Futures Reverse Rally As Oil Slides Ahead Of Surge In Unemployment Claims
Thu, 04/09/2020 - 08:06
"U.S. stock index futures dipped on Thursday, reversing a 3-day rally as investors braced for another staggering weekly jobless claims number, while European stocks clung to modest gains on the last trading day before the Easter holiday. Oil initially rose in the wake of Russia signaling readiness to cut output although US resistance to join the conversation has sparked concerns today's OPEC+ meeting could end up a major disappointment.
Early in the overnight session, futures continued their multi-day ramp on early signs the coronavirus outbreak in U.S. hot spots was close to peaking, with the S&P 500 ending more than 3.4% higher after President Trump suggested the government could reopen the country in phases and maybe ahead of schedule. However, sentiment has warned as the session continued ahead of today’s plethora of risk events.
First and foremost, traders will eye the number of initial jobless claims which are expected to have surged by 5.5 million this week, and to 15 million in the past three weeks. Estimates in the survey were as high as 9.295 million, and the final report from the Labor Department is expected at 8:30 a.m. ET.
Then again, the worse the initial claims number, the better it will likely for stocks. As DB's Jim Reid writes, "brace yourself ahead of what will likely be the strangest Easter weekend in your lifetime as today we have another weekly jobless claim report to look forward to in the US. Having said that the S&P 500 has rallied on the day of the staggeringly bad numbers over the last two weeks (+6.24% and +2.28% respectively) so it may be as much a curiosity of how bad unemployment is going to be in the short term as much as it is about markets."
A major event today will be the OPEC+ virtual meeting, where the Kuwait Oil Minister said the intention is moving towards reaching an agreement to lower output by a large amount between 10mln-15mln bpd, even though the Kremlin declined to comment on reports their maximum cut would be 2mln BPD. Russia and Saudi Arabia still need to settle differences regarding plans for a global oil production cut according to sources, regarding baseline and quantity with Vladimir PUtin saying he has no plans to talk to Trump or the Saudis. Meanwhile, yesterday we learned that consumption in India, the world’s third-biggest user, has collapsed by as much as 70% with the country in lockdown which is why Goldman said that even a 10mmb/d oil cut would have no impact on its $20 oil price target.
In Europe, the Stoxx Europe 600 Index trimmed an advance amid reports that Italy and the U.K. may extend lockdowns to combat the coronavirus outbreak, though it stayed higher overall. The impact of the outbreak continued to surface in corporate results with Switzerland’s largest banks bowed to pressure to delay dividends even as UBS Group AG reported a surprise jump in first-quarter profit.
Earlier in the session, most Asian stocks rose, led by energy and finance, after rising in the last session. Australia's S&P/ASX 200 gained 3.5% and India's S&P BSE Sensex Index rose 3.1%, while Japan's Topix Index dropped 0.6% as did the Topix with Hiramatsu and Bic Camera falling the most. The Shanghai Composite Index rose 0.4%, with Jiangsu Jiangnan High Polymer Fiber and Lifan Industry Group posting the biggest advances.
Investors have been trying to figure out how and when the $90 trillion global economy can begin to reboot in the wake of the coronavirus. While the White House’s top health advisers develop criteria to reopen the U.S. in the coming weeks if trends hold steady, the pandemic continues to exact a heavy toll. Italy’s new cases crept up after several days of declines, raising questions about whether plans will be delayed for relaxing the stringent restrictions on public life. The coronavirus may be “reactivating” in people who have been cured of the illness, according to Korea’s Centers for Disease Control and Prevention.
“It’s all a question of when the economy reopens and how quickly that happens,” said Nancy Davis, chief investment officer of Quadratic Capital Management LLC. “We aren’t out of the woods.”"
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