Markets Apr 06

Markets cheer coronavirus spread slowdown, oil tumbles

Huge US employment rise balanced with 'unprecedented' Fed Reserve outlays

by Umesh Desai
Markets cheer coronavirus spread slowdown, oil tumbles
All over the world people have been forced to adapt to the coronavirus. Here, an employee on a farm in La Riche prepares vegetable orders for delivery. Faced with a ban on open markets, farmers are now offering products for delivery. Photo: David Le Tellier / Hans Lucas via AFP

(ATF) Asian markets are higher amid signs of a slowdown in the infections count in some of the worst affected places. Italy, Spain and France reported a slowdown while New York witnessed a decline in fatalities. But investors are worried about the ongoing oil price feud between Saudi Arabia and Russia with the postponement of a scheduled meeting to discuss output cuts.

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.

The Nikkei 225 is up 1.87%, Korea’s Kospi benchmark is 1.9%, Hong Kong’s Hang Seng index has added 0.78% and Australia’s S&P ASX 200 is outperforming the region with a gain of 2.75%. Regionally, the MSCI Asia Pacific index is 1.48% higher.

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. BlackRock Asset Management said March employment data released on Friday “largely reflects lagged conditions”.

Biggest unemployment rise in 45 years

The unemployment rate increased in March to 4.4%, from 3.52% in February, the largest one-month increase since 1975 and “some economists’ estimates suggested that it might be headed to double-digit levels not even witnessed during the Global Financial Crisis.”

The S&P 500 fell 1.51%, the Dow Jones Industrial Average dropped 1.69%, and the Nasdaq Composite retreated 1.53%.

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 US 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.

Reflecting the safety first approach, flows remained strong into money market funds in the last week of the first quarter amid lockdowns in many countries, the collapse in oil prices and as 6.7 million Americans filed for unemployment. Money market funds set a new monthly inflow record of $716 billion while bond funds posted the biggest monthly outflow of $277 billion in March, according to funds tracker EPFR.

“At single-country and asset-class-fund levels, Municipal Bond Funds extended their longest redemption streak since 4Q18 and investors pulled over $2 billion from Total Return Bond Funds for the fifth consecutive week,” EPFR said.

It said South Africa, India and Thailand Bond Funds all posted new outflow records, France Equity Funds saw their longest inflow streak since late 3Q18 come to an end and redemptions from Brazil Equity Funds hit a 43-week high.