Trade of the Day: Stocks and futures jump on virus decline; oil tumbles; US Treasuries, yen dip
Quote of the Day: “Unemployment is the key social risk for the (Chinese) government, so much so that there have been anecdotal reports of workers still listed as officially employed who receive no pay. That implies the recent surge in the official unemployment rate to 6.2% will not surge further,” said Cliff Tan, head of research at MUFG Bank.
Stock of the day: CK Hutchison Holdings rose as much as 6.7% after filings showed Hong Kong’s second richest man Li and his son Victor, through LVM Unity, bought 18.48 million shares in the company last month.
Number of the Day: $100 billion. The revenue loss to the car industry due to shutdown in Europe and North America if factories across both continents remain closed until the end of April, a study by Financial Times showed.
Tip of the Day: “In EM, our growth forecasts continue to tumble as lockdowns become more widespread. EM policy makers have decidedly chosen to support growth even at the cost of increasing external vulnerabilities, but will also need to rely on global coordinated help. The outbreak also continues to focus market attention on end-of-cycle vulnerabilities. In EM local bond markets, our strategists are now modestly overweight duration after adding overweights in low yielders. In EMEA EM they add an overweight in Poland, and in EM Asia they hold overweights in China,” said JP Morgan analysts in a report issued on Monday.
Financial markets climbed amid signs of a slowdown in the infections count in some of the worst effected places. Italy, Spain and France reported a slowdown while New York witnessed a decline in fatalities. Oil prices retreated after last week’s monster rally over the postponement of a scheduled meeting between Saudi Arabia and Russia to resolved the ongoing oil price war.
Brent Futures fell 6.2% and US WTI crude eased 5.9% and all eyes are now on the postponed emergency meeting which is now rescheduled for Thursday.
Europe is opening higher and Wall Street is set for a firm start after Asia’s strong finish. The Stoxx Europe 600 is up 2.8% and S&P Futures are 3.8% higher.
Earlier, the Nikkei 225 surged 4.24%, Korea’s Kospi benchmark jumped 3.85%, Hong Kong’s Hang Seng index advanced 2.21% and Australia’s S&P ASX 200 outperformed the region with a gain of 4.33%. Regionally, the MSCI Asia Pacific index jumped 3.46%.
“The global new case growth has now slowed to an average of 8.4 per cent over the past seven days, compared with 11.7 per cent over the prior seven. The reduction in new case growth is driven mostly by easing in harder-affected regions of Europe like Spain and Italy,” said Deutsche Bank analysts in a note.
The reversal came after last week’s disappointing jobs data.
Friday’s US non farm payrolls data of a loss of 701,000 jobs, while a sharp reversal from strong January and February employment figures, is expected to worsen in the months to come, analysts said.
“The US is expected to be about three to four weeks behind Europe in feeling the impact from the Covid-19 global pandemic. Therefore, when the US Bureau of Labor Statistics (BLS) reported 701,000 non-farm job losses for the month of March on 3 April, it came as a severe shock. The figure is seven times greater than the Reuters consensus survey estimate,” said Azad Zangana, Senior European Economist and Strategist at Schroders.
“As more data is released that shows the extent of the unfolding economic crisis, policymakers (fiscal and monetary) could return with more stimulus measures. Our forecast has the US unemployment rate reaching 8% by the end of the second quarter. Clearly, we are seeing just the tip of the iceberg and the start of a very deep recession.”
Meanwhile, BlackRock said financial markets are underestimating the potential stimulus impact from the CARES Act passed by the US Congress.
“If we make some very conservative assumptions about the pace at which this committed fiscal outlay will be recycled over coming weeks/months, we see at least $1 trillion in spending over the next 90 days – that’s an annual run-rate of more than 20% of U.S. GDP, which is staggering and unprecedented, and will go some distance toward helping to cushion the economic blow of this health crisis and help get the country to the other side,” said Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income