, told Fox News on Sunday that the coming week will be “the hardest and saddest week of most Americans’ lives.”
The U.S. has now registered over 9,600 deaths from the coronavirus and has over 337,000 confirmed cases.
3. Stocks set to open higher, lifted by Europe
U.S. stock markets are set to open higher, benefiting from a bounce in Asian and European markets.
By 6:30 AM ET, the Dow Jones 30 futures contract was up 761 points, or 3.6% at 21,718, while the S&P 500 futures contract was up 3.6% and the Nasdaq 100 futures contract was up 3.9%.
Data over the weekend from Spain and Italy, the two European countries worst hit by the virus, showed a fall in the number of daily deaths, and a slowdown in the rate of increase in new infections.
The benchmark Stoxx 600 was up 2.9% by midday in Europe, while the Nikkei and Australian S&P/ASX 200 indices both added more than 4%. Emerging market indices were more mixed.
4. Dollar gains vs yen, emerging market currencies
The dollar showed no sign of retreating, despite the general risk-on tone in markets, holding its ground against developed-market currencies and advancing broadly against emerging market ones on growing fears of sharp economic contractions and balance of payments crises in the latter.
The dollar index, which measures the greenback against a basket of developed-market currencies, was up less than 0.1% at 100.71, down against the Australian and Canadian dollars but up 0.7% against the yen after the Japanese government said it would declare a state of emergency. Japan’s official numbers on Covid-19 cases have risen sharply since the country abandoned hope of staging the 2020 Olympics this summer.
The dollar also made gains against the Indian rupee, Egyptian pound and Turkish lira, although the Russian ruble rebounded, catching up with late Friday’s price action in the oil market.
5. U.K. PM Johnson taken to hospital with Covid-19
Prime Minister Boris Johnson was admitted to hospital late on Sunday in the U.K., as a precautionary measure, Downing Street’s press office said.
Johnson had said over a week ago that he had tested positive for the virus and his appearance in video messages to the country had visibly worsened over the last week.
Sterling shrugged at the development. By 6:30 AM ET, the pound was at $1.2300, up 0.3% from late Friday in Europe. The FTSE 100 stock index was up 2.2%, while the more domestic-focused FTSE 250 was up 4.1%.
1. Payrolls to tell no more than half the story
It’s payrolls day – with a difference. The monthly employment report from the U.S., due at 8:30 AM ET, is likely to be bad, but won’t tell anything like the whole story given that the cut-off date is the week of March 12, that is, before any major lockdowns in the U.S.
The reality, as indicated by the weekly jobless claims data on Thursday, is much worse. Over 9 million Americans have filed for unemployment benefits in the last two weeks. That’s around 6% of the workforce.
The Cleveland Federal Reserve President Loretta Mester said the jobless rate could reach 15% in the near future, echoing comments earlier this week by colleague James Bullard.
2. Oil prices hit highest since mid-March on supply deal hopes
Oil prices climbed to their highest in two and a half weeks after a spate of newswire reports citing mostly unnamed sources added further details to President Donald Trump’s bold claim of a likely deal to end the global price war. U.S. crude futures rose 4.2% to $26.41 a barrel, while global benchmark Brent soared back above $30 to trade at $32.59 a barrel, up 8.9%.
The OPEC+ format, which includes both Saudi Arabia and Russia, has called an emergency meeting for Monday. However, Reuters reported that the group would insist on a cut in U.S. production as part of any deal.
Other reports cited sources saying a cut of 10 million barrels a day, roughly 10% of world oil supply, was “realistic”. Trump had said the cut could be up to 15 million barrels a day. He has also said he will meet with U.S. oil bosses today, with meetings possibly stretching into the weekend.
President Vladimir Putin is also due to meet with Russian oil producers Friday, the Kremlin said.
3. Stocks set to open lower; dollar strengthens again
U.S. stock markets are set to open lower as the market absorbs the implication of Thursday’s jobless claims data.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 Futures contract was down 236 points or 1.1% at 21,036 points. TheS&P 500 Futures was down 1.1% and the Nasdaq 100 contract was down 1.0%.
The dollar index rose 0.5% to its highest in over a week as both the euro and sterling fell sharply in the wake of apocalyptic readings from IHS Markit’s purchasing manager indices. However, the dollar gained against both currency commodities and haven currencies such as the yen and Swiss franc, suggesting that the tension in global funding markets has further to run.
Elsewhere, China’s central bank cut its reserve requirements again in an effort to prop up domestic liquidity – even though the virus peaked over a month ago in that country and anecdotal reports suggest a broad, if slow, rebound in activity.
4. Europe's PMI horror show
Europe is facing a recession deeper than in 2008/9, judging by the look of the latest survey data. IHSMarkit revised down its March PMIs across the region, due mainly to shocking declines in services activity, which makes up the bulk of all European economies, even Germany’s.
In Italy, the services PMI fell to 17.4, from 52.1 in February. That’s the lowest number Markit has ever reported for any of its PMIs, ever - worse even than Greece at the depths of its recession in the last decade.
Claus Vistesen, eurozone economist with Pantheon Macroeconomics estimates that eurozone GDP fell 4% in the first quarter and will shrink a further 10% in the current quarter, “based on the notion that activity will be at a hold in April and most of May.”
5. Disney , GE furlough workers; trouble with SBA loan plan
Walt Disney (NYSE:DIS) and General Electric (NYSE:GE) said they will furlough thousands of workers, as the Covid-19 outbreak reaches ever deeper into U.S. economic life.
Disney said the cuts will apply to all its U.S. divisions. The company has shut its domestic parks indefinitely, while its cruise division has suspended sailings. In addition, blockbuster movie releases have been pushed back to next year.
GE’s cuts affect mainly the aviation division, where future demand is being rapidly revised downwards due to the collapse in air travel and the uncertainty over how quickly and fully it will rebound.
Elsewhere, there were signs that the U.S. government’s $350 billion plan to help small businesses faces problems. JPMorgan (NYSE:JPM) said it wouldn’t be able to process applications for government-guaranteed loans, which can be submitted from today. Bank of America (NYSE:BAC) is limiting applications to existing customers.
The Federal Reserve’s planned Main Street lending facility is also facing delays. Boston Fed President Eric Rosengren said Wednesday that it won’t be ready for “another couple weeks.”
1. Jobless claims set for another huge increase
Brace, brace. The U.S. is due to report last week’s initial jobless claims at 8:30 AM ET (1230 GMT), the latest sign of how badly the Covid-19 pandemic is hitting the U.S. labor market.
Those who had hoped for some clarity from payrolls processor ADP (NASDAQ:ADP) on Wednesday were disappointed as the company took March 12 as its cut-off date, excluding last week’s record 3.28 million surge in claims.
Inevitably, there’s a huge range of forecasts for this week’s number, from 1.5 million to as much as 6 million, the latter being Goldman Sachs’s revised estimate.
There are also data on the U.S. trade balance in February, which may show a sharp drop in imports from China, and the ISM’s Business Conditions index at 9:45 AM ET. February’s durable goods orders, at 10 AM, are of historical interest only.
2. U.S. Covid-19 death toll hits 5,000 as Florida locks down
The death toll from the Covid-19 coronavirus in the U.S. topped 5,000, while the number of confirmed cases rose over 14% to 216,724, according to Johns Hopkins data.
That’s over twice as many as China has reported, although the U.S. government said on Wednesday that intelligence reports suggest China dramatically under-reported the impact of the disease. Crematoria in Hubei province, where the pandemic started, have reportedly returned the remains of far more people than were confirmed as dying in recent days as the state has relaxed its lockdown measures.
Evidence of strains on the corporate world continue to mount. Carnival (NYSE:CCL) had to scale down the equity part of its capital raising after failing to find enough buyers, while Boeing (NYSE:BA) is reportedly offering buyouts across its whole workforce.
Elsewhere, Softbank said it wouldn’t cash out WeWork founder Adam Neumann and other early shareholders as it had previously agreed, while The Wall Street Journal reported that the creditors of movie theater chain AMC Entertainment have appointed lawyers to advise it on a debt restructuring.
3. Oil prices surge on hopes of peace deal
Crude oil prices surged some 10% after President Donald Trump said he thought an end to the price war launched by Saudi Arabia and Russia could come within days.
By 6:15 AM ET, U.S. crude futures were up 10.2% at $22.38 a barrel, while the global benchmark Brent was up 11.1% at $27.50.
The news comes after the third-biggest combined rise in stocks of U.S. crude and gasoline in history, numbers that underlined the collapse in demand in the world’s largest consumer. Trump is due to meet with U.S. oil industry bosses on Friday.
Oil and gas stocks in Europe also rebounded sharply, amid hopes that their prized dividends will stay intact (in contrast to most of the rest of the stock market). Royal Dutch Shell (LON:RDSa) stock rose 8.2% by mid-morning in London, while BP (LON:BP) stock rose 7.5% and Total (PA:TOTF) rose 3.6%.
4. Stocks set to open higher, dollar gives ground
U.S. stocks are set to open higher after a negative start to the new quarter that saw major indices slip by around 4%.
By 6:15 AM ET, the Dow Jones 30 futures contract was up 361 points or 1.7% at 21,101, while the S&P 500 futures contract was up 1.6% and the Nasdaq 100 futures contract was up 1.2%.
Overnight, China’s CSI 300 had risen 2.3% while Europe’s Stoxx 600 was up 0.3%.
The dollar, meanwhile, was easing across the world after three days of increasingly ominous gains. The dollar index, which tracks the greenback against a basket of developed world currencies, fell 0.1% to 96.655.
5. China prepares stimulus for auto market
China said it would step up measures to support its auto market, the world’s largest, after an unprecedented drop in sales of nearly 80% in the first two months of the year.
The commerce ministry will relax or remove restrictions on car purchases in some regions to help sales of new vehicles, while accelerating plans to boost the scrapping of old ones, Reuters reported, citing comments from Wang Bin, the deputy head of the ministry's consumption promotion division.
The news lifted the shares of European auto groups by between 1.4% and 3.6%, while also supporting suppliers’ share prices.
1. Trump warns of a tough April; tariff suspensions mooted
President Donald Trump warned of a painful month ahead after the White House projected up to 240,000 Americans could die of the Covid-19 coronavirus.
“This is going to be three weeks like we’ve never seen before,” Trump told reporters, completing a pivot away from weeks of downplaying the outbreak.
Johns Hopkins data estimates over 189,000 cases in the U.S., a rise of 15% on the day. The U.S. death toll has now topped 4,000, with around one quarter of those coming in New York City.
Various reports suggest the White House is poised to announce the suspension of more U.S. import tariffs in the coming days to ease conditions for importers already struggling with a drop in demand from consumers.
2. Europe's factory output slumps, while China's rebounds
Europe’s factory activity fell to its lowest level in seven years in March, according to the latest purchasing manager indices released by consultancy IHS Markit. The Caixin PMI for China, meanwhile, rebounded back above the growth line.
The figures had been largely anticipated, but prompted another lurch downward in European stock markets in early trading, with the benchmark Stoxx 600 index losing 2.7% and the U.K. FTSE 100 losing 3.1%.
The FTSE in particular was hit by the latest round of capital conservation measures, as HSBC (LON:HSBA), Barclays (LON:BARC), Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) all suspended their dividends under pressure from regulators. The banks account for some 12% of U.K. companies’ dividend payments, many of which would normally be reinvested in normal times.
3. Stocks set to open lower; ADP's payrolls report eyed
U.S. stock markets are set to open the second quarter markedly lower, asset managers preferring to make more conservative bets for the next three months after the stock market’s worst quarter since the 2008 financial crisis.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 636 points or 2.9% at 21,115 points. The S&P 500 Futures contract was down 2.9% and the Nasdaq 100 futures contract was down 2.5%.
The market is bracing for the release of the ADP private payrolls report for March, which will shed more light on how far and how fast the labor market is deteriorating.
Restaurant chain owner CraftWorks is expected to fire 18,000 staff after its plans to restructure in bankruptcy proceedings collapsed, The Wall Street Journal reported.
Also in focus will be Xerox (NYSE:XRX) and HP (NYSE:HPQ), after the former ended its interest in merging with the printer-maker late on Tuesday.
4. Carnival tries to stay afloat
Cruise line operator Carnival (NYSE:CCL) will try to complete an ambitious $6 billion capital raising in an effort to get through an unprecedented collapse in demand due to the outbreak.
Panama-listed and unlikely to receive support from any government package, Carnival’s plans are a test of private markets’ willingness to back business through a sudden stop, and trust in a future that has near-zero visibility.
The company is trying to place $1.25 billion in new stock (the price of which has fallen over 70% so far this year) as well as $1.75 billion in convertible notes and $3 billion in senior notes which will be supported by liens on the group’s ships.
Even with such backing, the company is reportedly marketing the senior notes with a coupon of 12.5%.
5. Crude tests $20 again amid further capex cuts
U.S. crude oil prices bounced off the $20 a barrel support level but remain under pressure, after a call between President Donald Trump and his Russian counterpart Vladimir Putin failed to generate any concrete measures on addressing the glut on world markets.
The American Petroleum Institute’s weekly report on U.S. oil supplies on Tuesday showed crude inventories rising by over 10 million barrels last week, illustrating the difficulties caused by the collapse in demand for fuel. The U.S. government’s inventory data are due at 10:30 AM ET (1430 GMT).
Elsewhere, BP (LON:BP) said it would cut capital spending by 20%, in line with cuts announced by most other majors. It's cutting capex at its U.S. shale operations by half.
1. Phase 4 is on the way as virus and lockdowns spread in U.S.
The White House and Congress are already working on a ‘phase 4’ economic support package, less than a week after President Donald Trump signed the $2.2 trillion ‘phase 3’ deal into place, according to Bloomberg.
The news agency reported that White House officials have compiled lists of requests from government agencies totaling roughly $600 billion. House Speaker Nancy Pelosi told reporters that more support for local government could be necessary, along with further direct payments to households.
The U.S. is rapidly taking over from Europe as the global epicenter of the Covid-19 pandemic, with 164,610 confirmed cases and a death toll of 3,170 that is still rising quickly. New York City alone has 67,000 cases and has registered 1,342 deaths, according to Johns Hopkins.
Maryland, Virginia and Washington D.C. all enacted tighter restrictions on non-essential movement and business on Monday.
2. WHO sees Europe hitting peak Covid-19 soon; data calm before the storm
The World Health Organization said the Covid-19 outbreak may peak soon in Europe, but fatalities continued to rise in Spain, France and Italy. In Italy, at least, the figures show a clear slowdown in growth.
The virus already appeared to be showing in the region’s hard economic data, with eurozone inflation falling to 0.7% on the year in March, from 1.2% in February, chiefly due to lower oil prices.
However, the labor market apocalypse will have to wait another few weeks, as Germany’s jobless number rose by only 1,000. ING analyst Carsten Brzeski noted that the cut-off point for the data was before the nationwide lockdown began 9 days ago.
3. China PMI rebounds strongly
The Chinese economy showed signs of stabilization after its record contraction in the first two months of the year. The official Purchasing Managers Index rose to 52 in March, back above the line that indicates economic growth, from 35.7 in February.
The news tallies with reports of individual countries reopening factories as lockdowns across the country are eased. However, most of those companies reporting have simultaneously said that their facilities are working well below capacity due to ongoing operational constraints.
The yuan was left little changed against the dollar.
4. Stocks set to open higher, dollar strengthens again
U.S. stock markets are poised to open higher, as market price in reports of further U.S. stimulus and a faint light at the end of the virus tunnel for Europe. End-of-quarter portfolio rebalancing also appears to be playing a role.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 futures contract was up 27 points, or 0.1%, at 22,193. The S&P 500 futures contract was up 0.1% and the Nasdaq 100 contract was up 0.4%.
European markets were also broadly higher, with the benchmark Stoxx 600 rising 0.7% to 316.94.
China and most other Asian markets, with the exception of Japan, had also closed higher in a broad risk-on move.
The dollar, however, was on the march again, rising 0.5% as Japanese banks in particular chased greenbacks for their year-end accounting.
5. Democracy, currencies in trouble in Central Europe
The euro hit a new all-time high against the Hungarian forint, after Hungary’s parliament voted through a radical new law that effectively suspends constitutional law and raises grave doubts about its long-term place in the European Union.
The law extends a state of emergency declared by Prime Minister Viktor Orban earlier this month I the context of the Covid-19 pandemic. It allows him to rule by decree for an unlimited period. It also makes the spreading of ‘fake news’ punishable by up to five years in prison.
By 6:35 AM ET, the euro was at 359.115 forint, down fractionally from an earlier high of 360.41.
The euro has now risen some 7% against the forint in the last month, and by 5.5% against the Polish zloty, which is also under pressure from concerns about a drift to authoritarian rule. Poland's nationalist right-wing government is currently pressing ahead with plans for an election on May 10, despite the obvious public health risks.
1. Trump to keep U.S. distancing in place longer; sees higher death toll
President Donald Trump pushed back his timeline for reopening the U.S. economy, citing the risks of letting the Covid-19 outbreak spiral further out of control.
In a press conference on Sunday, Trump extended the federal guidelines on social distancing measures to the end of April.
He also sharply increased his estimates of the pandemic’s impact even in a best-case scenario, saying that keeping the U.S. death toll to between 100,000 and 200,000 would mean that “we, altogether, have done a very good job.”
That would imply that the U.S. still has the worst of the pandemic ahead of it: Johns Hopkins data put the total number of U.S. deaths from Covid-19 only at 2,500 so far, with over 143,000 confirmed cases.
2. Oil prices hit 17-year low on outlook for U.S. demand
Oil prices tumbled to a 17-year low after President Trump pushed back the timeline for reopening the U.S. economy, creating an even more pressing problem of near-term oversupply.
Goldman Sachs (NYSE:GS) analysts estimate that global oil demand last week was some 26 million barrels a day below pre-pandemic levels.
By 6:15 AM ET (1015 GMT), U.S. crude futures were down 4.6% at $20.52, having earlier dipped as low as $19.92 a barrel. Brent crude futures were down 4.8% at $26.62, bouncing from an intra-day low of $25.16.
3. U.S. stocks sete to open mixed
U.S. stocks are set to open mixed in the wake of Trump’s comments. By 6:15 AM ET (1015 GMT), the Dow Jones 30 futures contract was down 71 points, or 0.2%, at 21,398. The S&P 500 futures contract was flat and the Nasdaq 100 futures contract was up 0.1%.
The dollar, meanwhile, was finding a floor after its precipitous decline in the last week. The dollar index rose 0.4% against a basket of developed market currencies, rising against the pound after Fitch downgraded the U.K.’s credit rating at the weekend.
The dollar was also strong against most emerging market currencies, and hit a new all-time high against the South African rand on Sunday, before consolidating gains on Monday. It also hit its highest in nearly two months against the Egyptian pound, amid reports that banks had been instructed to limit withdrawals and deposits.
4. China rejoins the monetary easing party
China’s central bank rejoined the ranks of global central banks easing monetary policy, after a hiatus. The People Bank of China cut its seven-day reverse repo rate, a key reference point for its other benchmark rates by 20 basis points to its lowest-ever rate 2.2%.
The official yuan rate stayed broadly stable within its recent range around 7.09-7.10 the dollar, while the offshore yuan rate weakened to 7.1050.
Elsewhere, China’s largest banks warned that their asset quality could suffer later in the year due to the post-pandemic recession, despite posting better-than-expected results for the latest quarter. Anecdotal reports out of China indicate that the actual mortality rate in Wuhan was far higher than official data admitted.
5. Banks cut dividend payouts, EasyJet grinds to a halt
European banks started to suspend their dividend payments and buybacks under pressure from their supervisor, the European Central Bank.
Unicredit (MI:CRDI), which had earlier this year outlined plans for its first buyback in a decade, and Dutch giant ING (AS:INGA) were among the biggest to suspend payouts, as did Bank of Ireland (IR:BIRG). ABN AMRO (AS:ABNd), which warned of a $200 million clearing loss on a single client last week, also suspended payouts and warned of a heavy quarterly loss.
Cash conservation measures stepped up in the travel sector too. EasyJet (LON:EZJ) grounded its entire fleet, putting its workforce on a state scheme that will pay 80% of their wages up to a certain threshold.
1. U.S. labor market impact
Due to the timing of the survey period for the U.S. nonfarm payrolls report for March it likely preceded the worst of the impact on the labor market. Economists still expect Friday's figures to show a loss of 100,000 jobs.
A significant overshoot of that and the unprecedented $2 trillion stimulus package approved by Congress could suddenly start to look inadequate. The government's package includes a $500 billion fund to help hard-hit industries and a comparable amount to fund direct payments of up to $3,000 apiece to U.S. families.
Ahead of that, Thursday’s jobless claims report is expected to show another massive wave of new claims for unemployment benefits in the week to March 28, after they surged to a record 3.28 million in the preceding week.
2. Trump walks back remarks about faster reopening
Investors will be closely following developments in the White House after President Trump appeared to back off from remarks he made last week about getting the economy going again by Easter Sunday.
Trump said Saturday he was unsure about whether the United States will reopen for business by April 12th following shutdowns in major cities across the country.
Some investors believe an earlier return to work would boost the U.S. economy, but health experts say a haphazard patchwork of restrictions across states could make the coronavirus impact worse. Cases in the U.S. soared past 115,000 on Saturday, the highest number in the world.
Trump, who is concerned about the economic repercussions of an extended shutdown of nonessential business has accused his Democratic critics of wanting to keep the economy in paralysis to improve their chances of ousting him in the Nov. 3 election.
3. Chinese PMI data
Already Chinese factories' Jan-Feb profits have hit their lowest in a decade and Tuesday’s PMI survey data for March will very likely reveal more pain. And just like everywhere else, job losses are mounting up, regardless of how many cheap loans are being offered to businesses.
While China seems to have contained the coronavirus, allowing work and travel to resume the major economic damage may still be to come. With infections climbing exponentially in the U.S., Europe and the other markets China exports to, and with supply chains in disarray, China being hit by a supply-demand shock.
4. Eurozone data
There is a lot of economic data coming out of the Eurozone this week and Monday’s March economic sentiment data will offer insights into how businesses and consumers assess the situation, even though is predated new restrictive measures put in place since the survey was conducted.
The slump in oil prices means that March’s inflation will have tumbled, while reports on retail sales and unemployment are for February, so will still not show the full magnitude of the economic fallout from measures put in place to try to contain the coronavirus pandemic.
5. Q1 wraps up
Few will regret the end of the first quarter of the year. Fears of a U.S.-Iran war gave way to the coronavirus pandemic which JPMorgan analysts have estimated will have pushed the world economy into a 12% contraction in the three months to March. The quarter saw the most brutal global equity collapse since the Great Depression, exacerbated by a 60% oil price slump.
The start of Q2 may not bring much relief, with coronavirus still spreading rapidly and keeping large parts of the global economy shuttered. Banks have rushed to slash Q2 forecasts too, so expect more turbulence on financial markets.
But markets have rebounded and may actually end Q1 on a high after governments pledged a $5 trillion stimulus effort and major central banks slashed rates and restarted asset purchases. Investors will be watching to see if infection rates are peaking, but there is still no certainty about when the coronavirus will be got under control.
--Reuters contributed to this report
1. U.S. overtakes China in Covid-19 cases
The U.S. has now overtaken China in the total number of confirmed cases, with nearly 86,000, despite having only one quarter of the population. The U.S. death toll approached 1,200, still well behind the likes of China and Italy.
In a press conference on Thursday, President Donald Trump said the figures were a credit to U.S. testing and repeated his priority of restoring activity as quickly as possible, saying that “people want to get back to work.”
Separately, the Washington Post reported that the G7 had been unable to agree on a joint communique due to the U.S.'s insistence of calling the Covid-19 virus the "Wuhan virus".
2. Senate support package due for House vote
The House of Representatives is expected to vote on the $2.2 trillion package passed earlier this week by the Senate, despite rumblings of resistance from individual lawmakers.
Republican Rep. Thomas Massie of Kentucky told a local radio station on Thursday he would oppose allowing the bill to pass by voice vote, effectively forcing a physical vote in Washington for which it would be difficult to gather a quorum.
However, the effect of the bill and of measures taken by the Federal Reserve continues to course through global funding markets, driving the dollar index below 100 and putting it on course for its biggest weekly drop since 2009.
3. Stocks set to open lower as profit-taking kicks in
U.S. stocks are set to open lower on Friday after a breathless rally over the last three days that meets the technical definition of a new bull market.
By 7:10 AM ET (1110 GMT), the Dow Jones 30 futures contract was down 470 points or 2.1%, while the S&P 500 contract was down 2.1% and the Nasdaq 100 futures contract was down 1.8%.
The Chinese CSI 300 had earlier fallen 0.5%, not helped by a 38% drop in industrial profits over the first two months of the year, while Europe’s Stoxx 600 fell 2.7%.
4. Europe struggles, medically and financially
Europe continues to struggle with the Coronavirus, both medically and financially.
Spain reported its deadliest day of the outbreak so far with 769 deaths on Thursday, while Italy also broke a three-day sequence in which new infections and deaths had slowed. The deterioration in Italy’s figures appear due to the virus spreading further beyond the region of Lombardy in the north.
A teleconference among EU leaders on Thursday, meanwhile, produced no further progress on coordinating the bloc’s response to the outbreak, due to a dispute over proposals to issue joint debt, led by France, Spain and Italy.
Elsewhere in Europe, the U.K. government effectively suspended the housing market due to public health concerns, a measure that rippled through the shares of realtors, banks and builders on Friday.
5. Russia keeps pressure on oil; U.S. Senators up in arms
Crude oil prices turned lower as the rally in other risk assets ran out of steam, leaving participants to focus on a mind-blowing level of oversupply in the near term. By 7:10, U.S. crude futures were down 0.1% at $22.55, while Brent was down 1.2% at $26.02
Additionally, Russia’s deputy energy minister was quoted by newswires as saying that Russia thought a fair price for oil is between $45 and $55 a barrel. That’s somewhat below the level that many western oil companies have used for their baselines in recent years, and also below what many shale producers would need to breakeven, at least in the current environment of sky-high borrowing costs.
A group of Republican Senators, chiefly representing oil and gas producing states, urged the administration to take action against Russia and Saudi Arabia for conducting “economic warfare” against the U.S.
1. Stimulus bill passes in the Senate, moves to House
The ‘phase 3’ package of support measures for the U.S. economy moves to the House of Representatives, after the Senate finally approved the $2 trillion bill by a reassuring 96-0 vote.
The bipartisan support reduces the risk of major holdups in the House, whose Speaker Nancy Pelosi had repeatedly attacked its generosity on government support for large corporations.
A vote in the House is due on Friday, after which it is likely to be signed into law immediately by President Donald Trump.
2. Jobless claims to show extent of economic damage from pandemic
The scale of the impact of the Covid-19 pandemic on the U.S. economy will become clearer as the U.S. releases initial jobless claims for last week at 8:30 AM ET (1230 GMT).
A record surge is expected, reflecting the laying off of workers as states and cities across the country prepared to go into lockdown.
Expectations for the number are widely spread, ranging from 2 million to over 4 million, compared to last week’s 281,000.
California Governor Gavin Newsom said that in his state alone, over 1 million people had filed new claims last week. California is ahead of the infection curve in the rest of the U.S., so increases in other states may not be as severe.
3. Stocks set to open lower after two straight Up Days
U.S. stocks are set to open lower after posting their first back-to-back gains in six weeks as the Senate’s stimulus bill finally passed.
By 6:50 AM ET (1050 GMT), the Dow Jones 30 futures contract was down 98 points or 0.5%, while the S&P 500 Futures contract was down 0.9% and the Nasdaq 100 contract was down 0.8%.
Stocks had also retreated overnight in Asia, where the Nikkei fell by 4.5% and the Chinese CSI 300 by 0.4%. Europe also gave up some recent gains, the benchmark Stoxx 600 losing 1.2%.
Despite that, funding stresses in many markets seemed to ease further, the dollar index falling 0.7% to its lowest in over a week.
4. Fallen Angels
Ford Motor's (NYSE:F) credit rating was downgraded to junk by Standard & Poor’s, in what was arguably the highest-profile illustration yet of a trend that is fast getting real in corporate debt.
Occidental Petroleum (NYSE:OXY) was also cut to junk after a two-notch downgrade to BB+ from BBB.
The distinction between investment grade and junk has become more important in the last week, as only the former qualifies for the Fed’s new backstop measures for the corporate debt market. That makes high-yield issuers, including the likes of United Airlines which was downgraded further into junk territory on Wednesday, particularly dependent on the bailout provisions of the phase 3 U.S. stimulus bill.
5. Argument over Euro bonds set for another round
European Union leaders are set to press Germany and others to agree to the issuance of common bonds to finance the explosion in government spending and deficits caused by the Covid-19 outbreak.
Nine leaders, including French President Emmanuel Macron and the prime ministers of Spain and Italy, published a direct appeal to EU Council President Charles Michel on Wednesday for “corona bonds”, a day after the Netherlands, Germany and Austria had refused to discuss it at a meeting of eurozone finance ministers.
The argument threatens to put in the spotlight longer-term issues of debt sustainability among the euro zone’s periphery, reviving concerns over the currency union’s long-term viability.
G20 leaders are also due to hold a conference call to discuss reactions to the pandemic.
1. Senate agrees stimulus deal; Trump agitates to end lockdowns by Easter
The U.S. Senate finally agreed on the terms of a $2 trillion package of measures to support the economy through the Covid-19 crisis.
Majority Leader Mitch McConnell said the Senate will move to vote on the bill later Wednesday, although there still remains some doubt as to how quickly it can pass in the Democrat-controlled House of Representatives.
The final terms are still not known, but various officials have indicated they include direct payments to U.S. families and a big increase in unemployment insurance, as well as some $500 billion in support for larger companies and $150 billion for the health care system.
President Donald Trump said late on Tuesday he wanted to reopen the economy by Easter, on April 12 this year, minimizing the nationwide down time.
2. Markets pause for breath after epic (bear-market) rally
Global stock markets struggled to extend a two-day rally on news of progress on Capitol Hill.
By 6:45 AM ET (1045 GMT), the major U.S. indices were all running out of steam, after the Dow posted its biggest one-day gain since 1933 on Tuesday in anticipation of the agreement.
The Dow Jones 30 futures contract was up less than 0.1%, while S&P 500 futures were down 0.6% and the Nasdaq 100 contract was down 0.4%.
3. Dollar squeeze eases further
The global squeeze for dollar eased further, as the emergency liquidity lines set up by the Federal Reserve both at home and abroad addressed an acute shortage of ready cash.
The dollar index, which tracks the greenback against a basket of developed market currencies, fell 0.90% to 101.34, over 2.5% down from Monday’s high but still up more than 2% on the week.
Demand for seven-day dollars at the European Central Bank’s daily swap operation was down by over half from last week. The dollar also retreated against emerging currencies such as the South African rand, Mexican peso and Russian ruble, but rose another 0.4% against the Chinese yuan.
4. Euro zone inches toward activating ESM, as Ifo index falls further
The euro zone inched closer to deploying its regional bailout fund, the European Stability Mechanism.
A meeting of eurozone finance ministers indicated that member states could count on borrowing up to 2% of GDP through an ‘enhanced conditions credit line’, for which the usual tight conditions on fiscal and structural reforms would likely be waived or at least substantially relaxed.
However, there was no discernible progress toward the issuance of joint debt, as has been urged in the last week by the Prime Ministers of Spain and Italy, the two eurozone countries hit worst by the Covid-19 virus.
Elsewhere Wednesday, the scale of the coming European recession was underlined as German research institute Ifo revised down its closely-watched business climate index for March to 86.1, its lowest since August 2009.
5. Oil reverses as price war drags on
The bounce in crude oil prices topped out, as little of substance materialized to back up hopes of an early end to the global price war.
By 6:45 AM ET, U.S. crude futures were down 2.0% at $23.52 a barrel, while Brent was down 3.2% at $26.27 a barrel.
Norwegian major Equinor (NYSE:EQNR) joined Chevron (NYSE:CVX) and others in announcing a 20% cut in this year’s capital spending that now appears to be the industry-standard response.
Government data for oil inventories are due at 10:30. The figure for gasoline is likely to be as closely watched as that for crude stocks, given the record lows that gasoline futures have posted recently, and warnings of reduced U.S. refinery runs.