Stocks Rise As Worries Over China Trade Relations Ease

Stocks rose Friday, adding to this week’s strong gains, amid a report by Bloomberg News that China is set to up its purchases of U.S. farm products to comply with phase one trade deal.

The report eased concerns about U.S.-China trade relations as the two countries exchange heated rhetoric regarding the coronavirus.

The Dow was up 125 points, or 0.5%. The S&P 500 also climbed 0.5%, while the Nasdaq rose 0.8% to trade back above 10,000.

Stocks tied to the reopening of the economy gained. United Airlines rose 1.7%, while Kohl’s gained 1.6%. Oil and energy stocks were among the biggest gainers, with Devon Energy jumping 3.2%. The Energy Select SPDR ETF jumped 2.5%.

For the week, the major averages were on pace to post their fourth weekly gains in five. The Dow and S&P 500 were each up at least 3% week to date while the Nasdaq has risen 4.7%.

The Dow, S&P 500 and Nasdaq Composite headed into Friday’s session on pace for their fourth weekly gain in five weeks. The Dow is up 1.9% week to date through Thursday’s close while the S&P 500 has gained 2.4% in that time. The Nasdaq has climbed more than 3% over that time period.

On Thursday, the Dow closed just below the flatline, while the S&P 500 and Nasdaq eked out small gains as traders traders grappled with disappointing unemployment data and rising coronavirus cases.

A report Thursday showed initial U.S. jobless claims totaled 1.5 million last week, topping a Dow Jones estimate of 1.3 million. Meanwhile, the number of coronavirus cases continues to rise in certain parts of the U.S. Texas, California, Arizona and Florida all reported its biggest-ever one-day increase.

Some investors fear that a resurgence in coronavirus cases could lead to states retaking stricter quarantine measures to curb the spread, thus thwarting expectations of a smooth economic recovery. To be sure, those increases come as states ramp up testing.

“The rally of the past few months may have led to stocks reaching within striking distance of record highs, but investors are struggling to reconcile upward momentum and less optimistic messages about the months ahead,” said Lindsey Bell, an investment strategist at Ally Invest. “That, along with concerns about a second wave of coronavirus and geopolitical tensions, has led to some serious indecisiveness.”



$190 Oil Sounds Crazy. But JPMorgan Thinks It’s Possible Even After The Pandemic

In a little-noticed report, JPMorgan Chase warned in early March that the oil market could be on the cusp of a “supercycle” that sends Brent crude skyrocketing as high as $190 a barrel in 2025.

Weeks later, the coronavirus pandemic set off an epic collapse in oil prices as demand imploded. And yet the bank is doubling down on its bullish view.

Brent hit a two-decade low of $15.98 a barrel in April. US crude crashed below zero for the first time ever, bottoming at negative $40 a barrel. 

The United States, Russia and Saudi Arabia — the three largest producers — have dramatically slashed production in response. The massive supply cuts helped breathe life back into oil prices. 

Though demand remains depressed, JPMorgan still thinks a bullish oil supercycle is on the horizon. A huge amount of supply has been taken offline and the industry could have major trouble attracting future capital. 

“The reality is the chances of oil going toward $100 at this point are higher than three months ago,” said Christyan Malek, JPMorgan’s head of Europe, Middle East and Africa oil and gas research. 

Looming deficit suggests prices will ‘go through the roof’

For years, the world has had more oil than it needs. That glut caused storage tanks to fill up to the point that crude turned negative in April. 

So oil producers slashed supply. But now the pendulum in the boom-to-bust oil industry could swing too far in the opposite direction. 

Oversupplied oil markets will flip into a “fundamental supply deficit” beginning in 2022, according to a JPMorgan report published June 12. The most likely scenario, JPMorgan said, is that Brent rises to $60 a barrel to incentivize higher output. 

The report didn’t spell out a price target for its bull case scenario — yet Malek told CNN Business that JPMorgan’s $190 bullish call from March still stands. In fact, he thinks it’s even more likely now. 

Malek, who has been bearish since 2013, pointed to the very large supply-demand deficit that’s expected to emerge in 2022 and could hit 6.8 million barrels per day by 2025 — unless OPEC and others pump much more. 

“The deficit speaks for itself. That implies oil prices will go through the roof,” he said. “Do we think it’s sustainable? No. But could it get to those levels? Yes.” 

BP sounds the alarm

Of course, it’s hard to imagine triple-digit crude today. Some analysts believe even the rebound in US oil from negative $40 to positive $40 in just seven weeks is overdone

Coronavirus cases are spiking in some areas in the United States and Latin America. Demand for gasoline is improving but isn’t nearly back to pre-pandemic levels. And it could take years for the airline industry to fully recover — if it ever does.

BP warned this week that the health crisis could have an “enduring impact on the global economy,” causing less demand for energy over a “sustained period.” The UK oil giant slashed its forecast for Brent crude prices over the next three decades by 27% to $55 a barrel. 

BP also said it plans to write down the value of its assets — including untapped oil and gas reserves — by up to $17.5 billion. 

Somewhat counterintuitively, JPMorgan’s Malek said the BP writedown and gloomy forecast are “one of the most bullish” developments he’s seen. 

That’s because oil companies must spend heavily just to maintain production, let alone increase it. If they do nothing, output will naturally decline.

And BP’s weaker outlook suggests even fewer long-term oil projects will make the cut. That in turn will keep supply low — even as demand rises. 

“It validates our point,” Malek said. 

Oil spending could collapse to 15-year lows

Between 2015 and 2020, more than 50 new oil projects were sanctioned globally, according to JPMorgan. But the bank estimates just five so-called “greenfield” projects will come on the line in the next five years. 

And some Big Oil companies including BP, Shell, Total and ConocoPhillips have delayed making final investment decisions. 

Global upstream investments are expected to plunge to a 15-year low of $383 billion in 2020, according to a recent Rystad Energy report. 

Those spending cuts, Rystad said, will make it “more challenging to maintain existing production” and will potentially impact the “stability” of supply in the long run.

Of course, Saudi Arabia and Russia have the firepower to respond quickly to supply shortages. The two nations, along with the rest of OPEC, are intentionally holding back production to get rid of the supply glut. 

But Saudi Arabia needs much higher oil prices to balance its massive budget, with breakeven at about $80 a barrel. 

“They’re not going to flood the market” for that reason, Malek said. 

That could leave room for the United States to respond. US output has also dropped sharply, with the number of active drilling wells sinking to a record low, according to Baker Hughes data that goes back to 1987.

The climate change factor

Yet shale drillers can’t bank on the once-unlimited stream of Wall Street funding. Investors are demanding frackers live within their means after years of burning through piles of cash. 

“Shale is growing up. It’s still there, but it’s maturing,” said Malek.

Capital is being further restrained by heightened concerns about climate change and the rise of socially responsible investing. A growing number of investors simply don’t want to touch oil stocks. 

The combination of the price crash, capital flight and climate change could limit the oil industry’s ability to attract the necessary money — just when it’s needed the most. 

The past few months have shown how difficult it is to forecast the future. While $190 crude might sound far-fetched, so did negative-$40 oil. 

EIA: U.S. Crude Stockpiles Rose 1.2M Barrels

Stockpiles of U.S. crude oil rose 1.2 million barrels, the Energy Information Administration said Wednesday, confounding expectations. Analysts tracked by had forecast a draw of 152,000 barrels compared to a build of 5.7 million barrels the previous week.

U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, are now at a record high of 539.3 million barrels. That is about 15% above the five year average for this time of year.

Oil prices have been under pressure because of mounting evidence that it will take longer to bring down mounting stockpiles of crude as businesses struggle to come back after Covid-19 lockdowns. Crude Oil WTI Futures recently traded down 0.17%, at $38.21 a barrel, edging higher after Wednesday’s data was reported.

Late Tuesday, the American Petroleum Institute said U.S. crude stocks rose 3.3 million barrels, the third increase in four weeks.
The EIA said distillate stock fell 1.35 million barrels, while gasoline stores fell 1.67 million barrels.

“This is a very interesting data set that kind of offsets one bullish impact against a bearish one,” said analyst Barani Krishnan. “Firstly, you have an unexpected build in crude that is offset by the bigger than expected drop in gasoline and surprise draw in distillates.

The distillates number is a very important marker as it marks the first such draw in over two months. But distillates production actually fell last week, so it may explain the draw.”

Krishnan added that crude imports fell 222,000 barrels per day last week, “so it’s kind of surprising that you actually had a build in crude inventories. And Cushing inventories fell by 2.6 million barrels. To make it all more confusing, you have another 1.7 million barrels that went into the Strategic Petroleum Reserve.” Crude production of 10.5 million barrels per day is down 2.6 million bpd from the mid-March record high of 13.1 million bpd, he noted.

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Demand for crude collapsed earlier this year because of Covid-19 work shutdowns. OECD stockpiles, traditionally the key indicator for the Organization of Petroleum Exporting Countries, are some 141 million barrels above their five-year average, implying a significant supply overhang even if the OPEC+ producers extend their agreement to cut production 9.7 million barrels a day beyond the end of July.

Earlier Wednesday, OPEC’s latest monthly report indicated that there will be room for its members to ease their production constraints later in the year. It estimated global demand for its crude rising to 27.8 million barrels a day in the third quarter and to 31.2 million bpd by the final quarter of 2020.
OPEC members produced 24.20 mil bpd in May.



Rating: 4 out of 5.

Facebook Closes Political Ads Ahead Of U.S. Presidential Election

Facebook Inc said on Tuesday it would affix labels to political ads shared by users on their own feeds, closing what critics have said for years was a glaring loophole in the company’s election transparency measures.

The world’s biggest social network has attached a “paid for by” disclaimer to political ads since 2018, after facing a backlash for failing to stop Russia from using its platforms to influence the 2016 U.S. presidential election.

But the label disappeared once people shared the ads to their own feeds, which critics said undermined its utility and allowed misinformation to continue spreading unchecked.

“Previously the thinking here was that these were organic posts, and so these posts did not necessarily need to contain information about ads,” said Sarah Schiff, a Facebook product manager overseeing the change.

After receiving feedback, Schiff said, the company now considers it important to disclose if a post “was at one point an ad.”

Facebook introduced a similar labeling approach for state news media earlier this month, but that label also sometimes drops off with sharing and does not appear when users post their own links to those outlets.

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The company is facing demands to do more to combat false viral information before the Nov. 3 presidential election, including by presumptive Democratic nominee Joe Biden, who last week called on Zuckerberg to reverse his decision to exempt political ads from fact-checking.

Zuckerberg has touted transparency tools in response, arguing that voters should be able to examine statements from would-be political leaders unimpeded.

In a USA Today op-ed on Tuesday, he pledged to display a Voting Information Center at the top of U.S. users’ news feeds. He also said the company would aim to help 4 million people register to vote, double its goal for 2016.



Rating: 5 out of 5.

Financial Markets – Top 5 Things To Watch This Week

StockMarketNews.Today – Federal Reserve Chairman Jerome Powell is due to testify to Congress amid concerns over a possible resurgence of Covid-19. U.S. retail sales data will be watched for indications on the strength of the reopening rebound, with investors waiting to see if the recent bounce in value stocks can be sustained. Across the pond, the Bank of England is expected to further expand its stimulus program after a report showing that the economy contracted by more than 20% in April. And its set to be a busy week in the European Union with a fresh round of Brexit talks and a summit to discuss its pandemic recovery fund proposal. Here’s what you need to know to start your week.

1 – Powell testimony
Fed Chairman Jerome Powell is to testify on the central bank’s semiannual monetary policy report before Congress on Tuesday and Wednesday. Investors will be on the lookout for any further indication of the Fed’s view on the economy and more clarity on its bond buying and lending programs.
Last week the Fed indicated that it plans years of extraordinary support for an economy facing a long hard recovery from the coronavirus pandemic, with policymakers projecting the economy to shrink 6.5% in 2020 and the unemployment rate to be 9.3% at year’s end.

2 – U.S. retail sales, jobless claims data
U.S. retail sales data for May is due out on Tuesday with investors on the watch for signs of an economy on the mend. April retail sales plunged a record 16.4% but hopefully that was the nadir and economists are forecasting an 8% rebound amid the ending of lockdowns across many states. The latest initial jobless claims report will be released on Thursday. Jobless claims totaled 1.5m last week, marking the 10th consecutive weekly decline as hiring slowly returns. While claims have slowed, the unemployment rate, currently at 13.3% remains at historic levels.
The calendar also features updates on industrial production and housing starts.

3 – Can the bounce in value stocks stick?
As the U.S. economy begins to recover from the steep coronavirus slowdown, some fund managers have been drawn to value stocks, a sector that underperformed during the recent rally. Value stocks tended to underperform growth stocks during the bull market that ran for more than a decade and ended this year. That pattern has recently reasserted itself: The S&P 500 Value index was up just 4.5% over the last month compared to a 5% gain in the S&P 500 Growth index. But increased uncertainty over the economic outlook or the course of the pandemic could push investors back into the growth companies that have delivered performance in recent months, so investors will be keeping a close eye on this week’s economic data.

4 – BoE to expand stimulus measures
All central banks are fighting the economic fallout from the coronavirus pandemic, but the Bank of England also has Brexit to contend with. April’s 20% GDP slump leaves Britain’s economy the same size as in 2002; this year could bring the biggest contraction in 300 years. The BOE is expected to give itself another 150 billion pounds in firepower at its Thursday meeting, adding to the expansion announced in March and some analysts reckon it could even stretch to 200 billion pounds. The current rate of buying looks set to hit the limit over the next couple of months and an increase would help avoid premature discussion about ending the policy or of tapering.
The U.K. is also to release data on unemployment, inflation, retail sales and house price inflation during the week.

5 – Busy week in the EU
EU Commission President Von der Leyen is set to meet with British Prime Minister Boris Johnson on Monday in a bid to revive stalled talks on post-Brexit ties. So far there hasn’t been much progress on a free-trade agreement and there’s not much time left to extend the end-2020 deadline for a deal. Then on Thursday and Friday EU leaders will meet to discuss the proposed recovery fund to repair economic damage from the pandemic. Most members support the recovery fund but a quartet dubbed the “Frugal Four” – Netherlands, Austria, Denmark and Sweden — remain skeptical. For the proposal to succeed, it must be agreed on by everyone and any delay will be a major setback for the euro.



Rating: 4 out of 5.

Dow Jumps More Than 800 Points

Stocks rallied on Friday, clawing back some of the sharp losses from Wall Street’s worst day since March. The Dow Jones Industrial Average traded 831 points higher, or 3.3%. The S&P 500 gained 2.9% while the Nasdaq Composite advanced 2.8%.

Investors on Friday went right back into the plays whose fates hinge on a successful reopening of the economy. Carnival Corp jumped 10.6% in premarket trading. United Airlines climbed 10.5%.

Other premarket winners included brick-and-mortar retailers Kohl’s and Gap. Those stocks were hit big time during Thursday’s sell-off as investors feared the reopening of the economy could be delayed by a second wave of cases.

The Dow, S&P 500 and Nasdaq on Thursday all recorded their biggest one-day losses since mid-March, posting losses of at least 5%. Thursday’s declines put the major averages on pace for their biggest weekly losses since March 20, when they all dropped at least 12% amid broad economic shutdowns stemming from the pandemic.

Even after Friday morning’s bounce, Morgan Stanley Investment Management’s Andrew Slimmon said: “Given the magnitude of the rally, it would shock me if we had a one day sell-off and that’s it.”

“The stocks that are up the most from the lows are still the risk-on, high beta, value, small-cap stocks,” Slimmon, who is a managing director and senior portfolio manager at the firm, told CNBC’s “Squawk Box Asia” Friday morning Singapore time. “They’re still the big winners and I would suspect that there’s more pain to come near-term before the market clears out kind of this excessive speculation that we’ve seen recently.”

Wall Street’s fear gauge signaled more wild trading ahead. The Cboe Volatility Index on Thursday jumped to trade above 40 for the first time since May 4. The VIX remained elevated Thursday morning, above 37.

Thursday’s losses came after data compiled by Johns Hopkins University showed the number of new coronavirus cases has risen in states like Arizona, South Carolina and Texas as they continue their reopening process. Arizona cases have nearly doubled since Memorial Day.

Still, Treasury Secretary Steven Mnuchin told CNBC’s Jim Cramer the U.S. can’t shut down the economy again.

Overall, more than 2 million coronavirus cases have been confirmed in the U.S. along with over 100,000 deaths.

Stocks had been ripping higher prior to this week, as investors cheered the prospects of the economy recovering as states and countries eases quarantine measures.

“We had gone straight up more than 30% without a real sell-off, so you’re due for one, and I don’t think it’s the worst thing in the world,” said JJ Kinahan, chief market strategist at TD Ameritrade. “As more states get back, the question becomes: Are they going to ramp up fast enough to please Wall Street? What you’re seeing is it’ll be hard to do that.”

Despite Thursday’s sell-off, the S&P 500 and Dow remained more than 37% above the intraday lows reached on March 23. Most of those gains have been driven by stocks that would benefit from the economy reopening, including airlines, cruise lines and retailers.

“Some of these stocks may have gotten ahead of their skis,” said Kinahan. “When you see some of the airlines being priced at the levels they were before this all started when they say they’re going to do 60% of their business just doesn’t make sense.”

American, Delta and United ended Thursday’s session down more than 20% each for the week while Southwest has lost 14%. Banks such as JPMorgan Chase, Citigroup, Wells Fargo and Bank of America — which have surged amid expectations of improving economic activity — are all down over 12% for the week.

Consumer sentiment data along with the latest U.S. import and export numbers are scheduled for release Friday morning.



Just Eat To Buy Grubhub For $7.3 billion

European food-ordering firm Just Eat NV said on Wednesday it had agreed to buy U.S. peer Grubhub Inc in an all-stock deal that, if completed, would create the world’s largest food delivery company outside China.

The deal would create “a company built around four of the world’s largest profit pools in food delivery: the U.S., the UK, the Netherlands and Germany,” the companies said in a joint statement. For Grubhub, the deal offers an escape from the antitrust concerns that plagued its talks with the Uber Eats division of ride-hailing firm Uber Technologies (NYSE:UBER) Inc.

Uber approached Chicago-based Grubhub in May for an all-stock deal that fell apart this week. In a statement, Uber said the food delivery industry needs consolidation, but “that doesn’t mean we are interested in doing any deal, at any price, with any player.”

Media reports about the Uber offer prompted Just Eat Takeaway to reach out with its own offer, Grubhub CEO Matt Maloney told Reuters in a phone interview.

Dutch-based Takeaway had acquired Just Eat in January for $7.8 billion.
Maloney has known Just Eat Takeaway’s billionaire Chief Executive Jitse Groen since 2007, and both companies have similar models based around being a marketplace for customers to find restaurants and order from them, Maloney said.

The European firm presented an offer “at a price that made the decision very easy,” Maloney said. The deal also provides Grubhub “financial strength and flexibility.”

Grubhub’s stock price rose nearly 6% in aftermarket trading and Just Eat Takeaway shares closed more than 13% lower in Amsterdam after the companies disclosed they were in talks in the late afternoon.

Experts say consolidation is long overdue in the U.S. restaurant delivery sector, where demand is surging, especially as many people stay home to combat the spread of the novel coronavirus.

Just Eat Takeaway said it expects to close the deal in the first quarter of 2021, pending shareholder and regulatory approval. Chris Sagers, who teaches at Ohio’s Cleveland-Marshall College of Law, said a deal between Grubhub and Just Eat Takeaway should win easy approval from U.S. antitrust enforcers.

The combined company will be headquartered in Amsterdam.
The companies said in a presentation that Just Eat Takeaway had 2019 revenues of 1.5 billion euros ($1.7 billion), compared with Grubhub’s 1.2 billion euros.

In a trading update, the companies said that order growth was up 41% across the companies’ main markets in April and May, as the coronavirus outbreak led to a surge in use of online food services.

Groen founded Takeaway in 2000 while still a student and oversaw its growth through a series of acquisitions, including a 2018 deal to buy the German operations of rival Delivery Hero. Groen owns a 10.29% stake in Just Eat Takeaway ahead of the Grubhub deal.



Rating: 4 out of 5.

Investors Brace For Market Swings As Trump Slips In Election Polls

The U.S. presidential election is re-emerging as a potential risk to markets after a shift in polls that has seen President Donald Trump lose ground to Democrat Joe Biden.

Concerns over election-fueled volatility have regained prominence in recent weeks, even as broader market swings have subsided and stocks have surged. Futures on the Cboe Volatility Index (VIX), known as Wall Street’s “fear gauge,” show a visible bump in volatility expectations near the election.

Election-related risk captured in VIX futures has risen to about three times the levels seen ahead of the 2012 and 2016 elections based on the spread between September and October futures, according to Susquehanna Financial Group. VIX futures reflect volatility expectations for the month-long period after their expiration.

Contributing to investors’ election concerns are polls showing that Trump’s standing among voters has eroded amid criticism over his handling of the coronavirus pandemic as well as the protests sparked by the killing of George Floyd in police custody.

A Democratic victory could threaten policies championed by Trump and generally favored by Wall Street, including lower corporate tax rates and fewer regulations, analysts said.

“A potential victory by Joe Biden … and to a greater extent, a ‘Democratic sweep,’ are generally considered more market-unfriendly outcomes,” analysts at BofA Global Research said in a recent note to clients.

A Reuters/Ipsos poll released June 2 showed that Biden’s lead over Trump, a Republican, among registered voters expanded to 10 percentage points – the biggest margin since the former vice president became his party’s presumptive nominee in early April. More than 55% of Americans said they disapproved of Trump’s handling of the protests, a separate poll showed.

The closely-watched betting site PredictIt put Biden 9 points ahead of Trump, compared with a 6-point lead for Trump a month ago.

“I don’t believe we’ll get to the election without a substantial spike in volatility,” said James McDonald, chief executive of hedge fund Hercules Investment Management.

McDonald expects election-related trades to ramp up in the weeks just before the Nov. 3 general election and plans to deploy options and futures strategies that take advantage of volatility spikes once the results come in.

The election-related concerns stand in contrast to a recent easing in broader market volatility: the VIX has fallen to its lowest levels since late February, while the S&P 500 (SPX) has climbed 44% from its March 23 closing low.

Taxes have been one major area of contrast between the two presidential contenders. Biden has criticized Trump’s 2017 tax decreases and pledged to reverse some of those cuts, a move that could weigh on companies that had benefited from the legislation.

Analysts at Goldman Sachs (NYSE:GS) have estimated that Biden’s tax reform, if enacted, would reduce earnings for S&P 500 companies by around $20 a share in 2021, to $150 a share.

Netflix Inc (O:NFLX), Visa Inc (N:V) and Inc (N:CRM) are among the companies that have received a bigger than average benefit from the 2017 tax reform, the bank said.

A Trump win, on the other hand, could raise concerns over the continuation of a trade war between the U.S. and China that has periodically roiled markets over the last several years.

Trump has already taken a harsher tone on China in recent weeks, a move some analysts believe is intended to shore up support among the president’s voter base.

Financial and technology-related stocks have been particularly sensitive in the past to threats of increased regulation and restrictions on trade with China, and those sectors may again grow more volatile as the election approaches, said Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets.



Rating: 4 out of 5.

Trading: Natural Gas Is Bottoming

However, Monday’s rebound pointed at trader demand that might be sufficient to have caused the contract to bottom out.

NG Daily

NG Daily

The price has been range trading since May 11 within an ascending triangle, in which demand has been gaining on supply. The price fell out of the triangle yesterday but closed higher after wiping out the loss.

The rebound confirmed another presumed boundary of demand, that of a rounding bottom, in place since early January. It provides a symmetrical visual of how COVID-19 first spurred the fall, seen in the first part of the pattern, and after a while, as the pattern begins to rise, the end to the lockdowns coupled with the hope that the worst is over.

Strictly technically, the single day breakout on May 5 messes up what is otherwise a perfect pattern, as well as hinders deriving a precise determination to the pattern’s completion. We still expect the top of the Jan. 20 falling gap to mark the end of the bottom. Purists, however, may insist on a penetration of the May 5 high.

The implied target of the ascending triangle—if completed—is above the May 5 high, suggesting that too will come. It isn’t a foregone conclusion though that in any trade an implied target is achieved, more so when conflicting with a resistance.

Trading Strategies

Conservative traders would wait for the price to clear the May 5 high, above 2.162.

Moderate traders may rely on the penetration of the $2 level, below which prices have been hovering, save for a single day.

Aggressive traders may commit a position upon the triangle’s breakout above $1.9 or even right now, with the price being so close to the base of the two patterns—as long as the trade follows a coherent trade strategy that fits the trader’s budget and character.

Trade Sample – Very Aggressive Long Position

  • Entry: $1.80
  • Stop-Loss: $1.74
  • Risk: 6¢
  • Target: $2.10
  • Reward: 30¢
  • Risk:Reward Ratio: 1:5



Economic Calendar – Top 5 Things to Watch This Week

The main focus this week will be on Wednesday’s Federal Reserve meeting, with investors on the lookout for clues on how much more, if any, stimulus may be needed. The U.S. calendar also features data on CPI, jobless claims and consumer sentiment.

Investors will continue to monitor the steepening yield curve amid a selloff in U.S. bonds. In the euro zone, European Central Bank head Christine Lagarde will likely offer more insights into last week’s larger than expected increase in its stimulus program. Concerns over Chinese growth could also be on the radar after weak trade data on Sunday. Here’s what you need to know to start your week.

Fed meeting
The U.S. central bank’s monetary policy announcement on Wednesday will be the first since April when Fed Chair Jerome Powell said the U.S. economy could feel the weight of the economic shutdown for more than a year. Investors will be keen to hear the Fed’s views on the economic outlook in the wake of Friday’s U.S. employment report which showed that the economy unexpectedly added jobs in May after suffering record losses in the prior month. The report offered the clearest signal yet that the worst of the downturn triggered by the coronavirus crisis is probably over, fueling a rally in stocks and a selloff in Treasuries.

Steepening yield curve
Friday’s U.S. jobs report added fuel to a dramatic sell-off in U.S. government bonds from their recent record highs, pushing the yield curve to its steepest level since March. The steepening — when longer-dated yields rise faster than short-dated ones — signals a brighter growth outlook. But too fast a rise in borrowing costs can strangle the economic recovery. While the Fed could introduce yield-curve control measures to target short-term rates, fund managers say they expect yields will need to rise significantly to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the economic rebound can support the rise in yields.

U.S. economic data
This week’s calendar also features updates on U.S. jobless claims, a key indicator of the health of the economy, along with consumer price inflation and consumer sentiment.
Claims have declined since hitting a record 6.8 million in late March, falling below 2 million last week for the first time since mid-March. The report suggested the worst is over for the labor market, combined with Friday’s nonfarm payrolls report.
Meanwhile, CPI should continue to ease given the lack of demand in the economy, while the University of Michigan’s consumer sentiment index should continue to rise amid the re-openings and rally in stock markets.

Lagarde testimony, euro zone data
On Monday, ECB President Christine Lagarde will testify, via satellite link, before the European Parliament Economic and Monetary Affairs Committee. Lawmakers will have the opportunity to ask questions about the reasons behind the ECB’s larger-than-expected increase in its emergency bond buying stimulus program. On the data front, Germany is to release industrial production data for April on Monday followed by France and the wider euro zone later in the week. Germany, the euro area’s largest economy, is facing the prospect of its deepest recession since World War Two as the coronavirus pandemic takes its toll, even though lockdown restrictions are now being eased.

China growth fears
Chinese trade data on Sunday indicated that global demand for goods produced by the world’s second-largest economy remains weak. Chinese exports contracted in May as global coronavirus lockdowns continued to devastate demand, while a sharper-than-expected fall in imports pointed to mounting pressure on manufacturers as global growth stalls. The data could reinforce expectations that China may not have any growth this year. Investors will be watching to see how bullish stock markets will react as the unstoppable force of Chinese production runs into an impregnable global downturn.



Wall Street Surges At Open On Jobless Surprise

U.S. stock markets surged at the opening on Friday after an expected and large rise in employment in May strengthened hopes that the worst of the coronavirus pandemic was over, and bolstered confidence in a speedy, ‘V-shaped’ recovery.

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By 9:37 AM ET (1337 GMT), the Dow Jones Industrial Average was up 672 points, or 2.6%, at a three-month high of 26,954 points. The S&P 500 rose 2.1% and the Nasdaq Composite was up 1.4%.

The Labor Department had earlier reported that the economy created 2.509 million net jobs in the month to mid-May, causing the jobless rate to fall from its postwar high of 14.7% to 13.3%. Analysts had expected nonfarm payrolls to shrink by 8 million.

“There will naturally be some doubt lingering about these figures given they are telling such a different story to all other data on the labor market, but these are the official ones and on the face of it are fantastic,” ING’s chief international economist James Knightley said in a research note. “It suggests the American economy can bounce back very vigorously and we all need to massively revise up our economic projections.”

The biggest individual gainers were, again, those that had lost the most on the way down, including Hertz Global and Luckin Coffee (NASDAQ:LK), both of which have already filed for bankruptcy protection. Among more viable businesses, American Airlines (NASDAQ:AAL) stock and Occidental Petroleum (NYSE:OXY) stock both rose 23%, the latter helped further by reports that OPEC and its allies will meet on Saturday to confirm a one-month extension to the current deal keeping a total of 9.7 million barrels a day of oil off world markets.

U.S. Crude futures hit their highest in three months on the news, rising as high as $39.55 a barrel before retracing a little to trade at $39.05, up 4.4% on the day.




U.S. Exports, Imports Fell Sharply In April Amid Coronavirus Disruptions

Trade deficit widened as the pandemic sapped global commerce, affected supply chains.

U. S. exports and imports both posted their largest monthly decreases on record amid coronavirus-related shutdowns around the world.

Imports fell 13.7% in April from March, and exports dropped 20.5%, the largest declines since record-keeping began in 1992, the Commerce Department reported Thursday. The trade deficit expanded 16.7% to a seasonally adjusted $49.41 billion.

“Beyond the fact that we’re seeing a significant widening of the trade deficit, what really strikes me is the pace at which trade flows are declining,” with imports and exports down about a quarter since the coronavirus outbreak, said Gregory Daco, chief U.S. economist at Oxford Economics.

Exports of aircraft and cars have dropped as manufacturers such as Boeing Co. were hit by the world-wide disruption of travel and auto makers including Ford Motor Co. closed factories to prevent the spread of the virus.

“We’re reopening fast enough that import demand will pick up faster than export demand,” said Joel Naroff, president of Naroff Economic Advisors. “We’ll have more total activity as we go forward but the trade deficit is likely to widen.”

Global trade flows may start to pick up again as some factories reopen and the easing of social-distancing measures revives consumer demand.

“Much of the disruption may have already occurred,” Angeliki Frangou, chief executive of container ship operator Navios Maritime Containers LP, said on an earnings call last month. “As countries emerge from quarantine and return to work, we expect volumes to pick up, particularly in the second half of 2020.”

Exports of goods in April were the lowest since late 2009, when the nation was recovering from a deep recession, Thursday’s report showed Imports of goods were the lowest since late 2010.

A similar trend was seen in Canada, where the goods trade deficit widened in April as exports plunged to their lowest level in over a decade. Statistics Canada attributed the dramatic drops in exports and imports to factory shutdowns, weaker energy prices and widespread economic restrictions as authorities moved to contain the spread of the new coronavirus.

While the U.S. usually runs a deficit in goods, it runs a surplus in services. That surplus, in services such as medical care, travel, higher education and royalties, decreased by $1.3 billion in April to $22.4 billion, its lowest since December 2016.

In the first quarter, a narrowing trade deficit helped limit a sharp contraction in the U.S. economy. As a whole, the economy still shrank at a 5% annual rate, the steepest drop since the last recession. Trade is expected to subtract from gross domestic product this quarter should the deficit continue to widen.

The U.S. deficit in goods with China widened to $25.96 billion from $16.99 billion the prior month. Year to date, the deficit with China amounts to $87.60 billion, compared with $123.68 billion in the same period of 2019.

Chinese state-controlled companies have canceled some shipments from U.S. farm exporters, according to maritime officials, as tensions between Washington and Beijing rise over China’s handling of pro-democracy protests in Hong Kong and the coronavirus pandemic. The cancellations involve orders made following the phase-one trade pact between the two countries signed in January, in which China committed to increasing farm imports from the U.S.

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Lockdowns associated with the pandemic, which originated in China late last year, have sapped global commerce and growth, disrupted supply chains and closed factories and stores.

The International Monetary Fund said in April that it expected the U.S. economy would shrink 5.9% this year. It predicted the global economy would contract 3% in 2020. China’s growth would slow to 1.2% this year, the IMF projected, from 6.1% last year.

Global trade, already experiencing its weakest activity since the 2008-09 financial crisis because of the two-year U.S.-China trade conflict, is likely to contract by 11% in 2020, the IMF said, a collapse that would make it difficult for countries to revive their economies by increasing exports.



China’s Digital Currency Could Challenge Bitcoin And Even The Dollar

The Chinese government has begun a pilot program for an official digital version of its currency—with the likelihood of a bigger test at the Beijing Winter Olympics in 2022. Some observers think the virtual yuan could bolster the government’s power over the country’s financial system and one day maybe even shift the global balance of economic influence.

Most money that gets swapped around electronically is just credits and debits in accounts at different banks. China’s digital cash is designed to be an electronic version of a banknote, or a coin: it just lives in a digital wallet on a smartphone, rather than a physical wallet. Its value would be backed by the state. But virtual cash would be quicker and easier to use than the paper kind—and would also offer China’s authorities a degree of control never possible with physical money.

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The program started small in April, with a limited rollout in the cities of Shenzhen, Suzhou, Chengdu, and Xiong’an—a new “smart” city in the making, southwest of Beijing, conceived by President Xi Jinping. Local media have reported that some of the money was distributed in the form of transport subsidies paid to individuals in Suzhou.

One thing authorities have to be careful about is that the digital currency doesn’t start crowding out other forms of money, such as bank deposits. Banks need those deposits to extend as credit to borrowers. The system would also potentially compete with two of China’s most successful tech giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which back Alipay and WeChat, respectively.

That might be part of the point. Payments for consumption using big tech companies’ mobile apps represent 16% of gross domestic product in China, compared with less than 1% in the U.S. and U.K. Policymakers have expressed some concern about too much of the country’s financial plumbing being in the hands of a few companies. “Those big tech companies bring to us a lot of challenges and financial risks,” People’s Bank of China Governor Yi Gang said during a conference last year. “You see: In this game, winners take all, so monopolies are a challenge.”

The rise of independent cryptocurrencies such as Bitcoin and Ether, meanwhile, have created the danger that a huge swath of economic activity will occur out of the view of policymakers.

China, in recent years, has cracked down on the use of such coins but was quick to see some potential in the basic idea—as long as it had some control. China started studying issuance of its own digital unit as far back as 2014. “This has very strong political will behind it,” says Andrew Polk, co-founder and head of economic research at Trivium China, a Beijing-based consultant. “They see an opportunity of being a global leader here.”

While a digital currency is likely years away from a national rollout, China’s moves have triggered concern about a new threat to U.S. financial dominance. Aditi Kumar and Eric Rosenbach of the Harvard Kennedy School, writing in May for Foreign Affairs, argue that the digital version of the renminbi, as China’s currency is officially known, could eventually allow Iran and others to more easily evade U.S. sanctions or move money without it being spotted by the U.S. government. That’s because it might one day be possible to transfer the digital currency across borders without going through dollar-based international payments systems.

Not everyone is so worried. Former Treasury Secretary Henry Paulson has written, also for Foreign Affairs, that despite China’s plans, the threat to the dollar’s status as the world’s preferred currency is “not a serious concern.” Even if a digital yuan proves to be highly mobile around the world, the dollar is widely trusted, and oil and other key commodities are still priced in it.

When the new denomination is up and running, individuals will be able to exchange it using digital wallets. They won’t need to have bank accounts. That could make it accessible to the 225 million people in China who have no access to the banking system. In rural areas, electronic distribution and exchange of money could help bolster development and reduce fraud by making cash easier to track.

The PBOC, China’s central bank, would be able to see where the money goes. The PBOC has also indicated that it could put limits on the sizes of some transactions, or even require an appointment to make large ones.

Some observers wonder whether payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are “whitelisted” for privileges, while those with criminal and other infractions find themselves left out. “China’s goal is not to make payments more convenient but to replace cash, so it can keep closer tabs on people than it already does,” argues Aaron Brown, a crypto investor who writes for Bloomberg Opinion.

Even if digital currency takes off nationally, it’s still unclear whether it would be allowed move across borders. There could be great appeal for a secure international payment method with instantaneous transfers. Foreign-exchange transactions currently can take a business day or two to clear.

A widespread digital yuan could also encourage countries and people overseas to get on board with China’s technology—and eventually, its currency. “It’s very possible that other countries adopt the China framework, and then a first-mover advantage turns into a strong network effect,” says Matthew Graham, chief executive officer of Sino Global Capital, a Beijing-based consultant on blockchain, the technology behind many cryptocurrencies. “This is the best-case scenario for China.”

At the same time, China will likely be wary of any circumvention of its capital controls, which aim to keep people from moving significant amounts of wealth out of the country. These controls were significantly tightened after a messy exchange-rate devaluation in 2015. Da Hongfei, founder of blockchain platform Neo, says the central bank could split part of the digital currency for use outside of China, much as it did with the offshore version of the yuan in currency trading.

Once a national rollout begins, things could move quickly. More than 80% of smartphone users in China regularly pay for transactions on their devices, the highest rate in the world, according to UBS Group AG. And Chinese consumers are eager adopters of appealing new financial tech.

One money market fund offered via Alipay, Yu’E Bao, became so popular after its 2013 launch that it was at one point the world’s largest money fund. It drained so much, so quickly, from the country’s bank deposit system that in 2017 the central bank stepped in to restrict it. The test will be whether Chinese consumers trust the new cash technology—as well as the power behind it.



U.S. Stock Futures And European Shares Fall, Reflecting Investor Uncertainty

International markets were subdued following gains in the U.S., as investors assessed the pace of economic reopening.

U.S. stock futures slipped, with securities tied to the S&P 500 down 0.4%. The pan-continental Stoxx Europe 600 declined 0.6% ahead of the latest monetary policy announcement from the European Central Bank, which will be out later Thursday.

In Asia, Hong Kong’s Hang Seng Index retreated slightly, as did the Shanghai Composite. The S&P/ASX 200 benchmark in Australia advanced more than 0.8%, while indexes in Japan and South Korea edged up.

Alex Wong, a director at hedge fund Ample Capital, said he has turned cautious following recent stock rallies, given the uncertain pace of the global economic revival.

“There’s a disconnect between equities and the economic fundamentals,” Mr. Wong said. “Many investors are looking beyond short-term realities and banking on hopes of an economic recovery in 2021 as global economies gradually reopen,” he said.

Mr. Wong said he was holding more cash after gradually reducing holdings in some richly valued new-economy stocks.

Rob Mumford, an investment manager for emerging-market equities at GAM Investments, said stocks had been buoyed by huge amounts of official stimulus and optimism over resumption of business activity. However, he said new clusters of coronavirus infections and containment measures would weigh on corporate earnings and economic activity.

Given that, Mr. Mumford said, “We expect quite a choppy trading pattern over the summer.” He said stocks that had been slower to recover, and those in industries that are more exposed to economic cycles, would continue to play catch-up with better-performing sectors of the market.

Mr. Mumford said his fund has rotated some investments since May out of markets in North Asia and some highly valued sectors such as technology into emerging markets including Brazil, the Philippines and Indonesia.

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Emerging-market investments tend to perform better when the dollar is weaker. Mr. Mumford said if the U.S. recovery lags the rebound in other regions, that would tend to keep the dollar weak.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, spiked in March and has pulled back in recent weeks. It rose slightly on Thursday to 91.71.

U.S. stocks rose Wednesday as social unrest across the country showed signs of calming and investors bet economic activity would improve with the ebbing of new coronavirus cases and additional government stimulus.

In commodities, global oil prices retreated. West Texas Intermediate, the main U.S. crude gauge, fell 1.7% to $36.66 a barrel. Brent crude, the global oil benchmark, retreated 1.1% to $39.37 a barrel.

The pullback came after a Saudi-Russian deal to extend production cuts helped boost U.S. crude Wednesday to its highest since early March, and briefly pushed Brent crude above $40 a barrel for the first time in about three months.



U.S. Economy Faces Projected 10-Year Recovery From Coronavirus Effects

The U.S. economy could take the better part of a decade to fully recover from the coronavirus pandemic and related shutdowns, a U.S. budget agency said, as a series of surveys pointed to continuing weakness in global manufacturing.

The Congressional Budget Office, a nonpartisan legislative agency, said the sharp contraction triggered by the coronavirus caused it to mark down its 2020-30 forecast for U.S. economic output by a cumulative $7.9 trillion, or 3% of gross domestic product, relative to its January projections. GDP isn’t expected to catch up to the previously forecast level until the fourth quarter of 2029, the CBO added.

The roughly $3.3 trillion in stimulus programs enacted by Congress since March will only “partially mitigate the deterioration in economic conditions,” the CBO said.

“After you get the initial bounce of economic activity simply from removing the lockdowns, I think what we’ll see is an economy that is running at a level of activity notably below where we were prior to Covid,” said Michelle Meyer, chief U.S. economist at BofA Merrill Lynch. “It’s going to take a long time to heal. There will be scars as a result of such a painful shock of the economy.”

The CBO analysis came as new surveys showed that factories in the U.S. and abroad continued to reduce output and shed jobs in May, though the pace of deterioration moderated as governments moved to ease coronavirus-related restrictions on their economies.

Surveys of purchasing managers at manufacturers in the U.S., Asia and Europe offered signs that the decline in global factory activity is starting to bottom out after the record fall seen in April. But sentiment remained negative, suggesting any recovery in the months ahead could be tentative.

The U.S. Institute for Supply Management’s manufacturing index for May rose to 43.1 from an 11-year low of 41.5 in April. The index’s core components all remained well below the 50 level that marks the threshold between contraction and expansion. A majority of survey respondents said both production and new orders worsened in May from April, and two-fifths reported lower employment levels.

The factory indexes add to other signs the U.S. and other countries may have reached an economic bottom, though recoveries could be slow. Unemployment is up sharply across the globe. Services industries, hit particularly hard by the virus, are just starting to recover. And consumer spending, an important catalyst for the U.S. and other economies, remains weak.

“We’re probably past the worst in terms of rates of decline, but things are still quite bad,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. He said forward-looking aspects of the ISM survey are still “extremely weak,”

The CBO now expects U.S. GDP to be 5.6% smaller in the fourth quarter of 2020 than a year earlier, a sizable markdown from its 2020 projection of 2.2% growth made at the end of 2019 before the pandemic.

While the economy is expected to resume growing after this year, the pace of growth likely won’t be fast enough to quickly make up for the ground lost during the coronavirus pandemic. The difference between the CBO’s latest projection for GDP and its January forecast “roughly disappears by 2030,” adjusted for inflation.

The outlook for weak manufacturing is one factor weighing on the ability of global economies to turn around.

Tim Fiore, who manages the ISM’s factory survey, said he expects further improvement in June as state governments allow more nonessential economic activities to resume. But until a vaccine or an effective treatment for Covid-19 becomes available, social-distancing efforts will limit the number of workers allowed on factory floors, likely restraining production.

Only in China, the first major economy to begin reopening after the novel coronavirus outbreak, did factories report an increase in activity. But the surveys suggested that its nascent economic recovery is already beginning to stall, with export orders falling sharply amid continued global efforts to contain the pandemic.

The surveys indicate the worst might be over for manufacturers, and activity could start to increase in coming months. But the road back to the levels of output and employment seen at the end of last year is set to be long and bumpy.

“Whether growth can achieve any serious momentum remains highly uncertain, however, as demand looks set to remain subdued by social-distancing measures, high unemployment and falling corporate profits for some time to come,” said Chris Williamson, chief business economist at IHS Markit, the data firm that compiles most of the surveys outside the U.S.

In many countries, factory managers reported that restrictions on movement continue to make it difficult for them to operate at normal levels of output. But they also reported that weak demand is holding them back, with new orders continuing to fall.

In a sign that factories don’t expect conditions to improve rapidly, many reported further job cuts. In India and South Korea, those reductions in payrolls were the largest on record.

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One problem highlighted by the surveys is that even where local restrictions have been removed, or were never very severe to begin with, the return to normality is being impeded by weak export demand.

China—the first country exposed to the virus—entered lockdown earlier than other countries. It also exited its lockdown earlier, but May surveys of purchasing managers pointed to a large decline in export orders.

That was also true of South Korea, which chose not to impose mandatory lockdowns and focused instead on widespread testing and tracing of those infected by the virus, and the people with whom they had come into contact.

Separate figures released on Monday showed South Korea’s May exports were down 23.7% from a year earlier to $34.86 billion following the prior month’s revised 25.1% contraction.

China’s Caixin general manufacturing purchasing managers index rose to 50.7 from 49.4, a sign that manufacturing activity increased after having fallen in April. A reading above 50.0 indicates an increase in activity, while a reading below that level indicates a decrease.

However, other manufacturing powerhouses continued to experience deep declines. Germany’s PMI rose only slightly, to 36.6 from 34.5, while Japan’s PMI fell to 38.4 from 41.9.

Across the eurozone, Italy moved closest to a manufacturing recovery, as its PMI rose to 45.4 from 31.1.

According to the CPB Netherlands Bureau for Economic Policy Analysis, global industrial production was 4.2% lower in the first three months of the year than in the final quarter of 2019. The surveys of purchasing managers suggest the decline in the three months through June might be even larger.



Financial Markets – Top 5 Things To Watch This Week


Heightened tensions between the U.S. and China will mean that risk sentiment remains fragile this week, while the highlight of the economic calendar will be Friday’s May non-farm payrolls report. Ahead of that, investors will have the chance to parse other economic data, including initial jobless claims and factory orders. The European Central Bank is widely expected to top-up its emergency asset purchasing program and the UK and European Union are to hold another round of virtual Brexit talks. Here’s what you need to know to start your week.

U.S. unemployment seen soaring to near 20%
Friday’s U.S. jobs report is expected to show that the unemployment rate rose to 19.7% last month with employers forecast to have cut 8.25 million jobs, compared with the record 20.5 million jobs lost in April.

While some encouraging signs in the employment picture have emerged in recent weeks as some workers rejoin jobs with businesses starting to reopen in the second half of the month, these changes are unlikely to be reflected in the May data.

Any positive surprise, however, is likely to be cheered by stock market bulls eager to grasp at signs of a rebound from the coronavirus induced economic slump.

Jobless claims, ISM data
While Federal Reserve officials are now in the traditional blackout period ahead of their next policy meeting in June the calendar this week features ISM manufacturing data Monday, Thursday’s jobless claims report and reports on factory orders and private sector hiring.

In the euro zone investors will be looking at figures on German factory orders for April while the UK calendar has the final manufacturing PMI on Monday and then the final services PMI on Wednesday.

U.S.-China standoff
The standoff between the worlds two largest economies over Beijing’s new security legislation for Hong Kong, which investors fear could erode the city’s freedoms, looks set to continue this week.

U.S. President Donald Trump has vowed to end Hong Kong’s special status if Beijing imposes new national security laws on the on the Asian financial center, but China’s state media has pushed back, saying this would hurt the United States more than China.

Whether Trump goes so far as to scrap his Phase 1 trade deal with China or merely takes some symbolic steps around sanctions and visas for Hong Kong citizens could determine how long the latest global stock market rally will last.

ECB to boost stimulus program
While on the face of it the announcement of the 750 billion euro EU plan to prop up economies hit by the coronavirus pandemic has eased some pressure on the ECB, officials are still expected to unveil fresh stimulus on Thursday.

The EU recovery fund will take time to set up and will likely face hurdles on the way and the ECB is burning through its emergency asset purchases, which will likely run dry by October – unless expanded.

The ECB is widely expected to announce a 500 billion-euro ($555 billion) increase to its Pandemic Emergence Purchase Program and extend is duration until mid-2021.

The central bank will also publish updated economic projections which could confirm President Christine Lagarde’s assessment that the bloc’s economy is in the midst of a much-deeper downturn than initially believed.

Brexit talks
Another round of Brexit talks get underway on Tuesday ahead of the June 18-19 EU summit by which time London needs to make up its mind about asking for an extension to the transition agreement.

There’s not much time left until the December 31 Brexit deadline, when the two sides will part ways – with or without a trade deal in place.

Negotiators have not made much progress and the EU has urged Britain to make a bigger effort and be more realistic about what it can achieve in talks.

The resulting uncertainty has pinned sterling close to its lowest levels in almost 30 years. And as if a potentially messy Brexit was not enough, the British currency is also battling with the prospect of negative interest rates and a prolonged recession.



UK To Launch Big Stimulus Package Before Summer

Britain’s government is planning to launch a big stimulus package before the summer with a focus on creating jobs and infrastructure projects to help drag the economy out of the coronavirus crisis, the Financial Times reported.


Finance minister Rishi Sunak declined on Friday to say whether he would bring forward his next budget statement, due in the autumn, to spell out how he will tackle Britain’s surging debt.

But Prime Minister Boris Johnson’s government was elected in December after promising to upgrade the country’s creaking infrastructure and the FT said this would form a central part of its recovery programme, along with the retraining of workers.

“We are trying to identify shovel-ready projects — we want to get a move on with this,” it quoted one minister as saying.

Sunak said on Friday that employers hammered by the coronavirus shutdown would have to gradually start contributing to the government’s hugely expensive wage subsidy scheme, but only from August.

The government has been paying since March 80% of the wages of workers who are temporarily laid off, and who now total 8.4 million, to limit a surge in unemployment.

While that has been warmly welcomed by unions and business groups there are still fears that many jobs will go in sectors which will struggle to reopen, such as hospitality, retail and aviation.




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Financial Markets – Investors Jittery About Potential Actions From The U.S. Or China

International stocks wavered, as investors braced for President Trump’s response to China’s push for tighter security controls on Hong Kong.


By early Friday afternoon in Hong Kong, the benchmark Hang Seng Index had declined 0.6%. Japan’s Nikkei 225 closed 0.2% lower, while Australia’s S&P/ASX 200 retreated 0.8%.

Indexes in South Korea and Shanghai recouped earlier losses to turn slightly positive, rising 0.3% or less. S&P 500 futures were down 0.2%.

Colin Low, senior macro analyst at in Singapore, said optimism over the reopening of economies could be overriding concerns over heightened U.S.-China tensions, helping markets pare earlier losses.

“Markets will be watching what Trump will do or say in his press conference later today,” he said, as investors are concerned about potential concrete actions by either the U.S. or China.

Any U.S. measures on trade or against Chinese companies, and any Chinese retaliation, could have a greater impact than previous actions taken before the new coronavirus battered both economies, he added.

U.S. stock indexes closed lower Thursday after President Trump said he would hold a press conference about China on Friday. The three major gauges fell between 0.2% and 0.6%.

On Thursday, China’s legislature approved a resolution to impose national-security laws on Hong Kong. That sets the country on a collision course with the U.S., which has accused Beijing of reneging on its pledge to respect the city’s self-governance.

Weakness in the Chinese yuan has reflected heightened tensions between the world’s two largest economies. A weaker yuan could help China’s economy by making its exports more competitive, but risks provoking U.S. criticism that Beijing is manipulating its currency.

The People’s Bank of China set a daily midpoint for trading of the onshore yuan at 7.1316 to the dollar, fixing this level at a fresh 12-year low for the third time this week.

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By early afternoon in Hong Kong, the less tightly controlled offshore yuan strengthened slightly to 7.1659 to the dollar, while the onshore yuan stood at 7.1478. Earlier this week, the offshore yuan, which started trading in 2010, came close to the all-time weak levels that it hit in September.

The yield on the benchmark 10-year U.S. Treasury note fell to 0.664%, from 0.703%. Bond yields fall as prices rise.

Brent crude, the global gauge of crude-oil prices, fell 0.8% to $35.73 a barrel.




Global Stocks Drift Higher On Recovery Hopes

International stock indexes mostly rose, following U.S. markets higher on optimism over signs of an economic recovery and plans for additional stimulus, while shares fell in Hong Kong.


The Stoxx Europe 600 rose 0.6%, led by gains in telecommunication and travel-and-leisure stocks. S&P 500 stock-index futures, flipping between small gains and losses, were down 0.1%.

China’s Shanghai Composite ticked up 0.3% while Hong Kong’s Hang Seng fell 0.8%. The Chinese yuan weakened against the dollar.

Australia’s S&P/ASX 200 added 1.2% and Japan’s Nikkei 225 jumped 2.3%.

U.S. stocks surged Wednesday, reaching highs not seen since early March, as the Dow Jones Industrial Average rose 2.2%.

“We have a FOMO rally—a fear of missing out,” said Michael Drummey, head of U.S. equity risk trading at Mizuho Americas. “People are frustrated that they missed out on the rally in the past few days, and that frustration is only growing.”

Mr. Drummey said investors across the globe are picking up stocks that were sold during the height of the pandemic, but continue to debate whether to buy overvalued stocks, or to invest in companies that still face challenges from a slow recovery.

However, he warned that stocks could be due for a reasonably sized pullback because of the economic uncertainties ahead.

“The market is acting in a way that doesn’t really line up with that uncertainty,” he said.

On Wednesday, Secretary of State Mike Pompeo said the State Department had determined Hong Kong no longer has a high degree of autonomy from China. That clears the way for President Trump to implement a range of possible measures, including revoking special arrangements on trade.

Investors are worried about whether that means there could be new trade barriers introduced,” said Chang Wei Liang, a macro strategist at DBS Bank. “We’re not likely to get a solution on this immediately, so this will be lingering on investors’ minds until we get clarity on what the U.S. intends to do with Hong Kong.”

Mr. Chang added that the weakness in China’s currency also reflected the heightened U.S.-China tensions.

In the offshore markets, the yuan weakened slightly to trade at 7.1802 to the dollar, according to FactSet. That put it close to its weakest levels since China started allowing offshore trading of the currency in 2010. Last September, the yuan depreciated beyond 7.19.

The People’s Bank of China set a daily midpoint for trading of the more tightly controlled onshore yuan at 7.1277 to the dollar. That was only slightly stronger than Tuesday’s fixing, which was the weakest since February 2008. The onshore yuan was trading at 7.1659 by early afternoon Shanghai time.

Paul Sandhu, head of multiasset quant solutions for Asia-Pacific at BNP Paribas Asset Management, said while trade tensions help explain the weakness in the yuan, Chinese investors’ pursuit of higher returns overseas is another reason pressure is building on the currency.

Yields on the 10-year U.S. Treasury note rose to 0.685%, from 0.677% Wednesday. Bond yields rise as prices fall.

U.S. crude-oil prices fell 3.2% to $31.77 a barrel.



Optimism Over Reopening Pushes Global Stock Markets Higher


International markets rose, as optimism about economic reopening outweighed concerns over escalating U.S.-China tensions. Futures for the S&P 500 advanced nearly 2%, suggesting U.S. markets could gain when they resume trading Tuesday after the Memorial Day holiday.

The pan-continental Stoxx Europe 600 1.1%, led by gains in the U.K. and France.

In afternoon trading, Japan’s Nikkei 225 led regional gains, rising 2.6%, with electronics groups such as Hitachi, auto makers including Honda Motor and transport stocks such as Central Japan Railway among the biggest gainers. Japan’s government lifted its state of emergency Monday.

Australia’s benchmark index rose nearly 3%, while Hong Kong’s Hang Seng Index and South Korea’s Kospi Composite advanced more than 1.5%. The Shanghai Composite gained 1%.Markets were underpinned by early signs that global economic activity is slowly improving, said Louis Lau, a California-based director of investments at Brandes Investment Partners. He said mobility data, such as traffic volumes, is encouraging and might point to a gradual economic recovery.

“People have been locked up for a few months, so I think they are eager to resume their normal lives,” he said.


Mr. Lau said he has kept a low cash position and is eyeing investment opportunities in global cyclical stocks. These include economically sensitive shares in the energy, financial, real estate and consumer-discretionary sectors, where valuations look relatively cheap and have been slow to factor in a potential economic recovery.

The Memorial Day weekend drew Americans to bars, beaches and parks, despite the number of U.S. deaths from Covid-19 approaching 100,000. U.S. spending on hotels, restaurants, airlines and other industries hurt by social distancing remains low, but appears to be picking up.

Mr. Lau said he is cautious about a possible resurgence of infections and rising U.S.-China trade tensions. “The recovery will be in fits and starts, and it may be a little jumpy,” with some states that are quicker to reopen potentially risking a second wave of outbreaks, he said.

Bhaskar Laxminarayan, chief investment officer for Asia at Bank Julius Baer, said reversing lockdowns would take longer than implementing them.

“The reopening will be a much more laborious process,” he said.

Mr. Laxminarayan also said the pace of recovery would vary country by country, with governments in some developing nations unable to spend heavily to support their economies. He said lasting shifts in behavior and spending patterns could affect travel and retail, with potential economic consequences.

Global oil prices rose. West Texas Intermediate, the main U.S. crude gauge, advanced 3.6% to $34.45 a barrel. Brent crude, the global oil benchmark, advanced 1.7% to $36.73 a barrel.

In currency markets, China’s central bank fixed its daily reference rate for yuan trading at 7.1293 to the dollar, the weakest level since February 2008. The onshore yuan is allowed to trade in a band around this fix, which the People’s Bank of China sets based partly on previous market prices.



Markets – Top 5 Things to Watch This Week


The rush to develop treatments for Covid-19 is heating up, prompting investors to diversify bets in the healthcare sector and trade tensions between the U.S. and China are firmly back on the agenda. On the economic calendar, the weekly jobless claims report continues to be the main number to watch, given its timeliness. Federal Reserve Chairman Jerome Powell is to discuss the U.S. economy in an appearance on Friday and the Fed publishes its Beige Book on Wednesday. Meanwhile, the European Commission is to unveil its pandemic response plan and retail earnings are winding up. Here’s what you need to know to start your holiday shortened week.

Covid-19 vaccine hunt heats up
Governments and investors are focusing their hopes on a vaccine as it’s unlikely economic activity can resume fully without one.

So the race is on and it has already driven up prices for some pharmaceutical stocks. Hopes for a treatment have sparked outsize rallies in the shares of companies such as Moderna (NASDAQ:MRNA) and Inovio Pharmaceuticals (NASDAQ:INO).

AstraZeneca (NYSE:AZN) has vaulted into the position of the most valuable British company after receiving a U.S. pledge for up to $1.2 billion for its experimental vaccine.

The U.S. also has vaccine development deals with Johnson & Johnson (NYSE:JNJ) and Sanofi (PA:SASY). But many others companies, both large and small, are in the race: Imperial College, Gilead Sciences (NASDAQ:GILD), Roche, China’s CanSino Biologics and India’s Glenmark to name just a few.

Flare up in U.S.-China trade tensions
With the global economy in an unprecedented downturn, fears over the prospect of a renewed trade conflict between the worlds two largest economies are difficult to discount.

In the past week, U.S. President Donald Trump has ramped up his rhetoric against Beijing over its handling of the pandemic, the Senate passed a bill that could result in barring some Chinese companies from listing shares on U.S. stock exchanges and a retirement-savings plan for federal workers delayed plans to invest in some Chinese companies.

China’s proposal for a tougher national security regime in Hong Kong looks set to open a new venue for Sino-U.S. tension, with the U.S. already warning of a tough response.

U.S. data, Fed view on economy
After Monday’s Memorial Day public holiday, the U.S. calendar is set for a busy week. Thursday’s weekly jobless claims report continues to be the highlight and will indicate whether there is any let up in layoffs as states continue efforts to reopen their economies.

Fed Chair Powell will appear in a webcast discussion on Friday to discuss the state of the economy and the central bank’s efforts to stabilize it. The Fed publishes its Beige Book on Wednesday and revised figures on U.S. first quarter growth will show if the economy suffered a bigger hit than initially reported. There will also be reports on consumer sentiment, durable goods and personal spending.

Pivotal week for euro zone economic response plan
Clashes in the euro zone over how to handle the economic impact of the COVID-19 crisis raised fears for the bloc’s future, but a Franco-German proposal aimed at helping the worst-hit states represents a pivotal moment. The markets want to see details so all eyes will be on the European Commission this Wednesday when it presents its pandemic recovery plan.

Other events to watch this week include German Ifo data on Monday, which is expected to show that German companies remain pessimistic and what are expected to be some subdued inflation numbers for May.

European Central Bank President Lagarde and Chief Economist Philip Lane are both due to speak this week and they will likely reiterate the message that more action from governments in the form of fiscal stimulus will be needed to get the bloc’s economy back on track.

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NYSE floor to reopen, retail earnings wind down
The New York Stock Exchange trading floor is set to partially reopen after the Memorial Day holiday on Tuesday, over two months after it shut down amid widespread measures to control the spread of the coronavirus.

First quarter earnings season is continuing to wind down with retailers again the main companies reporting this week. Costco (NASDAQ:COST), Dollar General (NYSE:DG), Nordstrom (NYSE:JWN), Ulta Beauty (NASDAQ:ULTA) and Burlington Stores (NYSE:BURL) are among some of the companies reporting earnings.



Oil Price – Traders Are No Longer In Panic Mode To Find Buyers For Unwanted Oil As Demand Ticks Up


Oil markets are returning to relative normality, the once yawning gap between the price of an actual physical barrel of oil and futures prices has narrowed sharply.

At its worst in April, a barrel of oil in the North Sea cost $10 less than the price on a Brent oil futures contract, a decade-high gap for the world’s benchmark oil price, according to S&P Global Platts. Now, the gap has shrunk to less than $2 a barrel as the oil market rebalances and traders are no longer in panic mode to find buyers for unwanted crude.

“A few weeks ago, we had armageddon pricing when nobody wanted physical barrels apart from for storage,” said Richard Fullarton, chief investment officer at hedge fund Matilda Capital Management Ltd.

The price of physical oil slipped far below futures prices last month when oil storage ran short and the cost to store crude jumped. The two prices tend to collide ahead of the expiration of futures contracts.

The return to health in the physical oil markets reflects several factors. Oil producers have made large, coordinated cuts in production. China’s economy has restarted and lockdowns in Europe and the U.S. eased, creating an uptick in demand. And a shortage of oil storage, which at one point drove U.S. oil futures prices into negative territory, appears to have peaked.

Oil prices, both physical and futures, have almost doubled since their April nadir, though they slipped Friday after China abandoned its yearly gross domestic product growth target.

Front-month futures for Brent crude, the global benchmark, fell 2.6% to $35.13 a barrel Friday, having rebounded from their $19.33-a-barrel low on April 21. Its physical counterpart was priced at $34.13 a barrel late Thursday.

Physical oil tends to be traded by major commodities trading houses, oil companies and refiners who have the financial heft and logistical capacity to store large amounts of oil in case they need to wait for a better pricing environment.

One of the largest independent traders, Trafigura Group Pte., has been on a buying spree. The Swiss company snapped up at least 15 cargoes of North Sea crude—amounting to 9 million barrels of oil—between May 13 and 21, according to S&P Global Platts. Trafigura declined to comment on its bet on North Sea crude, which was reported by Reuters.

Smaller traders also buy physical barrels of oil or refined products, for instance by filling fleets of tanker trucks with gasoline, selling it on to gas stations when prices move higher.

Overall, the gap between physical oil and futures was more pronounced in international markets than the U.S. As a largely seaborne crude, Brent producers could rush to store oil on massive tanker ships. Sellers of the largely landlocked U.S. benchmark, West Texas Intermediate, had to pay buyers to take it off their hands when futures prices turned negative on April 20.

Unlike Brent oil futures, which are all cash settled, some WTI futures contracts require their owners to take delivery of physical oil when the contracts settle. Even so, physical WTI at the end of March was $6 less a barrel than the futures market.

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That gap is now close to gone. The storage conditions were feared to be most acute in Cushing, Okla., where WTI contracts are settled.

“We didn’t see tank tops at Cushing. Instead we’ve seen phenomenal levels of shut-ins,” said Edward Marshall, a commodities trader at Global Risk Management, referring to the act of oil producers turning off wells to choke supply.

A pickup in refiner demand to supply Americans getting back on the road has helped WTI’s recovery. Pipeline flows from Cushing to Midwestern refiners are 400,000 barrels a day higher than they were in early April, according to commodity-market information provider Genscape.




Hertz Files For Bankruptcy


Hertz Global Holdings Inc., filed for bankruptcy protection Friday, saddled with about $19 billion in debt and nearly 700,000 vehicles that have been largely idled because of the coronavirus.

The Estero, Fla.-based company entered chapter 11 proceedings in the U.S. Bankruptcy Court in Wilmington, Del., hoping to survive a drop-off in ground traffic from the pandemic and avoid a forced liquidation of its vehicle fleet.

The Wall Street Journal reported earlier Friday that Hertz had failed to reach a standstill agreement with its top lenders and was preparing to file for bankruptcy as soon as that evening.

The company’s collapse marks one of the highest-profile corporate defaults stemming from the pandemic’s impact on air and ground travel, though Hertz also had challenges before the current economic crisis. Even before the Covid-19 outbreak, Hertz had been struggling with competition from peers including Enterprise Holdings Inc. and Avis Budget Group Inc., as well as from ride-hailing services such as Uber Technologies Inc. and Lyft Inc. The company lost some $58 million last year, its fourth consecutive annual net loss.

But Hertz’s business was hammered by the onset of the coronavirus, as people world-wide bunkered in at home and global travel shriveled up. Going forward, as businesses adapt by conducting meetings remotely, business travel may not return to prepandemic levels, according to bankers and analysts who follow Hertz.

Hertz didn’t reach a deal with creditors before entering chapter 11, heightening the risk of a full liquidation of the fleet, although the company and investors have several weeks to work out an agreement avoiding that outcome, people familiar with the matter said.

Hertz has spent years trying to restructure its business, and has blown through four chief executives in less than a decade. Most recently, former Chief Executive Kathryn Marinello was replaced Monday by Paul Stone, who previously served as the company’s executive vice president and chief retail operations officer for North America.

Hertz has also had a debt problem that can be traced back to a 2005 leveraged buyout by private-equity firms.

Founded in Chicago in 1918 and originally known as Rent-a-Car Inc., Hertz opened its first airport car-rental facility at Midway Airport in 1932. The company’s owners have included RCA Corp. and later Ford Motor Co., which sold Hertz to a buyout group led by Clayton Dubilier & Rice in 2005 for $5.6 billion.

The company went public in 2006, and activist investor Carl Icahn, who started acquiring Hertz shares in 2014, now owns more than one-third of the company and has placed three of his representatives on the board.

The pandemic has diminished automotive traffic in the U.S., squelched car sales and cut into rental reservations at Hertz. The Wall Street Journal reported in early May that Hertz, the nation’s second-largest rental-car company by fleet size behind Enterprise, was preparing for a bankruptcy filing.

The bankruptcy is expected to be complex given the company’s vast debt and corporate structure, which includes $14.4 billion of vehicle-backed bonds at subsidiaries that aren’t part of the chapter 11 filing.

Like Avis and some other rental car companies, Hertz doesn’t own its vehicles. The company leases its rental-car fleet, nearly 700,000 vehicles in total, from separate financing subsidiaries. The lease payments are earmarked for investors that own bonds backed by the fleet.

Now that Hertz has filed for bankruptcy, investors with rights to the vehicle fleet have to wait for 60 days before they can foreclose on and sell the cars. Hertz and its creditors will likely aim to prevent a complete liquidation and strike a deal to downsize the fleet while keeping some vehicles in operation, said people familiar with the matter.

With the $14.4 billion in vehicle-finance bonds so widely held—by pension funds, mutual funds and structured-credit funds—the company has faced difficulty coordinating with bondholders, people familiar with the matter said.

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Rental-car companies play an important role in supplying newer models to the used-vehicle market. Hertz also is a major customer for U.S. auto makers, purchasing about half of its fleet from General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV in 2019, according to a financial filing.

Analysts were concerned that Hertz could be forced to sell part or all of its fleet into an unusually weak market. But the possible liquidation would come at a time when demand for used vehicles is rising slightly, and pricing in the market is showing signs of recovery after hitting historic lows in April.

“Any ripple effect will be less than it was six weeks ago,” said Zo Rahim, an analyst for Cox Automotive, which owns vehicle-auction operator Manheim Inc.



U.S. To Invest $1.2 Billion To Secure Potential Coronavirus Vaccine From AstraZeneca

The U.S. government has agreed to hand AstraZeneca PLC up to $1.2 billion to secure the supply of a potential coronavirus vaccine that could be ready as early as October.

Under the deal, the government will bankroll a 30,000-person vaccine trial in the U.S. starting in the summer, plus the ramp-up of manufacturing capacity to make at least 300 million doses. The first doses will be ready in the fall should the vaccine prove effective, it said.


Alex Azar, the Health and Human Services Secretary, called the deal a “major milestone” in the administration’s effort—code-named “Operation Warp Speed”—to make a safe, effective vaccine widely available to Americans by 2021.

The vaccine in question was developed by the University of Oxford’s Jenner Institute and is one of a small group of candidates already being tested in humans. Others include vaccines from Pfizer Inc. and Moderna Inc. AstraZeneca, under a licensing deal with Oxford, has responsibility for manufacturing the university’s vaccine, and has promised to sell the vaccine without making a profit during the pandemic.

Governments around the world are counting on an effective vaccine against Covid-19 to defeat a virus that has killed hundreds of thousands of people and devastated the global economy. But to guarantee that doses are ready as soon as possible, companies must ramp up manufacturing capacity significantly before clinical trials provide solid proof that the vaccines work—a costly exercise more viable with financial support from governments and other funders.

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The U.S. government has moved fast to secure supply deals with vaccine makers. It has also awarded Moderna $483 million to ramp up production of its candidate and is supporting research into potential vaccines from Johnson & Johnson and France’s Sanofi SA . It is doing those deals through its Biomedical Advanced Research and Development Authority division, or Barda, which was set up in 2006 to prepare for biologic threats such as pandemics and bioterrorism.

Earlier this week, the U.K. government agreed to pay AstraZeneca £65.5 million ($79 million) to secure 100 million doses for its population, with 30 million of those ready as early as September. That deal relates purely to manufacturing, and doesn’t include any clinical trial funding.

AstraZeneca says it is in talks with several other governments, as well as nonprofits like the international vaccine alliance, Gavi, and the Coalition for Epidemic Preparedness Innovations on deals that would further boost production.

Oxford started a 1,100-person study in April and expects to roll the trial out to a further 5,000 participants later this month, should the first phase go well.

Its vaccine has progressed quickly, in part because it uses a technology that has been deployed in earlier vaccines developed by the university. It uses an inactivated chimpanzee virus containing the genetic sequence for the “spike protein” found on the new coronavirus.

In a small animal study, not yet peer-reviewed, it appeared to stop the virus from spreading to the lungs, protecting the inoculated monkeys from developing pneumonia. It was unclear whether the vaccine stopped infection entirely, however, as the vaccinated monkeys tested positive for virus in their noses.



Economic Indicators – Japan Exports Fall Most Since 2009 As Pandemic Wipes Out Global Demand

Japan’s exports fell the most since the 2009 global financial crisis in April as the coronavirus pandemic slammed world demand for cars, industrial materials and other goods, likely pushing the world’s third-largest economy deeper into recession.

The ugly trade numbers come as policymakers seek to balance virus containment measures against the need to revive battered parts of the economy, with the risk of a second wave of infections only complicating this challenge.


The central bank will hold an emergency meeting on Friday to work out a scheme that would encourage financial institutions to lend to smaller, struggling firms. Policymakers are also considering cash injections for companies of all sizes.

Ministry of Finance (MOF) data on Thursday showed Japan’s exports fell 21.9% in April year-on-year as U.S.-bound shipments slumped 37.8%, the fastest decline since 2009, with car exports there plunging 65.8%.

The fall was the biggest since October 2009 during the global financial crisis, but slightly less than a 22.7% decrease seen by economists in a Reuters poll. Exports fell 11.7% in March.

“Reopening of trade with China led China-bound exports of electronics parts and imports of masks and PC, but trade with Europe, America and Southeast Asia remain shrunk,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

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“It’s still far from fully-fledged resumption of economic activity. As exports and imports remain stagnant for a prolonged period of time, global trade will remain contractionary for the time being.”

Exports to China, Japan’s largest trading partner, fell 4.1% in the year to April, due to slumping demand for chemical materials, car parts and medicines.

Shipments to Asia, which account for more than half of Japanese exports, declined 11.4%, and exports to the European Union fell 28.0%.

Other trade-reliant economies in Asia have also been hit with data on Thursday showing South Korea’s exports slumping by a fifth in the first 20 days of May, year-on-year.

Industry data released last week showed Japan’s machine tool orders in April fell to their lowest level in more than a decade, a sign of deteriorating business spending.

Japan’s economy slipped into recession for the first time in 4-1/2 years, putting the nation on course for its deepest postwar slump as the pandemic ravages businesses and consumers.

Monday’s first-quarter GDP data underlined the broadening impact of the outbreak, with first quarter exports plunging the most since the devastating March 2011 earthquake and tsunami.

A private sector manufacturing survey showed on Thursday the decline in Japan’s factory activity accelerated in May as output and orders slumped.

Analysts warn of an even bleaker picture for the current quarter as consumption crumbled after the government in April requested citizens to stay home and businesses to close.


Behind Bond Market’s Stall, Investors See Hard Times Ahead

For much of the past month and a half, the yield on the benchmark 10-year U.S. Treasury note has hovered around two-thirds of a percentage point—a shade above its all-time low of around 0.5% set in March.


Taken together, the low level of the 10-year yield and its stability suggest that bond investors not only hold a dreary economic outlook but also are unusually confident in that perspective, a contrast with the optimism that has carried stocks to their highest levels since early March.

An important benchmark for interest rates across the economy, the ultralow 10-year Treasury yield has facilitated an explosion of corporate-bond issuance from the likes of Costco Wholesale Corp., Apple Inc. and Clorox Co. Monday’s news that an experimental coronavirus vaccine from the drugmaker Moderna Inc. had shown promise in an early trial helped push the 10-year yield to the top of its recent range. But the yield, which falls when bond prices rise, edged lower again Tuesday and remained at roughly half of its low from before this year.

Two factors typically determine longer-term Treasury yields. One is investors’ estimates of the average federal-funds rate set by the Federal Reserve over the life of a bond. The other is what is sometimes referred to as a risk premium, or an extra amount of yield investors demand to be compensated for the chance that short-term interest rates could rise higher than anticipated as a result of scenarios such as accelerating economic growth and inflation.

Tuesday’s closing 10-year yield of 0.711% suggests many investors believe that the Fed could basically repeat its postcrisis playbook: leaving the federal-fund rate near zero for about seven years before raising it to around 2%. Yields are lower than they were a decade ago in large part because investors feel more assured about that outcome, having seen the central bank implement such policies before without spurring a significant pickup in inflation.

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The risk premiums embedded in Treasurys “are basically zero or nonexistent,” said Thanos Bardas, global co-head of investment grade at Neuberger Berman. Expecting yields to remain rangebound over the next few quarters, Mr. Bardas said he likes Treasurys in the seven to 10-year range and has high hopes for the new 20-year bonds that are set to be reintroduced by the Treasury Department on Wednesday.

The stability of Treasury yields is particularly notable because it comes even as an unprecedented deluge of new debt floods the market. Not only has the Treasury Department ramped up the size of bond auctions to fund trillions of dollars in economic-relief measures but higher-rated companies also have been bombarding investors with new bond sales as they try to replace revenue that is being lost as a result of the coronavirus pandemic.

he Fed, meanwhile—after saying in March it would buy an unlimited amount of Treasurys—has slowed the pace of its purchases to $6 billion a day from $75 billion a day. Still, yields have barely budged, indicating that “globally, there’s tremendous demand for that high-quality debt,” said Colin Robertson, head of fixed income at Northern Trust Asset Management.

Treasury yields that are reliably this low have wide-ranging implications for markets and the economy. For investors, paltry yields might signal a gloomy future. But they can also propel them into riskier assets in search of returns, a likely factor in the surprisingly strong rebound in stocks since their sharp decline earlier in the year.

Low yields have also encouraged borrowing. For a brief period in March, corporate borrowing costs shot upward as fear gripped markets and investors sold bonds from even the safest companies. Since then, though, the average extra yield investors demand to hold investment-grade corporate bonds over Treasurys has shrunk, enabling businesses to benefit from the low benchmark rates.

Last month, Costco sold 10-year notes with a 1.619% yield, the lowest on record for that maturity, according to LCD, a unit of S&P Global Market Intelligence. Other companies that have recently issued 10-year bonds with sub-2% yields include Apple, Clorox and International Business Machines Corp. Overall, through Monday, nonfinancial companies had issued $148 billion of investment-grade bonds this month after selling a record $231 billion in April, according to Dealogic.

Treasury yields could turn even less volatile if the Fed adopts a policy known as yield-curve control, several analysts said. A cousin of quantitative easing, yield-curve control entails purchasing an unlimited amount of bonds at a particular maturity to peg rates at a target.

Yield-curve control has been used for years by the Bank of Japan to keep the yield on 10-year Japanese government bonds at around 0%. In March, the Reserve Bank of Australia said it would set a target of 0.25% for the country’s three-year government bond.

In the U.S., Fed Chairman Jerome Powell said last fall that “short-term yield-curve control is something that is worth looking at” as a tool to fight the next recession. It is far from certain that the Fed will enact such a policy. Still, the mere discussion has likely contributed to the bond market’s calm, analysts said.

Something similar happened to corporate bonds after the Fed said in March it would start buying the securities, said Thomas Simons, senior vice president and money-market economist in the Fixed Income Group at Jefferies LLC. Though it was nearly two months before the Fed started implementing the program, the announcement alone sparked a rush into the asset class as investors anticipated the Fed’s backing.

“Just knowing that the Fed could do something is almost the same as the Fed actually doing it,” Mr. Simons said.

Not all investors are unconcerned about a pickup in inflation that could push longer-term yields higher. A welcome surprise—such as an early vaccine available for emergency use this fall—could provide a major boost to the economy. Some also see risk in the tremendous amounts of money that the federal government is spending to help the economy, coupled with the promise of unlimited bond-buying from the Fed, which essentially helps finance that spending.

“The Fed wants to push inflation higher, and is willing to keep monetary policy accommodative even as the economy recovers from the Covid-19 shutdown to get inflation expectations up,” said Donald Ellenberger, senior portfolio manager at Federated Investors. Mr. Ellenberger said he therefore sees value in Treasury-inflation-protected securities, or TIPS.

Still, he said, his team’s strategy is to “trade the range”—betting on higher yields when the 10-year falls below 0.6% and lower yields if it approaches 1% in large part because of the Fed’s continued bond-buying and desire to support the economy.


Millions Of Applications For Benefits Have Been Filed Each Week Since Disruptions Became Widespread

U.S. workers have filed millions of applications for unemployment benefits each week since disruptions related to the coronavirus pandemic became widespread in mid-March. Here is what we can—and can’t—learn from the Labor Department’s weekly report on jobless claims.


How is a jobless claim counted in the Labor Department’s weekly claims report?
A jobless claim is an application for unemployment benefits that an individual submits by phone or online to a state labor department. Not every person who is laid off applies for benefits, and not every individual who tries to file for unemployment benefits will be counted as filing a claim. About one million Americans tried to apply but were unable to do so in the week ended May 2, according to Alexander Bick, an economics professor at Arizona State University, and Adam Blandin, an economics professor at Virginia Commonwealth University, based on a survey they conducted with about 3,000 individuals. Those individuals were excluded from the 3.2 million jobless claims recorded that week.

Are jobless claims the same thing as layoffs?
Jobless claims are typically viewed as a proxy for layoffs, but they are not an exact measure of weekly layoffs, especially during the pandemic. Many people who were laid off earlier in the coronavirus economic crisis are just now able to submit applications because state systems were overwhelmed by historic numbers of claims and because some states just recently began accepting applications from independent contractors and self-employed people, who became eligible under a federal coronavirus stimulus law. Thus, a jobless claim filed last week could reflect a layoff that occurred in mid-March.

Why does the Labor Department seasonally adjust jobless-claims data?
The Labor Department makes seasonal adjustments to jobless-claims data to strip out volatility that occurs during certain periods of the year. Around Thanksgiving and Christmas, claims can be particularly volatile because of holiday-season job losses, so the Labor Department adjusts the data to make it comparable to other times of the year.

Because of springtime patterns, the seasonally adjusted claims figure during the coronavirus pandemic has run higher than the number that isn’t seasonally adjusted.

How do unemployment claims translate into job losses reported in the Labor Department’s monthly jobs report?
There isn’t a direct translation between unemployment claims and monthly payroll losses because the two numbers derive from different sources and methodologies. State labor departments receive applications for unemployment benefits and report the numbers to the U.S. Labor Department each week. Its nonfarm payrolls figure is based on a survey of businesses asking about the week or pay period including the 12th of the month.

What are continuing claims?
Americans whose applications were approved by a state labor department can begin receiving financial payments by submitting continuing claims. They must file these claims each week to verify that they are jobless and meet certain other state-specific requirements. During the week ended May 2, there were about 23 million continuing claims. By comparison, leading up to the pandemic, there were about two million continuing claims a week.

Does every initial jobless claim become a continuing claim? – No. Initial jobless claims, which are applications for unemployment benefits, don’t always become continuing claims. For one thing, not all applications are approved. One person could also submit multiple claims, with only one of those initial claims becoming a continuing claim.

Moreover, an unemployed person might get a new job or return to work shortly after filing a claim. Such a situation is possible as small businesses tap loans under the Paycheck Protection Program, which requires companies to bring back workers. At this point, it isn’t clear how many such workers have returned to their jobs.

Do applicants have to file separately to get an extra $600 in benefits a week?
No. The $600 a week, which is tacked on to the regular weekly benefit amount, shouldn’t result in workers’ being counted in the claims data twice. This temporary federal program is currently set to expire at the end of July.

How are applications counted under the federal program that makes self-employed individuals and independent contractors newly eligible for benefits?

The Labor Department is publishing separate data on these federally funded claims, called pandemic unemployment assistance claims, in its weekly report. Unemployed people accessing pandemic claims can also receive $600 a week under the program mentioned above.

Some states have asked this subset of workers to apply for pandemic unemployment assistance when they are denied regular unemployment benefits. Other states have asked workers to hold off on applying until the states are ready to process these claims.

The number of people filing for pandemic claims isn’t seasonally adjusted and is excluded from the main claims number. There were nearly two million applications for these federal benefits in the two weeks ended May 9.


Global Stock Markets Mixed – Investors Continue To Weigh The Prospects For Economic Recovery From The Pandemic

U.S. stock futures rose, while international markets were mixed, as investors continued to weigh the prospects for global economic recovery in the wake of the coronavirus pandemic.

S&P 500 futures were up 0.6%, suggesting U.S. stocks could open higher Wednesday. The pan-continental Stoxx Europe 600 dropped 0.4%. Markets in France, Germany and Switzerland were closed for a public holiday.


In Asia, Japan’s Nikkei 225 and Korea’s Kospi Composite rose 0.8% and 0.5% respectively. That put both on course for their fourth straight day of gains. Hong Kong’s Hang Seng was little changed, sliding less than 0.1%, while Australia’s S&P/ASX 200 rose 0.2%, reversing earlier losses. The Shanghai Composite declined 0.5%.

Foreign and institutional funds—detecting more signs that some economies are slowly returning to normal—have started reallocating investments back into Asia, and particularly China, said David Chao, global market strategist for Asia Pacific ex-Japan at Invesco.


Mr. Chao said valuations of Asia shares were lower than those of developed-market peers, adding to investor incentives to buy the region’s stocks.

“Equities are expensive in developed markets like the U.S., and they’re not yet out of the woods with the coronavirus,” he said.

However, he warned that escalating trade tensions between the U.S. and China, coupled with economic weakness in developed countries, could weigh on stock performances globally.

Mr. Chao said U.S. stocks could be volatile in the months ahead, as investors become less optimistic about a V-shaped recovery.

“It feels like the calm before the summer storm,” he added.

A couple of near-term catalysts could lift regional markets, said Ben Powell, BlackRock Investment Institute’s chief investment strategist for Asia Pacific. One would be data—such as exports from South Korea, Taiwan and other trade-reliant economies—that started to show a recovery in global economic activity.

New stimulus measures by governments and central banks could be another trigger. China could detail new government spending plans during national legislative meetings that start Friday, while in Japan, the central bank will meet Friday to discuss further aid to financial institutions.

In the energy markets, West Texas Intermediate futures, the main gauge for U.S. crude oil prices, declined less than 0.1% to $31.93 a barrel. Global benchmark Brent crude rose 0.3% to $34.76 a barrel.

The yield on the 10-year U.S. Treasury note fell to 0.699% from 0.711% Tuesday. Bond prices rise as yields fall.



The Treasury Department Ready to Increase Investments In Fed Lending Programs

Treasury Secretary Steven Mnuchin said Tuesday he was prepared to provide more money and take more risks to facilitate lending programs being established by the Federal Reserve.


Congress made $500 billion available to the Treasury Department through the $2 trillion economic-relief package that President Trump signed into law in March. The legislation provided the Treasury with $46 billion to provide direct assistance to airlines and other distressed industries, plus another $454 billion to cover losses in Fed lending programs.

The Fed has launched nine lending programs with Mr. Mnuchin’s approval to support financial markets, businesses, cities and states, and the Treasury Department has provided $195 billion from the economic-relief bill to cover losses in some of those programs.

“I am prepared to allocate the rest of that,” Mr. Mnuchin told lawmakers during a hearing conducted by the Senate Banking Committee via a videoconference Tuesday. “The only reason I have not allocated it fully is we are just starting to get these facilities up and running.”

Lawmakers have pressed Mr. Mnuchin on how much risk the government is willing to take on its investment in the Fed’s lending facilities, and whether he is prepared to lose the money Congress provided to ensure credit is widely available to companies that need it most.

“The answer is absolutely yes,” Mr. Mnuchin said. “We are fully prepared to take losses in certain scenarios on that capital.”

Mr. Mnuchin appeared at the hearing alongside Federal Reserve Chairman Jerome Powell. Lawmakers pressed both men on the need for additional spending to limit the economic damage from the current downturn. Democrats in the House of Representatives narrowly approved a $3 trillion relief package last week with only one Republican voting in favor.

Mr. Mnuchin has said the administration expects economic growth to pick up in the second half of the year, and administration officials are taking a wait-and-see stance regarding additional relief. Mr. Powell in recent weeks has urged Congress and the White House to spend more money to ensure the government’s response to the economic downturn isn’t squandered, and he has said the recovery faces a longer and more uncertain path.

“This is really a question for Congress to weigh,” Mr. Powell said Tuesday.

“There is a growing sense that the recovery may come more slowly than we would like…and that may mean that it’s necessary for us to do more,” Mr. Powell said last week during a moderated discussion online.

Mr. Powell faced questions on when the central bank’s lending programs will be up and running. The Fed has launched several operations to calm short-term funding markets, recycling programs it had used in the 2008 crisis to stabilize financial markets.

But it has unveiled other programs to backstop corporate and municipal bond markets and to lend directly to small and midsize businesses that are taking more time to put into operation.

The Fed began purchasing exchange-traded funds of corporate debt last week through one of these new programs, and it rolled out application materials Monday for state and local-government borrowers that plan to issue debt of up to three years through the central bank’s Municipal Liquidity Facility.

By simply announcing its intention to backstop corporate-debt markets, the Fed has made it possible for companies to borrow more money from private investors without the Fed’s buying a single security.

Still, the Fed’s ability to follow through on those programs will be closely watched by markets and lawmakers alike.


In one particularly novel operation, called the Main Street Lending Program, the central bank will lend directly to middle-market firms that are too large for aid from the Small Business Administration and too small to borrow in Wall Street debt markets.

The Fed has already adjusted the terms of its loan programs several times, and Mr. Powell said the central bank would continue to adjust the terms for those operations “as we learn more.”

Mr. Powell said he expected that program would be ready to start lending by the end of the month or in the first week of June.

While some lawmakers have pushed the Fed to ease terms on certain lending operations, others have warned against the central bank’s expanding eligibility criteria to benefit sectors of the economy they think shouldn’t be helped by the Fed, such as oil-and-gas exploration and drilling.

Mr. Mnuchin faced questions on the Treasury Department’s role in administering the Paycheck Protection Program, which has provided $530 billion in emergency small-business loans. The program got off to a bumpy start and has faced criticism over loans that went to large public companies, and rules limiting how small firms may spend the money to qualify for loan forgiveness.


Stocks Surge As Oil Prices Rally

Stocks have their biggest gain in weeks as Wall Street is encouraged by a vaccine prospectvaccine prospect. Many of the world’s economies have begun to loosen restrictions on commerce, the Federal Reserve chair on Sunday signaled that the central bank has more firepower to lend to recovery efforts, and a drugmaker reported positive developments in an early trial of a coronavirus vaccine.


Taken together, the developments set off a surge in global stock prices and Wall Street had its best day in about six weeks.

The S&P 500 rose more than 3 percent Monday, while stock benchmarks in Europe were 4 percent to 6 percent higher.

Before trading began in the United States, the drugmaker Moderna said its coronavirus vaccine showed promising early results in tests on humans. The early-stage tests were on just eight people, but the hope that a vaccine might be quickly developed was enough to give stock prices a lift.

Also bolstering markets was a pledge from Jerome H. Powell, the Fed chair, that there was “really no limit” to what the central bank could do with its emergency lending facilities.

“The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve,” Mr. Powell said during a television interview broadcast on Sunday.

The Fed chair also suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7 percent in April, could peak at 20 percent or even 25 percent.

Still, investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed its economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. Some restrictions have also been lifted in parts of Europe and the United States.

And trading on Monday had all the characteristics of a rally focused on the prospects for a return to normal. Shares of companies that stand to gain the most, like United Airlines, Expedia Group and Marriott International, were among the best performers in the S&P 500.

Businesses that have benefited as Americans stockpiled food and cleaning supplies, like Campbell Soup and Clorox, were among a small number of decliners.

Oil prices also reflected optimism about the economy, with West Texas Intermediate, the U.S. benchmark, rising above $30 a barrel for the first time since March. Shares of energy companies like Chevron and Exxon were also sharply higher.


Oil Outlook Vastly Different Than When It Plunged Into Negative Territory A Month Ago

The fortunes of the oil market have turned around dramatically in the past month. This time last month, investors were watching the futures market in disbelief. The May contract for West Texas Intermediate oil was set to expire, and prices did the unthinkable — they plunged 300% in one day, deep into negative territory. In the spot market all across North America, prices also turned negative, meaning people literally couldn’t even give oil away.


There were dire forecasts of much more pain ahead, and a recurrence of the wild trading was feared for the June contract. But now the outlook is much improved, as the June contract is set to expire Tuesday. The world has changed, and the ugly crisis created by both oversupply and a sudden lack of demand is beginning to reverse.

“We think fundamental right steps have been taken to get us on sounder footing,” said Helima Croft, head of global commodities strategy at RBC. Croft said the “green shoots of recovery in place,” as Chinese and U.S. demand are improving, and OPEC plus ended its feuding and agreed to sharply cut output.

China has been buying more oil, and its demand is clearly strengthening. U.S. drivers are getting back into their cars as coronavirus shutdown restrictions lift. On the supply side, Saudi Arabia last week added another 1 million barrels a day cut of its own to the OPEC plus deal for a 9.7 million barrel reduction, and America’s oil industry has cut its production quickly and sharply.

Oil prices jumped sharply Monday, rising on the positive developments and a rally in risk markets sparked by Fed Chairman Jerome Powell’s comments that the Fed will can do more to support markets and the economy. WTI futures for June were up 7.4% at $31.62 per barrel in afternoon trading.

Now, the demand side of the market and the supply side are improving in tandem, to reduce the oil glut that was close to filling all available storage facilities, including ships at sea. The fact that the world was running out of places to store oil in April was behind the sharp drop in the futures contract. Investors were unable or unwilling to take delivery of oil, and there were also investors who became trapped in the trade as the selling spiraled. Interactive Brokers took a $109.3 million hit to cover its customers’ losses.

Oil is now trading above $30 for the first time since March 17, and RBOB gasoline futures have risen above $1 per gallon for the first time since March 13. The strong move higher in the June contract is also forcing some investors to cover short positions, adding to the rise.

The United States Oil Fund ETF, based on futures contracts, was up more than 8% Monday. Some investors initially blamed USO for causing the market disruption last month, but the fund had already rolled out of the May contract before the market began to crater. A popular oil play for retail investors, USO has since restructured its holdings to distribute them more evenly across later dated contracts, rather than holding them in the front month.

As the June contract gets set to expire, the landscape has changed dramatically for the U.S. oil industry. U.S. production was at a record high in March, and has cut back by 1.5 million barrels a day in just about six weeks, to 11.6 million barrels a day, according to the Energy Information Administration’s latest weekly data. Analysts expect production could be down by another 500,000 to 1 million barrels soon.

“It’s just a massive response by the U.S. industry,” said John Kilduff, partner with Again Capital. “This is a remarkable plunge in activity. … It’s pretty clear the U.S. is now the swing producer.”

Baker Hughes reported that another 34 oil rigs went out of service last week, leaving just 258 active oil rigs, about a third of the rig count last year.

“Storage at Cushing actually fell last week. That was the whole mechanism last month that drove the negative pricing,” said Kilduff. “There were barrels to take in and no place to put them.” Cushing, Oklahoma is the storage hub for WTI, so the market watches storage levels there closely.

“The pace was such that it would have been topped out by the end of June,” Kilduff said, but that seems to have reversed. Traders said oil prices were also lifted Monday by a report from Genscape that showed another big drop in Cushing storage levels. Government data on the latest storage levels will be released Wednesday.

The weekly U.S. government data shows implied demand for gasoline was also up sharply, with demand at 7.4 million barrels a day, from the early April trough of 5.1 million barrels a day. Normal demand for this time of year is about 9.5 million barrels a day, and it peaks ahead of the July 4 holiday. Analysts said the government data overstates retail demand, which is more like 6.5 million barrels a day in mid-May.

Analysts say demand has improved and as of last week, it was off by about 30% from normal levels, much better than the approximately 50% drop in demand in early April. U.S. gasoline demand is key because it is typically equal to about 10% of global oil demand.

Francisco Blanch, head of global commodities and derivatives at Bank of America, said he expects the rally to continue for now, but prices will not go that much higher. “This is a recovery that has a pretty low ceiling. My sense is that if prices approach $40 a barrel, then production will come back pretty quickly,” he said.

Oil prices were also helped Thursday by a news report that Chinese demand has returned to levels near where it was before the lockdown there.

RBC has been tracking Chinese data, including on airline flights, and it expects demand will recover an average 9% this quarter, 17% in the third quarter and 25% in the fourth quarter from the lows seen during the first quarter. Croft expects the recovery in China to be the quickest, relative to other global regions.


Which Trading Platform Is Best For Beginners UK?

Which Trading Platform Is Best In UK?


The best stock trading platform in UK for 2020? ….  How To Choose The Best Online Broker in UK { 2020 } …

Best Online Trading Platform. Start Trading Now or Try a FREE Demo Account.


◊ Best Stock Trading Platform In UK {2020} : Plus500 Review ◊

Plus500 is a streamlined broker that focuses on trading in a wide range of financial markets with relatively low spreads and no commissions but without offering many extra services. Plus500 has been in the forex and CFD business since 2008. They are registered in the U.K. and licensed by the Financial Conduct Authority (FCA).

The company offers access to a comprehensive product line including forex, stock indexes, equities, commodities, cryptocurrencies, ETFs and options. Plus500 is the first broker to introduce a bitcoin CFD in 2013. The company does not charge commissions on any of its trades.

All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Plus500 Ltd. (PLUS.L) is a publicly traded company on the AIM section of the London Stock Exchange since 2013 with a £1.73 billion ($2.25 billion) market capitalization and clients in more than 50 countries around the world. Plus500 offers access to more than 2,000 trading instruments.


TRUST … The company is registered with the Financial Conduct Authority (FCA), CySEC, ASIC, FSCA, FMA, MAS, and the ISA, which provides good accountability and visibility. The company is required to take steps to ensure client funds are not comingled with corporate funds – ensuring that client money and assets are protected in the unlikely event that Plus500 becomes insolvent – by holding those funds in segregated accounts at regulated banks.

If Plus500 defaults, any shortfall of funds of up to £50,000 may be compensated for under the Financial Services Compensation Scheme (FSCS). If the custodian bank holding client funds goes into liquidation, any shortfall of funds of up to £85,000 may be compensated for under the FSCS.

Plus500 also offers Negative Balance Protection, ensuring that clients cannot lose more than they have put into their account. Guaranteed stop losses can be used on some instruments depending on market conditions but they are subject to a wider spread.

The company does not charge commissions on any of its trades. All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Large volume traders do not get a trading discount at Plus500 and the spread is the same whether you trade one lot or 1,000 lots.

There are no charges for normal withdrawals or terminating an account. However, inactivity fees kick in after an account has been idle for three months. Beginning traders can open an account with as little as £100.

Traders can qualify for a “professional” account, which offers a higher level of maximum leverage, but the costs are the same. Investors with a professional account may increase their maximum leverage ten-fold, from 1:30 to 1:300.

Plus500 also offers access to options trading on many markets. These are very similar to plain call and put options traded on exchanges, but they are not standardized which means that the option premium can be customized for your risk tolerance and strategy objectives.




Japan’s Economy Fell Into Recession In First Quarter Of 2020

The world’s third-largest economy after the U.S. and China shrank an annualized 3.4% in the January-March period, pushed down by the initial effects of the coronavirus pandemic. That followed a revised 7.3% contraction in the previous quarter that was triggered by an increase in the national sales tax. Two straight quarters of contraction is one definition of a recession.


“The situation has become even more severe in April and May after a state of emergency was issued,” Economy Minister Yasutoshi Nishimura said Monday. “The economy is expected to shrink substantially for the time being.”

Prime Minister Shinzo Abe declared a national state of emergency in April to contain the spread of the coronavirus. Last week, he lifted it in 39 of 47 prefectures. It still applies in Tokyo and Osaka, but is expected to end nationwide in the next week or two.

Many stores and restaurants have closed during the pandemic, while tourism has virtually halted because most foreign visitors are barred from entering the country and Japanese people have been encouraged to avoid travel.

Economists are forecasting a contraction at an annualized pace of 20% or more in the current quarter.

Exports fell at an annual rate of 21.8% in the first quarter, reflecting supply-chain disruptions and lockdowns in China, one of Japan’s biggest markets. Private consumption and capital spending by companies also fell, but not as much.

Daiwa Securities economist Mari Iwashita said exports were likely to fall further with lockdowns continuing in some countries. She said imports might improve as China’s economy moves closer to normal operations and provides Japan with personal computers for people working at home and masks.

Société Générale economist Takuji Aida said that even after Japan’s state of emergency lifts, the pace of economic recovery may be slow because many people may see their income reduced or lose their jobs. “Households and companies are reaching their limits of their strength,” he said.

Mr. Nishimura, the economy minister, said the government planned to put together an additional spending package by about May 27, including further support for corporate financing and aid for students. In April, Parliament passed a measure with some $240 billion in spending, including cash payments of about $935 to every person in Japan.



Stocks Rally As Hopes For New Virus Vaccine Build

Shares of Moderna, a company that has been working on a vaccine for the coronavirus, jumped 21%. The company said it had positive results from early human tests of its vaccine.


U.S. stocks rallied Monday on hopeful news around a potential coronavirus vaccine, recovering ground following their biggest weekly percentage drop in nearly two months. The Dow Jones Industrial Average jumped 732 points, or 3.1%, to 24419, the S&P 500 rose 2.7% and the Nasdaq Composite added 2%.

The gains wiped out last week’s losses. The S&P 500 shed 2.3% last week after a range of data highlighted the sharp contraction in economic activity across the nation. European indexes also climbed, with the pan-continental Stoxx Europe 600 gauge rising 3.1%. Most major Asian benchmarks ended the day higher.

Shares of Moderna, a company that has been working on a vaccine for the coronavirus, jumped 21%. The company said it had positive results from early human tests of its vaccine.

“The idea that there has been progress in Moderna’s trials but also the more positive news that it looks like coronavirus could be tackled with a vaccine, has helped boost sentiment,” said Edward Park, deputy chief investment officer at Brooks Macdonald.

In bond markets, the yield on the benchmark 10-year Treasury edged up to 0.679% from 0.640% Friday. Yields move inversely to bond prices.

The S&P 500’s energy, real estate, industrials, materials and financials sectors all rose at least 3%. Energy was up 5.8%, driven by an 8.9% gain in crude-oil futures.

As economies emerge from monthslong lockdowns, markets will tend to creep higher, according to Paul Chew, head of research at Phillip Securities in Singapore. But a stronger rally would have to wait until investors believed there is little risk of a big second wave of infections, he said.

Virus-related news has been a bigger driver of stocks than economic data, which are lagging indicators, Mr. Chew said. “Even with better economic numbers, the market won’t rejoice,” he added.

Travel companies and airlines led gains among European stocks. Holiday provider TUI rose 13.5%, Ryanair Holdings climbed 13% and British Airways owner IAG Group rose 10%.

There were several factors behind the rise, said Russ Mould, investment director at AJBell. Major tourist destinations Italy and Greece signaled they would accept tourists from countries where international travel was permitted.

European flight operator Ryanair reported its full-year results Monday and reiterated that it planned to resume 40% of its flights from July. After grounding 99% of its aircraft in April, investors were concerned about missing out on buying the dip, Mr. Mould said.

“There’s an element of get in now; it can’t get worse and it might get sharply better,” he said.

Federal Reserve Chairman Jerome Powell cautioned Sunday that the U.S. economic recovery could take more than a year. The unemployment rate is likely to keep rising through June and then begin to decrease as businesses reopen, and both the Fed and lawmakers may need to do more to bolster the economy, he said in a broadcast interview.

“If lockdowns might be eased over a longer period of time, that would lead to recovery not really taking place until 2021,” Mr. Park said. “The size of the recession in the first half of 2020 is almost being viewed by markets as a curiosity, as investors believe the growth will be at least partially recouped.”

“The worse the news gets the more support there will be from central banks, and therefore more liquidity, as far as some investors are concerned, which is why they are buying,” Mr. Mould said. “That’s not the Main Street view, but it seems like the Wall Street view.”

Most equity benchmarks in the Asia-Pacific region were up less than 1%. Japan’s Nikkei 225 gained 0.5%, while the Shanghai Composite Index edged 0.2% higher. Australia’s benchmark S&P/ASX 200 traded 1% higher.

Fresh data Monday showed Japan’s economy, the world’s third-largest after the U.S. and China, fell into a recession in the first quarter. The economy shrank an annualized 3.4% in the three months ended March 31 after a 7.3% contraction in the previous quarter. Economists expect Japan’s economy to shrink by an annualized 20% or more this quarter as the pandemic keeps tourists away and depresses spending by households and companies.


Financial Markets – Top 5 Things To Watch This Week

This Tuesday will see Federal Reserve Chairman Jerome Powell testify to Congress on the economic stimulus measures put in place so far. A day later the minutes of the Fed’s April meeting are scheduled to be released.


Investors will be looking at the weekly jobless claims data as the reopening of the economy gathers pace. Retail earnings will shine a light on consumer spending amid the coronavirus pandemic, while Tuesday brings the monthly expiration of U.S. West Texas Intermediate crude futures contract. Meanwhile, central banks in South Africa and Turkey are expected to cut interest rates again.

Here’s what you need to know to start your week.

Powell testimony, FOMC minutes
The Fed chairman is to testify on Tuesday before the Senate Banking Committee alongside Treasury Secretary Steven Mnuchin to update government officials on the economic stimulus programs approved so far.

In a speech last week Powell gave a sober assessment of the long-term risks to the U.S. economic outlook and the possible need for elected officials to approve more spending programs to keep the economy afloat.

On Wednesday, the Fed is to publish the minutes of it is April meeting. In its rate statement last month, the Fed said it will keep interest rates at near-zero until officials are “confident that the economy has weathered recent events.”

Economic data
In the U.S., the main datapoint continues to be the weekly report on initial jobless claims. With the reopening of the economy gaining momentum economists are hoping for a reading of below 2.5 million, which would indicate that the rate of layoffs is slowing somewhat.

There is a packed economic calendar in the U.K. this week, with updates on March employment, retail sales and inflation. Given that the lockdown in the U.K. didn’t start until late March it may be too early to see the impact of the pandemic on the employment figures.

The retail sales data for April could show at least a 15% decline in spending, while plunging oil prices are expected to have sent inflation tumbling last month.

Retail earnings
While the U.S. first-quarter earnings season is almost over the retail sector is just getting started. This week will see results from big U.S. retailers including Walmart (NYSE:WMT), Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), Target (NYSE:TGT), Kohl’s (NYSE:KSS) and Best Buy (NYSE:BBY). Their figures will show whether U.S. consumers are still spending money despite the widespread coronavirus lockdowns.

The retailers are reporting in the shadow of online shopping giant Amazon (NASDAQ:AMZN), which is among the “stay-at-home” stocks benefiting from the lockdown. Its shares have soared some 28% this year.

Repeat performance of oil plunge?
The monthly expiration of U.S. West Texas Intermediate crude futures contract is coming up on Tuesday and many energy traders are worried about a repeat performance of the oil price slump last month which saw prices drop into negative territory for the first time ever.

Normally uneventful, the expiry turned dramatic in April as brimming storage tanks discouraged traders from taking delivery of oil.

The U.S. Commodities Futures Trading Commission has warned market participants they should be prepared for volatility and negative pricing again, with oil storage still tight and the demand outlook still severely depressed.

But oil prices have recently rebounded on hopes that the easing of lockdown restrictions will boost the energy demand outlook. In another hopeful sign, U.S. crude inventories fell in the most recent week for the first time since January.

Yet some traders seem to be heeding the CFTC’s warning. Volumes in the July futures contract, which expires in a month’s time, are outpacing the June contract by nearly 50%.

Emerging market rate cuts
Central banks in Turkey and South Africa are both to hold policy meetings on Thursday and both are expected to cut rates again despite heavy losses their currencies’ have recently endured.

Analyst polls predict South Africa will cut its 4.25% main rate by another 50 basis points. Economists stress any policy easing must be sizeable if it is to offer any help to the suffering economy.

Turkey’s meeting will be even more interesting. The lira has plunged to record lows, hard currency reserves are dwindling and inflation is in the double digits, yet all that probably won’t deter the central bank from chopping another 50-100 basis points off its 8.75% repo rate


Which Is The Best Broker In Singapore?

Which trading platform is best in Singapore?


What is the best stock trading platform in Singapore for 2020? ….  How To Choose The Best Online Broker in Singapore { 2020 } …

Best Online Trading Platform. Start Trading Now or Try a FREE Demo Account.

To evaluate brokers, you should look at the following factors:

>>> Commissions
>>> Account Minimum
>>> Account Fees
>>> Your Trading Style and Tech Needs
>>> Promotions

Look at commissions on the investments you’ll use most… Brokers generally offer a similar menu of investment options: individual stocks, options, mutual funds, exchange-traded funds, and bonds. Some will also offer access to futures trading and forex (currency) trading.

The investments offered by the broker will dictate two things: whether your investment needs will be satisfied, and how much you’ll pay in commissions. Pay careful attention to the commissions associated with your preferred investments:

Individual stocks: You’ll typically pay a per-trade commission of $4 to $7. Some brokerages also offer per-share pricing.

Options: Options trades often incur the stock trade commission plus a per-contract fee, which usually runs $0.15 to $1.50. Some brokers charge only a commission or only a contract fee.

Mutual funds: Some brokers charge a fee to purchase mutual funds. You can limit mutual fund transaction costs or avoid them completely by selecting a broker that offers no-transaction-fee mutual funds. (Mutual funds also carry internal fees called expense ratios. These are charged not by the broker, but by the fund itself.)

ETFs: ETFs trade like a stock and are purchased for a share price, so they are often subject to the broker’s stock trade commission. But many brokers also offer a list of commission-free ETFs. If you plan to invest in ETFs, you should look for one of these brokers.

Bonds: You can purchase bond mutual funds and ETFs at no charge by using no-transaction-fee mutual funds and commission-free ETFs. Brokers may charge a fee to purchase individual bonds, with a minimum and maximum charge.

Pay attention to account minimums… You can find highly ranked brokers with no account minimum. But some brokers do require a minimum initial investment, and it can skew toward $500 or more. Many mutual funds also require similar minimum investments, which means even if you’re able to open a brokerage account with a small amount of money, it could be a struggle to actually invest it.

Watch out for account fees… You may not be able to avoid account fees completely, but you can certainly minimize them. Most brokers will charge a fee for transferring out funds or closing your account. If you’re transferring to another broker, that new company may offer to reimburse your transfer fees, at least up to a limit.

Most other fees can be sidestepped by simply choosing a broker that doesn’t charge them, or by opting out of services that cost extra. Common fees to watch out for include annual fees, inactivity fees, trading platform subscriptions and extra charges for research or data.

Consider your trading style and tech needs… If you’re a beginner investor, you probably won’t need extras, like an advanced trading platform. But you may want an education and a little hand-holding. This could include videos and tutorials on the broker’s website, or in-person seminars at branches. Many brokers offer these services free to account holders.

Active traders, on the other hand, will want to look for a brokerage that supports that kind of frequency. That includes weighing a broker’s trading platforms, analysis tools, research and data offerings in addition to commissions — including discounts for high-volume traders — and fees.

Plenty of high-quality online brokers offer free demo access to trading platforms.

Take advantage of promotions… Online brokers, like many companies, frequently entice new customers with deals, offering a number of commission-free trades or a cash bonus on certain deposit amounts.

It isn’t wise to choose a broker solely on its promotional offer — a high commission over the long term could easily wipe out any initial bonus or savings — but if you’re stuck between two options, a promotion may sway you one way or the other.

Best Online Trading Platform. Start Trading Now or Try a FREE Demo Account.


◊ Best Stock Trading Platform In Singapore {2020} : Plus500 Review ◊

Plus500 is a streamlined broker that focuses on trading in a wide range of financial markets with relatively low spreads and no commissions but without offering many extra services. Plus500 has been in the forex and CFD business since 2008. They are registered in the U.K. and licensed by the Financial Conduct Authority (FCA).

The company offers access to a comprehensive product line including forex, stock indexes, equities, commodities, cryptocurrencies, ETFs and options. Plus500 is the first broker to introduce a bitcoin CFD in 2013. The company does not charge commissions on any of its trades.

All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Plus500 Ltd. (PLUS.L) is a publicly traded company on the AIM section of the London Stock Exchange since 2013 with a £1.73 billion ($2.25 billion) market capitalization and clients in more than 50 countries around the world. Plus500 offers access to more than 2,000 trading instruments.


Trust … The company is registered with the Financial Conduct Authority (FCA), CySEC, ASIC, FSCA, FMA, MAS, and the ISA, which provides good accountability and visibility. The company is required to take steps to ensure client funds are not comingled with corporate funds – ensuring that client money and assets are protected in the unlikely event that Plus500 becomes insolvent – by holding those funds in segregated accounts at regulated banks.

If Plus500 defaults, any shortfall of funds of up to £50,000 may be compensated for under the Financial Services Compensation Scheme (FSCS). If the custodian bank holding client funds goes into liquidation, any shortfall of funds of up to £85,000 may be compensated for under the FSCS.

Plus500 also offers Negative Balance Protection, ensuring that clients cannot lose more than they have put into their account. Guaranteed stop losses can be used on some instruments depending on market conditions but they are subject to a wider spread.

The company does not charge commissions on any of its trades. All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500’s WebTrader platform. Large volume traders do not get a trading discount at Plus500 and the spread is the same whether you trade one lot or 1,000 lots.

There are no charges for normal withdrawals or terminating an account. However, inactivity fees kick in after an account has been idle for three months. Beginning traders can open an account with as little as £100.

Traders can qualify for a “professional” account, which offers a higher level of maximum leverage, but the costs are the same. Investors with a professional account may increase their maximum leverage ten-fold, from 1:30 to 1:300.

Plus500 also offers access to options trading on many markets. These are very similar to plain call and put options traded on exchanges, but they are not standardized which means that the option premium can be customized for your risk tolerance and strategy objectives.




Big Investors Aren’t Betting It All On A Coronavirus Cure


Successful efforts that could help billions of people might not result in big profits for shareholders.

Shares are up for companies searching for coronavirus drugs and vaccines.

As drug companies race to discover treatments for the new coronavirus, big investment firms are placing cautious bets on likely winners.

Hedge funds and venture-capital firms, which are in the business of predicting the future for companies and economies, are growing more confident researchers will develop effective drugs to fight the pandemic.

Yet, successful efforts that could help millions—or even billions—of people, might not result in big profits for shareholders, the investors argue. Some are even placing bearish wagers on pharmaceutical companies they believe are attracting excessive excitement over their progress on Covid-19 treatments.

“Most of the stock prices don’t bear semblance to reality,” says Joseph Edelman, who runs Perceptive Advisors, a $4.2 billion New York hedge health-care fund, which is focused on what it sees as the disconnect between the price of stocks like drug company Gilead Sciences Inc. and their potential profits from any treatment or vaccine.

Shares are up for companies searching for coronavirus drugs and vaccines.

Gilead is up 18.9% this year, thanks to remdesivir, an antiviral drug administered intravenously that shortens the recovery time of hospitalized Covid-19 patients, according to recent data.

It is always hard anticipating successful drugs, but those wagering on coronavirus treatments face unique challenges. Some of the most innovative and promising approaches are wholly unproven. Companies are competing with foreign nations and not-for-profit organizations determined to achieve their own breakthroughs. Successful drugs or vaccines may run into pricing, manufacturing and distribution difficulties.

Among the issues investors are struggling with: Can Covid-19 treatments help those sick while also protecting individuals against the virus, or will that require different drugs? Will vaccines render treatments less necessary? Will governments allow companies to charge high enough prices to generate sizable profits?

Larry Robbins, who runs health-care hedge fund Glenview Capital Management, is avoiding bets on possible coronavirus treatments, partly because he expects researchers to find a vaccine, limiting the need for even the most effective treatments.

“We are all cheering for a treatment on a humanitarian level, but as an investor, you have to believe a treatment works, and that sales last long enough for it to have a material impact on a company,” he says.

Gilead is among the stocks that has investors thinking twice. The company expects to manufacture more than one million treatment courses of remdesivir by the end of this year, and the drug could have billions of dollars in new annual sales, investors say. If Gilead can develop an inhaled version of the drug or other alternatives to receiving it intravenously, its popularity could increase, bullish investors argue.


But Gilead has promised to donate 1.5 million doses of Covid-19 treatments to hospitals free of charge, and the price it would charge thereafter is unclear, raising questions about eventual profits. In the past, Gilead has been criticized for placing high prices on its HIV and hepatitis treatments. It may feel pressure to keep a lid on remdesivir’s cost—especially given President Donald Trump’s past public criticism of drug prices.

If Gilead charges about $4,000 per course, as some investors predict, that would result in $4 billion of revenue for a million patients. That figure would be well below Gilead’s $14.6 billion of added market value this year—without taking into consideration the drug’s development costs, estimated to be about $1 billion, a figure that would reduce any profits.

Some bearish investors aren’t yet convinced of remdesivir’s efficacy.

“Even if the drug has only a modest effect, people will still prescribe it, but Gilead won’t make a lot of money,” says Dr. Joseph Lawler, who runs hedge fund JFL Capital Management, which is shorting, or betting against, Gilead.

Gilead’s company spokesman said the drug company hasn’t yet set a price for remdesivir.

“At this time, we are focused on ensuring access to remdesivir through our donation,” he said. “Post-donation, we are committed to making remdesivir both accessible and affordable to governments and patients around the world.”

Dr. Luciana Borio, who was director for medical and biodefense preparedness at the National Security Council, argues that smaller, private companies may emerge with the most effective treatments, not publicly traded companies, another challenge for investors.

“For technology that’s truly innovative and disruptive there’s opportunity for funding and interest in partnerships,” she says.

Some investors are focusing on treatments that may help those who are sick but also can prevent people from getting the virus, a larger potential market. These investors are betting on therapies that use antibody proteins generated by the body’s immune system. These antibodies may be able to block the action of the coronavirus’s “spike” protein, preventing the virus from infecting healthy cells.

Mr. Edelman, of Perceptive, owns shares of Regeneron Pharmaceuticals Inc., a leader in antibody therapies. The company is using a “monoclonal” antibody approach, where scientists select the most powerful antibodies from recovered coronavirus patients—or, in the case of Regeneron, from mice that have been given human immune systems—clone them, and turn them into drugs.

Regeneron plans clinical trials in early summer and is preparing to manufacture hundreds of thousands of doses each month beginning in late summer.

Robert Nelsen, who helps run venture-capital firm Arch Venture Partners, which made early and successful bets on cancer immunotherapy, is backing VIR Biotechnology Inc., which plans trials for its own monoclonal antibody therapy this summer.

“I’m pushing them every day,” Mr. Nelsen says. “We don’t know if the virus will be weaker or stronger or the same in the fall, but in 1918 it came back stronger, so we have to be prepared.”

Regeneron shares are up 52% this year, adding $23 billion in market value, while VIR is 148% higher and has added $2.3 billion in value. Some investors say if a vaccine is discovered it could limit these shares’ potential. Mr. Nelsen counters that it could take longer than expected for researchers to find vaccines, creating a huge market for antibody treatments.

“Vaccines are never 100% effective,” he argues, “so antibody therapeutics may be key to preventing a re-emergence.”

One high-risk, high-reward strategy: Buying shares of tiny companies with potential upside. Messrs. Edelman and Nelsen hold big chunks of ownership in VBI Vaccines Inc., an unproven biotech company claiming an experimental vaccine approach. The stock closed at $2.07 on Thursday.

Forecasting a winning vaccine is perhaps even harder than predicting coronavirus treatments. By some measures, Chinese companies and a group at Oxford University are in the lead. Some companies say they will distribute a vaccine they develop at cost, potentially reducing profits for others. Still, the potential market is huge—some investors believe a combination of vaccines may be necessary to meet global demand, perhaps a low-cost option for younger, healthier individuals and a more potent one for those who are immune-compromised.

Moderna Inc. has attracted the most excitement among vaccine makers, sending its stock soaring 230% this year, as it moves through human trials. Moderna’s strategy is to produce a vaccine using the virus’s genetic sequence, rather than its actual genetic material. It uses programmed material, called messenger RNA, or mRNA, with the goal of directing a patient’s immune system to produce antibodies to the coronavirus.

The approach, which may be able to produce a vaccine quickly, was described as “impressive” by Dr. Anthony Fauci, director of National Institute of Allergy and Infectious Disease. Pfizer and Germany’s BioNTech are working on their own mRNA vaccine.

But analysts note that mRNA technology is expensive and has never produced an approved medicine or vaccine. Moderna is already worth $24 billion, up from $6.5 billion at the beginning of 2020. As for Pfizer, the company already is worth $211 billion, so it isn’t clear how much a vaccine would increase the company’s value.

Some investors are skeptical of some of the highest-flying coronavirus stocks. Mr. Lawler of JFL Capital is shorting Inovio Pharmaceuticals Inc., a small Pennsylvania company that’s up 314% this year despite limited past success.

A spokesman for Inovio says it is in phase one trials for a Covid-19 vaccine and expects results in June, while working on other medicines.

“The general public is throwing money at headlines,” says health-care investor Brad Loncar at Loncar Investments.


Day Trading: Top 3 Things To Watch For May 15

It was quite a comeback for the Dow today as investors finally decided to dip back into financial stocks. Bulls will hope that the same sentiment that was able to shrug off a rise of 3 million in jobless claims today will be on hand tomorrow, with more devasting data expected.
Here are three things that could move the stock market.

1. Consumer in Focus
Retailers without a big online presence will be hoping measures to reopen across the country will start paying dividends quickly. The market will get see what is expected to be another historically band month for sales. The Commerce Department will report the April retail sales figures at 8:30 AM ET (12:30 GMT).

Economists expect that retail sales plunged 12% last month, according to forecasts compiled by That would be the biggest drop ever, taking the top spot from March’s dive of 8.4%. Core retail sales, which exclude autos, are forecast to have dropped 8.6%, compared with a 4.2% drop in March. There will be more shopping data when the University of Michigan issues its preliminary measure of May consumer confidence at 10:00 AM ET.

The consumer sentiment index is seen dropping to 68 from 71.8 in April. That would still be well off the lows seen during the Financial Crisis and the early 1980s. And the Michigan consumer expectations index is forecast to tick up to 71.8 from 70.1 last month.

2. JOLTS, Empire Manufacturing on the Cards
Along with indicators on retail there will be numbers on the labor market and manufacturing. At 10:00 AM ET (14:00 GMT), the Labor Department will release its March Job Openings and Labor Turnover Survey (JOLTS). Job openings, voluntary quits and hires will likely have dropped sharply.


At 8:30 AM ET, the New York Fed will release its measure of manufacturing in the region. The May Empire State Manufacturing Index is seen coming in at -63.50, up slightly from -78.20 in April. And at 9:15 AM ET, April numbers on industrial production and capacity utilization arrive.

3. Oil Rig Count Likely to Dip Again
Oil prices settled higher thanks to some optimism on demand from the Paris-based International Energy Agency (IEA). The specter of negative prices has receded as a drop in total U.S. crude stockpiles and inventories as the Cushing, Okla. hub eased the pressure of storage constraints.

Investors will get another glimpse of how production is faring tomorrow when Baker Hughes issues its measure of rig activity. Last week the oil rig count dropped to 292, the first time it had fallen below 300 since the Great recession.


COVID-19 to Cause 17% Unemployment in June

U.S. unemployment is expected to hit 17% in June as the economy contracts due to efforts to contain the coronavirus pandemic, economists predicted, and the economy is expected to start rebounding in the second half of the year.

A monthly Wall Street Journal survey found economists expect gross domestic product to shrink 6.6% this year, measured from the fourth quarter of 2019, a downgrade from the 4.9% contraction economists predicted in last month’s survey. While economists expect a deeper contraction in the second quarter, a majority—85%—continue to expect the recovery will start in the second half of the year. They predict an annualized growth rate of 9% in the third quarter, up from 6.2% in the prior survey. Growth is expected to clock in at 6.9% in the fourth quarter, up slightly from last month.

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“The trough will occur in May or June, with activity starting to pick up,” said Chad Moutray, chief economist for the National Association of Manufacturers. “With that said, growth will remain well below pre-recessionary levels likely until at least 2022.”

Business and academic economists in this month’s survey expect, on average, that gross domestic product will contract at an annual rate of 32% in the second quarter. That represents a worsening from the April survey of economists, when they expected GDP to shrink 25% from April to June. The annualized rate, however, overstates the severity of any drop in output because it assumes that one quarter’s pace continues for a year.

In the May survey, 68.3% of economists said they expect the recovery to be shaped like a “swoosh.” Named after the Nike logo, it predicts a large drop followed by a gradual recovery. The survey results echo recent comments by corporate executives.

As states start to loosen stay-at-home orders, economists were split on whether this is the right moment to do so. Some 29.8% said the reopening measures are happening at the right time. 14% said such measures were overdue, while 31.6% described it as too soon. Just under a quarter, 24.6%, were unsure whether the timing is right.

“In the absence of a vaccine or some therapeutic drug, opening the economy now would certainly trigger a spike in new infections and will be followed by economic shutdown 2.0,” said Bernard Baumohl, chief global economist at The Economic Outlook Group, who currently views the reopening as premature.

Federal Reserve Chairman Jerome Powell received good grades for his performance as Fed chair during the coronavirus pandemic, with 71.9% of economists assigning him an A grade, while 24.6% gave him a B. Just 1.8% gave him a C and F respectively.

“Like a good engineer, [Mr. Powell] opened the floodgates to drain the reservoir in advance of an impending flood of demand for liquidity,” said Georgia State University economist Rajeev Dhawan.

The grades marked an improvement from December, when 63.8% of economists gave Mr. Powell a B. Seventeen percent assigned him an A grade and 14.9% gave him a C.

To fight the coronavirus pandemic, U.S. central-bank officials cut rates to near zero, purchased huge quantities of government debt and began lending to American businesses.

Those purchases of debt are expected to get bigger. Economists project the central bank’s portfolio of bonds, loans and new programs will swell to $7.74 trillion in June from less than $4 trillion last year. The portfolio stood at $6.72 trillion on May 4.

Economists see the Fed’s balance sheet swelling to $9.29 trillion by December, $9.63 trillion by December 2021 and $11.27 trillion by December 2022. In that range, the portfolio would be more than twice the size reached after the 2007-09 financial crisis.


Stock Markets Fell on Thursday as Worries Grew About a Second Wave of Coronavirus Infections

Stock markets fell and bonds were in demand on Thursday as worries grew about a second wave of coronavirus infections and a dour assessment from the head of the U.S. Federal Reserve dashed hopes for a quick economic recovery.

“The path ahead is both highly uncertain and subject to significant downside risks,” Fed Chair Jerome Powell said in a webcast speech.

He warned of a recession worse than any since World War Two, and called for additional fiscal spending to stem the fallout from the pandemic – a pointed comment from a central banker who has avoided giving advice to elected officials.

New outbreaks in South Korea and China were cause for concern, even as more countries begin to re-open their economies after lengthy lockdowns.

European stock futures were down, and every market in Asia fell. Bonds and the dollar held ground won overnight.

FTSE futures (FFIc1) and EuroSTOXX 50 futures (STXEc1) dropped about 0.5%, while futures for the S&P 500 (ESc1) struggled to lift much above flat.

MSCI (NYSE:MSCI)’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 1%.

“We don’t think the market is going to re-test the lows, but it’s probably seen its best also, so I’m expecting a correction,” said Tony Huntley, chief investment officer at Melbourne-based fund manager Adansonia Capital.

“The issue is whether we get a second wave (of infections) … that would be my greatest fear.”

China has re-imposed movement restrictions near its borders with North Korea and Russia after a new outbreak was detected there and South Korea is working to contain an outbreak centred around bars and nightclubs in Seoul.

“It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away,” WHO emergencies expert Mike Ryan told an online briefing on Wednesday.

Bonds and the dollar rallied after Powell talked down the prospect of negative interest rates in the United States, and extended gains on Thursday. Yields on benchmark U.S. 10-year Treasuries (US10YT=RR) fell slightly to 0.6395%.

A surprise drawdown of U.S. inventories helped oil prices make meagre gains, but the bleak outlook capped rises.

Gold pulled back from a one-week high hit early in the Asian session, but held comfortably above $1,700 an ounce at $1,711.20.

Markets are looking ahead to the release of the European Central Bank’s latest economic bulletin at 0800 GMT and the latest U.S. jobless claims data at 1230 GMT.


Equity markets have wavered since April’s rally as investors and authorities try to weigh the risks of re-starting economies quickly against the financial ruin that lockdowns have wrought, while worrying about a flare-up infections.

Australian jobless data bought the latest sign of doom, with a record plunge in employment dragging the currency to a one-week low of $0.6420.

Already bleak expectations and strong demand for Aussie bonds kept it from steeper falls. In the United States, the Trump Administration is pressing on with re-opening plans despite urgings of caution from medical experts.

“We’re going to slowly open the economy,” U.S. Treasury Secretary Steven Mnuchin told Fox News on Wednesday.

“But there is also a risk that we wait too long, there is a risk of destroying the U.S. economy and the health impact that that creates.”

Caution is also prevailing in Europe and the Antipodes, where restrictions are beginning to relax. “Global markets are still licking their wounds, and while equities remain robust, gains are slowing,” said Societe General FX strategist Olivier Korber.

“A second pandemic wave is unfortunately not a tail risk, so the full extent of the economic damage may be underestimated,” he said, recommending a long position in euro/kiwi (EURNZD=) which has gained nearly 9% this year as market volatility has increased.

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Elsewhere a strong greenback pushed the kiwi to a three-week low of $0.5968 and had the euro and pound under pressure. Brent crude (LCOc1) firmed slightly to $29.36 per barrel and U.S. crude (CLc1) was up 1% at $25.58 per barrel.



Federal Reserve Warns Of A Possible Sustained Recession From Pandemic

Federal Reserve Chair Jerome Powell is warning of the threat of a prolonged recession resulting from the viral outbreak and is urging Congress and the White House to act further to prevent long-lasting economic damage.

The Fed and Congress have taken far-reaching steps to try to counter what is likely to be a severe downturn resulting from the widespread shutdown of the U.S. economy. But Powell warns that there still could be widespread bankruptcies among small business and extended unemployment for many people.

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“Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” the chairman says in prepared remarks before an online discussion with the Peterson Institute for International Economics. “Avoidable household and business insolvencies can weigh on growth for years to come.”

The U.S. government “ought to do what we can to avoid these outcomes, and that may require additional policy measures,” Powell says.

He says the Fed will “continue to use our tools to their fullest” until the viral outbreak subsides but gives no hint of what the Fed’s next steps might be.

Powell repeats his previous warnings that the Fed can lend money to solvent companies to help carry them through the crisis. But a longer downturn could threaten to bankrupt previously healthy companies without more help from the government.

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Greater support from government spending or tax policies “could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he says.



Economic Indicators – Coronavirus Lockdowns Trigger Big Drop in Consumer Prices

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The coronavirus pandemic pushed down April consumer prices by the most since the last recession as efforts to contain the virus disrupted demand for energy, travel, clothing and other goods and services.

The Labor Department said the consumer-price index fell by 0.8% last month, the second month in a row prices have eased since the pandemic reached the U.S. and the biggest drop since 2008. Business closures and stay-home orders aimed at containing the virus have created cheap oil, and falling prices for air travel, clothing, car insurance and other goods and services.

Excluding the volatile food and energy categories, so-called core prices decreased 0.4%, the largest monthly drop in records dating to 1957. While the month-to-month drops in inflation notched records, annual prices only reached the lows of the last expansion. Overall prices were up 0.3% from a year earlier, the lowest since 2015, and core prices were 1.4% higher from a year ago, the lowest since 2011.

Economists expect the decline in prices to be short-lived, with costs firming up as the U.S. reopens its economy and demand increases. Most don’t think the U.S. is likely to see price softness turn into a worst-case scenario as an extended period of deflation—when there are so many idle economic resources that businesses and workers are forced to lower prices and wages to generate demand for their goods and services.

“With economic activity beginning to open up, even if in a halting manner, while prices may slip further, they are unlikely to do so to nearly the extent seen in April,” said Richard Moody, chief economist at Regions Financial Corp.

A weak economy and softening inflation has had some investors betting the Federal Reserve will turn to negative interest rates to help boost growth. But some central bank research shows negative rates, adopted in other countries, have pushed inflation expectations lower, and Fed officials have concluded the tool’s costs outweigh uncertain benefits.

The Fed’s preferred inflation gauge is the personal-consumption expenditures price index, which has tended to run a little cooler than the CPI. The two generally move in the same direction, though measurement differences might produce a larger difference than usual now.

Lately, energy prices are the biggest drag on both. The Labor Department’s index for gasoline prices tumbled 20.6% in April from the prior month.

As recently as January, a barrel of U.S. oil cost more than $60. On April 20, U.S. crude futures for delivery the following month fell below $0 a barrel for the first time in oil market history. The coronavirus killed demand for fuel. A price war between Saudi Arabia and Russia alongside broad overproduction added to the oil glut.

One area where the pandemic is pushing prices higher: food.

The price index for food at home posted its largest monthly increase since February 1974. Americans stocked up at the pandemic’s outset. Since then, outbreaks have forced meat-processing plants to close and otherwise snarled supply chains. The April price index for meats, poultry, fish and eggs increased 4.3% from a month earlier.

Fed officials will look past oil markets and food costs to focus more on core prices. At least for now, coronavirus-related developments are pushing those lower. Indexes for apparel, auto insurance and airfares all posted their largest monthly declines on record.

“The fallout from the coronavirus has a large disinflationary effect on prices due to the large demand shock, plunge in oil prices, and strong dollar,” said Kathy Bostjancic, an economist at Oxford Economics. “A surge in inflation is the least of our worries.”

One reason deflation may not become an issue is government action to limit the impact of the virus’s disruption. The Fed and U.S. Treasury are pumping trillions of dollars into the economy, and many economists expect a sharp, short recession followed by a slow recovery.

A New York Fed survey out Monday found consumer inflation expectations for the next year and three years increased slightly—both now stand at 2.6%. “Respondents, however, increasingly disagree about the future path of inflation,” the survey said.

The market outlook appears less anchored. Yield movements in the Treasury inflation-protected securities, or TIPS, market show that compensation for inflation expected in five years, after the temporary impact of lower oil prices has faded, fell sharply in March before rebounding slightly, albeit at historically low levels.

Fed officials believe that consumer and market expectations for inflation affect behavior, becoming almost a self-fulfilling prophecy.

Another, longer-term concern is that large amounts of government borrowing and rising costs of doing business could push inflation uncomfortably high. Low rates and government deficits spurred consumer-price inflation after World War II and during the 1970s.

But with the loss of 20.5 million jobs and unemployment hitting a post-World War II high in April, the focus is more immediately on building a fiscal and monetary bridge until the coronavirus is contained.

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“In the near term it’s more likely, we think here at the Dallas Fed, we’ll have disinflation,” Dallas Fed President Robert Kaplan said earlier this month. “That’ll be in the shorter run, the next year or two. I do worry about, as we get back over the next few years to full capacity, with some of this stimulus and the size of the Fed’s balance sheet, do we start creating inflationary pressures? But that’s not going to be for two or three years.”

Oil Prices Boosted By Saudi Arabia Pledge To Deepen Output Cut

Oil futures rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June in a bid to help drain the glut in the global market that has built up as the coronavirus pandemic crushed fuel demand.

Brent crude (LCOc1) futures advanced 0.5%, or 15 cents, to $29.78 at 0500 GMT, after hitting an intraday high of $30.11 a barrel.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were up 1%, or 26 cents, at $24.40 after touching an intraday high of $24.77.

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Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” Stephen Innes, chief global market strategist at AxiCorp, said in a note. OPEC+ is a group comprised of members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia.

The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total. Kazakhstan has also ordered producers in large and mid-sized oil fields including Tengiz and Kashagan to cut oil output by around 22% in the May to June period.

Still, the moves to deepen cuts raised questions for some about why the further cuts were needed.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?'” said Vivek Dhar, Commonwealth Bank’s mining and energy economist.

The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.

However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of COVID-19 cases spurring renewed lockdowns.

Data showing China’s April factory prices fell at the sharpest rate in four years also added to investor jitters as it revealed weak industrial demand.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” said Commonwealth Bank’s Dhar.

Inventory data this week will be key to extending the recent rally in oil prices, analysts said.

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U.S. crude inventories likely rose by about 4.3 million barrels in the week to May 8, a preliminary Reuters poll showed, ahead of reports from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday.


International Energy Agency Forecasts The Biggest Decline In Electricity Consumption Since The Great Depression

Pandemic Sparks Slump in Electricity Prices.

Wall Street trading floors have emptied. Spring has arrived north of the equator. Oil and gas markets have cratered. The result is a precipitous decline in electricity prices in the U.S., Europe and parts of Asia.

Closures of office blocks, shops and factories have throttled power demand, dwarfing the amount of electricity required to work from home. Globally, the International Energy Agency expects the biggest decline in electricity consumption since the Great Depression. It is as if Germany and France were both turned off for the year.

In the U.S., the drop has been most severe in New York City, center of the nation’s epidemic and home to a services sector that usually devours electricity. Wholesale power prices averaged $16.57 a megawatt-hour in the first six days of May, according to S&P Global Platts, down by more than a quarter from the start of the 2020.

Electricity trades in much the same way as raw materials like oil. In much of the U.S., power-plant owners sell electricity to utilities in a competitive wholesale market overseen by regional operators. Utilities then distribute power to customers. Both power companies and utilities protect themselves against price swings with futures, which investors use to bet whether the market is going up or down.

A key difference between electricity and oil is that power is hard to store. When there is too much to go around, particularly on windy days in places like Northern Europe, producers sometimes pay to give power away. U.S. crude futures behaved like electricity when storage space for oil dwindled in April, dropping below $0 a barrel for the first time.

In Europe, negative electricity prices have become commonplace. In auctions for the joint Germany-Luxembourg market on the European Power Exchange, prices turned negative five times in the year through April, more than all of 2019.

The crunch is shifting the math of electricity production in favor of renewable energy sources. Coal plants, among the costliest to run in the U.S., typically deliver bursts of power to the grid when demand increases. Much of that electricity isn’t needed right now. Forty percent of the world’s electricity could be generated from low-carbon sources—nuclear, wind and solar power, plus other renewables—this year, according to the IEA. That would be the highest level on record.

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Electricity prices were falling before the pandemic due to a surfeit of cheap natural gas, said Paul Cusenza, chief executive of Nodal Exchange, which runs a market for power futures. A 30% drop in U.S. gas prices over the past year—accelerated by the recent crash in energy markets—has pushed electricity prices down.

“Less demand, more low-cost generation and cheap gas,” said Dan Eager, principal analyst for European power at Wood Mackenzie. “You add that together and you have very, very low prices.”

Electricity takes an intricate route from the station where it is generated to the device it powers, hurtling down a 160,000-mile network of high-voltage cables that crisscross the U.S. before traveling to consumers along one of millions of low-voltage lines.

Wholesale prices are largely set a day ahead of time. Regional authorities forecast how much electricity will be needed at every hour the following day, based on factors like the weather. Producers bid to generate that power. Smaller trades take place on the day itself, fine-tuning supply to meet demand.

A bump in prices that takes place each weekday morning as New York City gets to work now comes an hour later, and is less pronounced, because offices aren’t opening at the same time. The city’s electricity prices were less than half their average for the time of year at the end of April, according to Nodal Exchange.

Electricity usage has started to creep higher in states that are relaxing restrictions. Still, mainland U.S. demand was 5% lower in early May than it would have been without quarantine measures, said Platts analyst Manan Ahuja.

The world will consume 5% less electricity this year than in 2019, the IEA forecasts. That is eight times the size of the decline that took place during the 2009 financial crisis. It equates to more than 1,000 terawatt-hours in lost demand, enough to power France and Germany combined.

Electricity prices normally fall in spring, before rising when air conditioners are turned on for the summer. The coronavirus shutdown has exacerbated that seasonal slump, slashing New York City’s electricity demand by 14%, according to the New York Independent Service Operator, which runs the state grid.

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“There’s still a very, very large number of [coronavirus] cases in New York City,” said Richard Dewey, president and chief executive of the NY-ISO. “I don’t anticipate the demand going up very much, at least not measurably, for probably a few weeks.”


Global Economic Downturn – Today’s Downturn Is Comparable In Scale To That Of The 1930s

News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression. This is likely to be literally true. Yet for many, the comparison does more to terrify than clarify. Economists say there is likely to be a big difference between a downturn that is the worst since the Depression and conditions as bad as the Depression.

“I don’t find comparing the current downturn with the Great Depression to be very helpful,” said former Federal Reserve Chairman Ben Bernanke, who has studied that 1930s era. “The expected duration is much less, and the causes are very different.”

The trajectory of the pandemic and economy remains uncertain. How quickly health officials can contain the crisis, how much the public will cooperate and whether policies will spark a swift recovery remains to be seen. Even so, many economists find a scenario rivaling the Great Depression in severity and duration hard to imagine.

“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession,” Mr. Bernanke said. Today, however, “the banks are stronger and much better capitalized.”

By most estimates, the current downturn is likely to be comparable in scale and duration to that 2000s recession and the other major post-World War II recession, in the early 1980s.

Comparisons with the Depression are difficult because most of the data sets collected today didn’t exist in the 1930s. But some rough measures are available, including global trade tallies from the League of Nations, Federal Reserve data on factories and Works Progress Administration records on joblessness.

In the 1930s, industrial production fell by more than half. Production slowly made up ground for almost four years, only to decline sharply again in 1937-38. By contrast, production declined by about 15% in 2007-09 and 10% in the early 1980s.

When the coronavirus hit, industrial production had already been dipping as a result of the recent trade wars. While many factories closed as consumer demand shrunk, some are rapidly retooling. Auto makers General Motors Co. and Ford Motor Co., for example, have switched from making cars to ventilators. Medical-supply factories are struggling to keep pace with demand.

From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade.

That compares with a 16-month decline in the early 1980s and an 18-month fall from 2007 to 2009. This time, many economists believe a rebound could begin this year or early next year if the virus is sufficiently contained.

While unemployment in the U.S. hit 14.7% in April and is likely to rise further, the blow today is softened by safety-net programs such as unemployment insurance.

“Many people are suffering now, and the economy won’t recover in only a quarter or two,” Mr. Bernanke said. “But if we’re able to get reasonable control of the virus, the economy will substantially recover, and this downturn should be much shorter than the Great Depression.”

The second quarter of 2020 is likely to be the worst ever for many economies. The median estimate of economists surveyed by The Wall Street Journal calls for a decline of 25% at an annual rate in the U.S. Some estimates are closer to 50%.

But annualized rates can be misleading. They assume that one quarter’s pace continues for a year. If 10% of the economy shuts down for one quarter, that would be considered a 40% decline at an annual rate.

“We’ve had this very abrupt, very sharp, immediate reduction in economic activity, driven by government policies to shut down economies. And because it’s very abrupt, the numbers are astronomical,” said Douglas Irwin, a professor at Dartmouth College who has studied U.S. trade policy during the Depression.

By contrast, he said, “The way the world evolved into the Great Depression was a slow and steady decline. It was a slow strangulation of the economy.”

As in the Depression, today’s collapse is global. But the scale is smaller, Gita Gopinath, chief economist at the International Monetary Fund, said in a briefing last month. The IMF estimates the world economy shrank about 10% during the Great Depression, versus an expectation of about 3% this year and an expected return to growth next year. Advanced economies shrank about 16% in the Depression, compared with about 6% forecast for this year.

A series of severe policy mistakes around the world exacerbated the length and severity of the Great Depression. Central banks tightened monetary policy to maintain the gold standard, which no longer exists. The result was severe deflation, which increased the value of debt and lowered incomes.

Governments also initially cut spending in reaction to declining revenue. And as economies deteriorated, countries raised trade barriers in an effort to protect their domestic industries. The result, though, was a global contraction in demand, which only deepened the depression.

This time, central banks around the world quickly slashed interest rates and deployed programs to prop up credit markets. Governments approved massive spending measures, including the roughly $2 trillion stimulus in the U.S., to help keep businesses afloat and protect jobs. And they haven’t raised trade barriers in response to the pandemic.

“I’m not going to say that everything in the policy is right, but we understand that delay worsens the economic outcomes,” said Catherine Mann, global chief economist at Citigroup.



Financial Markets – Top 5 Things To Watch This Week

This week’s economic calendar is packed with data which will further demonstrate the extent to which the coronavirus pandemic has hit global growth. The U.S. is set to publish figures on retail sales and industrial production for April, while the UK and Germany are to release data on first quarter GDP.

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The data will fuel the debate on whether a rebound in the U.S. stock market is justified amid an unprecedented slowdown. Trade threats by U.S. President Donald Trump against China continue to be a source of worry for investors at a time when large swathes of the economy are at a near-standstill. Meanwhile, bitcoin is due to undergo the third halving in its 11-year history this week. Here’s what you need to know to start your week.

U.S. data to underline steep drop-off in economic activity
Data on U.S. retail sales and industrial production for April due on Friday will further highlight the effect of closures on sales and factory output. Economists are expecting retail sales to have tumbled 11.6%, surpassing the record drop of 8.4% in March. Industrial production, which slipped 5.4% in March, is forecast to fall 11.5%.

There will also be numbers related to consumer sentiment and inflation while Thursday’s weekly report on initial jobless claims will cover the eighth week since widespread lockdowns came into effect. Last Thursday’s report showed that claims topped 3 million for a seventh straight week, but were off the peaks of 6.8 million seen in the week ended March 28.

Investors will also be watching a speech on Wednesday by Federal Reserve Chairman Jerome Powell on current economic issues at a webinar organized by the Peterson Institute for International Economics.

Trump’s trade threats
U.S.- China trade tensions look set to continue to simmer after Trump told Fox News Channel on Friday that he was “very torn” about whether to end the Phase-1 trade deal with China.

Trump’s administration is weighing punitive actions against Beijing over its early handling of the coronavirus outbreak, including possible tariffs and shifting supply chains away from China.

Trump has said he would terminate the trade deal if China fails to meet its purchase commitments. He said on Wednesday that he would know within a week or two whether that was possible.

The deal, which calls for Beijing to boost its purchases of U.S. goods by $200 billion over two years, only took effect on Feb. 15 as the coronavirus pandemic was unfolding. Lockdowns aimed at stemming the spread of the virus dealt a sharp blow to the Chinese economy and it is just now starting to recover.

UK and German GDP to show initial virus impact
First quarter GDP numbers from the UK and Germany will give investors an initial sense of the economic fallout from the lockdowns which began in late March.

The UK economy is expected to contract 2.5%, but the full damage, taking in the second quarter, will be much worse. The Bank of England said last week it expects the UK economy to fall by 14% this year, its worst annual slump for more than 300 years, and the unemployment rate to reach 8% as the coronavirus crisis ravages the economy.

Meanwhile, the euro zone’s largest economy Germany is expected to shrink 2.1% in the three months to March and the government has said it expects an annual contraction of 6.3% this year, which would be the most since World War II.

Divide between U.S. stock market, economy to widen
Recent economic data pointing to historic drops in activity is concerning to investors who worry that unprecedented stimulus from the Federal Reserve and U.S. government have led markets to shrug off the economy’s massive slowdown.

The Labor Department reported Friday that the U.S. economy lost a staggering 20.5 million jobs that month, the steepest plunge since the Great Depression.

If economic data this week is worse than the already awful forecasts it could bolster the argument that the rally in stocks has gone too far. But it is too early to say whether it will derail a surge which saw stocks post their best monthly gain in three decades in April, despite weak economic data from the previous month.

Recent gains could fade if U.S. states need to unwind efforts to reopen their economies and unemployment fails to decline in coming months.

Bitcoin’s third ‘halving’
Investors are widely anticipating Tuesday’s bitcoin halving, the third in the digital currency’s 11-year history. The previous two bitcoin halvings propelled massive rallies in bitcoin’s market value, but there is a wildcard this time in the form of the coronavirus pandemic, some analysts said.

“From an efficient market perspective, any fundamental reaction to the halving should be heavily priced in at this point; after all, it’s hard to imagine a more predictable event than an unalterable supply reduction that has been scheduled for more than a decade in a liquid, heavily-traded … asset,” said Matt Weller, global head of market research at GAIN Capital.

Bitcoin’s technology was designed in such a way that it cuts the reward for miners in half every four years, a move meant to keep a lid on inflation.

In the run-up to this week’s halving, bitcoin had surged almost 40% since the beginning of the year and climbed more than 80% from its lows.



The Mortgage Market Never Got Fixed After 2008. Now It’s Breaking

Many mortgage companies are nonbanks that don’t have deposits or other business lines to cushion them amid the coronavirus pandemic.

Ann Winn called her mortgage company to see about pausing payments in late March, soon after she had to shut down the salon she owns in a suburb of Austin, Texas.

What followed, she said, were hours of tense calls and emails with Freedom Mortgage Corp. The company agreed to let her skip a few payments—but only if she would repay them all in a lump sum this summer. Ms. Winn didn’t know when she would be back at work, so she declined.

“I’m just not going to pay my other bills,” she said, “because I don’t want to lose my home.”

The coronavirus pandemic has delivered a gut punch to the economy and the mortgage market is particularly exposed. The virus has forced millions of homeowners to suddenly stop making payments. At the same time, many mortgage companies aren’t built to handle an economic collapse or help their customers through it.

Many of them are nonbanks that don’t have deposits or other business lines to cushion them, and they have raised concerns that fronting payments for struggling borrowers such as Ms. Winn will quickly drain them of capital.

Years ago, the financial crisis revealed the folly of churning out “liar loans.” Regulators cracked down, and mortgages made today are generally more conservative. What regulators didn’t focus on was the strength of the mortgage companies themselves. Though the loans are sturdier, the infrastructure largely didn’t change.

Over the past decade, the business of originating and servicing mortgages has moved back toward nonbanks such as Freedom Mortgage. Nonbanks made 59% of U.S. mortgages last year, the highest level on record, according to industry-research group Inside Mortgage Finance. They also made a large proportion of U.S. mortgages before 2008 but many went bust when the crisis hit.

Many nonbanks, like United Wholesale Mortgage and LLC, are barely known outside the industry but dominant inside it. Quicken Loans Inc., one of the few with wide name recognition, ranked as the largest mortgage lender by originations for the first time this year, elbowing out Wells Fargo and JPMorgan Chase.

As big banks have refocused their mortgage operations on wealthier borrowers, nonbanks have stepped into the void, often representing the only path to a mortgage for buyers of lesser means. Their retreat could lock many would-be borrowers out of homeownership and make it harder for the economy to bounce back.

Nonbanks also have expanded in the crucial business of servicing mortgages. They now service roughly half of them, five times their share from a decade ago, according to the Urban Institute.

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In good times, that task involves collecting payments from borrowers and handing them to investors that own the loans, plus handling odds and ends such as taxes. In exchange, the servicer gets a slice of the interest. In bad times, servicers are supposed to create new payment plans for struggling borrowers, which takes much more work and expense. When all else fails, servicers initiate foreclosures.

For years after the crisis, regulators, mortgage executives and consumer advocates discussed how to improve this market. They floated ideas about changing the way servicers are paid so they collect a bigger fee when a loan becomes delinquent. They also considered having the servicers fund a central utility to handle defaulted mortgages. But those ideas never gained much traction, according to people involved.

“There was a big focus on the consumer experience,” said Michael Bright, the former head of government mortgage corporation Ginnie Mae, which backs Federal Housing Administration loans. “But there wasn’t much focus on the quality of a servicer.”

The structure of the U.S. mortgage market is much the same as it was before the crisis. Pools of mortgages are packaged and sold to investors around the world. When a borrower stops paying, servicers are caught in the middle, forced to front payments to the investor, even though they aren’t receiving money from the borrower.

The servicer will eventually get reimbursed if the mortgage is one of the roughly two-thirds guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. But that is a slow process and in some cases can take years.

Lawmakers recently outlined how struggling borrowers can request so-called forbearance plans, by which they pause their monthly payments. If the mortgage is government-backed, then companies are generally supposed to grant the request.

That has thrust both banks and nonbanks into the position of cushioning the blow for their customers. Nonbanks, which depend on short-term bank loans to fund their daily operations, are struggling to do so.

“This is a systemic problem,” said Karan Kaul, a senior research associate at the Urban Institute.

About 7.5% of borrowers had obtained forbearances as of April 26, according to a survey by the Mortgage Bankers Association, or MBA. That means about 3.8 million homeowners are skipping their monthly payments with permission.

If forbearance rates reach the mid-to-high teens, few servicers are expected to have the cash to meet their advance obligations, according to Warren Kornfeld, who covers nonbank mortgage companies at Moody’s Investors Service. As a result, many are now trying to gain access to additional cash.

Mortgage servicers, both banks and nonbanks, were on the hook for about $4.5 billion a month in servicing advances on government-backed loans because of forbearances as of Thursday. That is roughly 25 times more than they were on the hook for at the end of February, according to Black Knight Inc., a mortgage-data and technology firm.

Ms. Winn and her husband bought their Leander, Texas, home in 2014 using the FHA loan program, which is meant for first-time and modest-income buyers. Later, they learned their lender had passed the servicing rights to Freedom.

Ms. Winn had little interaction with Freedom until calling in March. A representative told her she could skip payments for April, May and June, but would then have to pay four months all at once. Another representative told her that she could later ask to tack the missed payments onto the end of the loan, but that there was no guarantee she would be approved.

In late April, she received a letter saying she had been automatically opted into the first plan. She intends to keep making her monthly payments anyway, since she doesn’t want to pay for four months at once.

Chief Executive Stanley Middleman said in a statement that Freedom is “managing a great deal of unplanned activity” but plans to fix any issues that arise.

“We are doing the best we can and will continue to do so,” Mr. Middleman said.

The stimulus bill provided little detail on when borrowers would have to make up deferred payments. But the regulator that oversees Fannie Mae and Freddie Mac, the government-sponsored mortgage companies that back conventional loans, clarified recently that its homeowners won’t have to make up their missed payments all at once. The FHA program has made similar comments.

Industry representatives say that forbearance plans were rolled out on a vast scale very quickly, which led to confusion among both servicers and borrowers. Bob Broeksmit, CEO of the MBA, acknowledged that there have been issues between servicers and borrowers but said that recent guidance is likely to bring more clarity.

The borrowers the nonbanks serve are often the ones that most need help. Last year, nonbanks made 86% of FHA mortgages. As of Thursday, roughly 13% of FHA loans had forbearances, according to Black Knight.

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Nonbanks say they have spent significant time bolstering their businesses for a downturn. Some said in recent earnings reports that they now expect the coronavirus fallout to be smaller than they initially feared. Still, Ginnie Mae has set up a lending facility to help companies that are out of options. Fannie Mae and Freddie Mac are only requiring servicers to advance four months’ worth of payments.

The health of nonbanks ultimately depends on keeping their funding. Worried about the surge in borrowers seeking relief, some banks have recently curtailed this lending.

Mortgage companies, both banks and nonbanks, are also pulling back on some lending to borrowers. Credit availability in April fell to its lowest since 2014, according to the MBA.

Lenders are cutting back in particular for borrowers with lower credit scores, according to the Urban Institute. But the contraction in credit is spreading to all types of loans—from jumbo mortgages to cash-out refinances.

Beverly Harris was in the process of buying a home in the Palm Springs, Calif., area in March when the type of unconventional loan she had been pre-approved for suddenly became unavailable.

The retiree, who has a high credit score and was planning to put 20% down, was expecting to use a loan that qualifies the borrower based on assets rather than income. She estimates she checked with 15 different mortgage companies and banks. All of them had stopped making those types of loans.

For now, Ms. Harris is staying put in her rental.


Why The Stock Market Is Up Even With Historic Job Losses?

A record number of Americans just lost their job, yet stocks are moving higher. This seems paradoxical, given the economic toll — to say nothing of the emotional toll — of millions of people across the country without a job.

While some observers say it’s further indication that the stock market has become decoupled from reality, others say there are clear reasons stocks have rebounded and can continue to move higher.

For one, the jobs data in and of itself is backward looking. The April figures, which showed a record 20.5 million Americans losing their jobs, is from the height of the crisis. Since then, economies have begun to reopen. There is still a long way to go, of course, but the market is discounting what’s going to happen six months from now, when most states will be getting back to business.

Strategists also point out that the losses have been somewhat concentrated in the leisure and hospitality sector, which has overshadowed strength in other areas of the market. And with the government and federal reserve providing record stimulus measures, some argue that once businesses do get back up and running, the recovery will be swift.

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite were all slated to open higher on Friday, with the Dow poised to rally more than 300 points. Since the March 23 low, all three averages have bounced more than 30%.


Worst over?
While the debate among health experts about how and when economies should reopen is ongoing, some states have already started easing shelter-in-place measures. A number of states including Florida began phase one reopenings on Monday. California became the latest state to lift some of its precautionary measures, with certain low-risk retailers allowed to open beginning Friday.

“The market knows that the job losses are self inflicted due to the widespread shutdowns,” Bleakley Advisory Group chief investment officer Peter Boockvar told CNBC. “Thus, now that we are beginning the reopening process the market assumes many of these people will hopefully get hired back over the coming months and quarters.”

Additionally, 78% of those that lost their job in April said they were furloughed, meaning the unemployment in theory will be temporary. Goldman strategist Jan Hatzius said this is an important distinction to make, given it suggests the recovery will be swifter.

“If job losses are concentrated in this segment [furlough], it would increase the scope for a more rapid labor market recovery when the economy eventually rebounds (because employees can be recalled to their previous jobs, as in several past recessions),” he wrote in a note to clients ahead of the report.

Pockets of strength?
At first the market sell-off was broad in nature as the uncertainty surrounding the coronavirus sent the major averages tumbling into a bear market at the fastest pace on record.

But since then, the divide between the winners and losers widened. Unsurprisingly stocks most exposed to the coronavirus threat — including hotels and airlines — have continued to trade lower. But other names are hitting new all-time highs. On Thursday the Nasdaq went positive for the year, as names like Netflix and Amazon surged to all-time highs.

“Large companies have fallen much less than smaller companies. It is likely that as a result of this crisis the strong will get stronger … and so the stock market is reflecting that in its relative valuation,” Peter Orszag, Financial Advisory CEO at Lazard and former OMB director under Obama, said on CNBC’s “Squawk Box.”

“The US consumer has proven to be the economic engine over the last decade, and investors who are buying heavily into this market believe that behavioral changes are unlikely to create a dislocation in demand longer than a couple of quarters,” added Shannon Saccocia, chief investment officer at Boston Private Wealth. That said, Saccocia said a more cautious tone is warranted, since she believes it’s a “misconception” that demand for consumer services will return quickly once government edicts lift.

Ongoing stimulus?
As the coronavirus wreaked havoc on markets, governments and central banks around the world stepped in in an effort to prop up prices.

In March, President Donald Trump signed into law a record $2 trillion federal stimulus package known as the CARES Act, while the Federal Reserve announced that it would engage in unlimited asset purchases.

“While the collapse in economic activity is historic, so too is the global policy response to cushion the impact and support a recovery as containment measures are relaxed,” JPMorgan strategist Marko Kolanovic said in a recent note to clients.

“We estimate the impact of Fed easing in both rates and credit more than compensate for the temporary hit to corporate earnings when valuing the US market via discounted earnings,” he added.

Zero rates?
As part of its stimulus measures, in March the Federal Reserve slashed interest rates to near zero. At the central bank’s most recent meeting at the end of April, it pledged to keep rates at historic lows until the economy recovers. This supports economic activity since it makes borrowing money cheaper.

“Interest rates are going to be extremely low — barely positive — for a very long period of time, so that does provide some support to equity prices,” noted Orszag.

Other factors?
Amid the ongoing uncertainty, Kate Moore, head of thematic strategy for BlackRock, said its important for investors to look through the noise and determine who the winners on the other side will be.

She believes the market is moving higher due to three reasons: the slowing rate of infection, gradual reopening of states’ economies, as well as improving relations between the U.S. and China.

“We need to continue to get government and policy support in order for the market to move forward, and for us to not just be reacting to some slightly incremental better newsflow, but to something that’s more fundamentally driven,” she said.

While many unknowns remain and the path forward is far but uncertain, famed investors are quick to note that the U.S. has bounced back before.

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“Nothing can basically stop America,” said Warren Buffett, chairman and CEO of Berkshire Hathaway, from the conglomerate’s first virtual shareholder’s meeting on Saturday. “The American miracle, the American magic has always prevailed and it will do so again.”


The World Is Running Out Of Room For Its Oil

Lockdown measures are crippling demand, and supply isn’t falling quickly enough to keep up. Oil-storage tanks around the world are rapidly filling with crude, leaving the new production coming out of the ground with nowhere to go.

The overwhelming glut is threatening one of the world’s vital industries and could prolong the economic fallout from the coronavirus. As storage filled, one price for U.S. crude recently fell below $0 a barrel—a first in oil-market history—effectively meaning sellers would have to pay buyers to take barrels off their hands.

Even with a recent rebound as parts of the world reopen for business, oil trades at a fraction of where it started the year. U.S. crude futures closed down 1.8% at $23.55 a barrel Thursday, extending a streak of wild moves by erasing an earlier 11% rally. Most energy companies would lose money producing at these levels.

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Stockpile data are incomplete or delayed, but recent figures already illustrate the crisis. Global oil inventories fall into two main categories: commercial stockpiles and strategic reserves held for emergencies. Most investors focus on changes in commercial inventories because those are most sensitive to shifts in global supply and demand.

Producers and traders who don’t want to sell crude at today’s low prices can try to store it in hubs around the world, then sell in the future. The problem now is that demand for storage space is skyrocketing.

U.S. commercial stockpiles are rising at their quickest pace ever in government data going back to 1982. At 532.2 million barrels during the week ended May 1, inventories are soon expected to blow past a record of 535.5 million barrels set in March 2017.

The increase has been pronounced in Cushing, Okla., a key hub. Analysts said dwindling storage space in Cushing contributed to the recent drop in one futures contract below $0 a barrel. On April 20, that futures contract was close to its expiration date—meaning traders had to either sell it or accept delivery of actual barrels of oil at Cushing by the following month.


Those stuck holding the contracts likely couldn’t find available storage for oil and began paying others to take the contracts from them.

It is hard to know how much space is actually available. Logistical hurdles mean storage tanks can’t be filled to the brim, and competition for remaining space is fierce. That means much of the remaining empty room could have already been claimed for future use. Even so, the official Energy Information Administration figures show Cushing inventories rising at a pace that would have them completely full in weeks.

As a result, crude-futures prices recently traded around their lowest levels in two decades.

Normally, when oil prices slide, consumers travel more, limiting the price drop and eventually spurring a rebound. But with much of the world practicing social distancing, fuel consumption has plummeted.

That means companies industrywide are struggling. Refiners such as Marathon Petroleum Corp. and Valero Energy Corp. that take in oil and turn it into petroleum products including gasoline are bringing in much less crude. The extra crude must find a home in storage.

In addition to Cushing, other U.S. storage hubs are located in the Gulf Coast. A flood of oil from Saudi Arabia, the world’s largest exporter, is starting to arrive in the region—fallout from a March production feud between the kingdom and Russia that raised global supplies even as demand crashed.

That extra crude could make the glut in the U.S. even worse. Oil normally moves seamlessly through a network of pipelines and storage hubs across the country, but more of it will have nowhere to go.

The excess oil is forcing energy companies to curb spending and shut in productive wells. Some companies are starting to go bankrupt and lay off employees. The turmoil is erasing hundreds of billions of dollars from the sector’s market value.

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There is also a large amount of oil floating at sea with nowhere to go, according to cargo tracker Kpler. Some ships have even been crowding off the California coast recently.

Oil-market analysts are also watching inventories overseas, particularly in China, the world’s largest commodity consumer. Figures from analytics company Kayrros show a rise in those stockpiles recently, too.

And with supply projected to continue exceeding demand for now, many analysts expect prices to remain volatile.


Global Markets Mostly Edge Up

Global shares largely crept higher, after a mixed session on Wall Street, and with few major news developments to alter investors’ outlook on the coronavirus pandemic.

Futures for the S&P 500 rose 0.9%, suggesting the U.S. market could open higher. The pan-continental Stoxx Europe 600 gained 0.4%. Hong Kong’s Hang Seng Index lost 0.6%, while Australia’s benchmark S&P/ASX 200 retreated 0.4%.

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The S&P 500 and Dow Jones Industrial Average edged lower Wednesday, while the Nasdaq Composite rose, as investors tried to untangle data and earnings to determine what the economy might look like in the months ahead.

Martin Hennecke, Asia investment director with St. James’s Place Wealth Management, said investors were grappling with a range of questions, from the pace of economic reopening to the long-term effects of central bank support.

“No one can predict exactly how Covid-19 will play out from here, and there are always other risks present as well,” he said, pointing to high government debts as one potential trigger for volatility.

Mr. Hennecke said concerns were resurfacing about trade tensions between the U.S. and China, and whether that could prompt currency devaluations to support exports.

President Trump has sharply criticized China for its handling of the pandemic. He has said he is considering using tariffs and other ways to collect compensation for it from Beijing. However, senior officials signaled this week that the administration is holding off on punishing China economically.
“The threat of additional U.S. tariffs on Chinese goods shouldn’t be ignored given the likelihood that the ‘phase one’ trade deal soon falls apart,” Julian Evans-Pritchard, an economist at Capital Economics, said.


Data Thursday showed China’s exports rebounded in April, beating market expectations by growing 3.5% year-over-year in dollar terms. But analysts, including Mr. Evans-Pritchard, said exports would fall back sharply in May as business activity slowed for China’s global trade partners.

In bond markets, the yield on the 10-year U.S. Treasury dropped to 0.695%, from 0.709% Wednesday. Yields fall as bond prices rise.

Brent crude, the global oil benchmark, fell 1.4% to $29.31 a barrel.



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U.S. Nonfarm Private Sector Lost 20 Million Jobs

The nonfarm private sector in the U.S. lost about 20.2 million jobs from March to mid-April as much of the country’s economy ground to a halt during the coronavirus pandemic.

The losses were the steepest among large businesses with 500 or more employees, which saw a decline of roughly 9 million jobs during the month, according to the ADP National Employment Report for April.

The report also said the number of job losses for its March report was revised to 149,000, instead of 27,000.

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Economists polled by The Wall Street Journal had expected the April report to show job losses of 22 million. The ADP report is based on data through April 12. The ADP Research Institute, working with Moody’s Analytics, publishes the report each month.

The service-providing sector was responsible for a majority of the losses, shedding 16 million jobs in the month. The number of service jobs lost was especially high in the leisure and hospitality sector, which saw a decline of 8.6 million jobs. The goods-producing sector was responsible for 4.2 million jobs lost.

Small businesses of fewer than 50 employees lost 6 million jobs in April, while medium businesses lost 5.3 million jobs.

“Job losses of this scale are unprecedented,” said Ahu Yildirmaz, the co-head of the ADP Research Institute. “The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession.”


The U.S. Department of Labor is expected to release its April employment report, which covers the same period in April, on Friday. Economists are expecting it to show nonfarm payrolls down 21.5 million jobs for the month, and a rise in the unemployment rate to 16%, from 4.4% in March.



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Home Prices Are Rising During The Pandemic

The economy is shrinking, businesses are closing and jobs are disappearing due to the coronavirus pandemic. But in the housing market, prices keep chugging higher.

Home prices plunged during the last recession after a housing crash caused millions of families to lose their homes. Home values could start to erode again, especially when mortgage forbearances end, some economists warn.

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But that hasn’t been the case so far. The median home price rose 8% year-over-year to $280,600 in March, according to the National Association of Realtors. While buyer demand has softened and sales fell 8.5% that month from the prior month, the supply of homes on the market is contracting even faster, recent preliminary data shows.

“Demand absolutely just got a kick in the gut, but at the same exact time, so did supply,” said Skylar Olsen, senior principal economist at Zillow Group Inc.

Homes typically go under contract a month or two before the contract closes, so the March NAR data largely reflects purchase decisions made in February or January.

Even by the end of last month, many sellers were reluctant to cut prices. Only about 4% of sellers cut their prices in the week ended April 25, down from 5.7% during the same week last year, according to

Some sellers say they are hanging tough because they believe their homes aren’t moving because buyers haven’t viewed them in person or are reluctant to make offers right now, not because the asking price is too high. They are waiting for stay-at-home orders to ease before deciding whether to lower the price.

“People really aren’t leaving their homes” to go house-hunting, said Sarah McMurdy, who listed her Bethesda, Md., house in late March and then opted to temporarily take it off the market in April due to the pandemic. “We’re not looking to fire-sale the house. We’re in no rush. We would rather wait this out.”

Real-estate brokerage Redfin Corp. said its measure of homebuying demand, which tracks buyer inquiries, was down 15% in the week ended April 26 compared with before the pandemic struck. Mortgage applications for home purchases around the same time were down 20% from a year earlier, according to the Mortgage Bankers Association.

Total listings of homes for sale, meanwhile, have hit a five-year low, while the median listing price was up 1% from last year at $308,000, Redfin said.

The housing market has been undersupplied for years. During the pandemic it may get worse. There were 1.5 million units for sale at the end of March, NAR said, down 10.2% from a year earlier. Homeowners are waiting to list their houses, real-estate agents say, because they have decided not to move or they are worried about letting buyers into their homes during a pandemic.

Still, some buyers are hoping for bargains. Haas El Farra and his wife were under contract to buy a house in Southern California in early March. As the coronavirus epidemic worsened, they worried they were buying at the top of the market and asked the seller to lower the price. When the seller refused, they pulled their bid and decided to keep looking for a better deal.

“Hopefully something nicer than what we were looking at will come up at an affordable price,” said Mr. El Farra, a portfolio manager.

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Prices in the Midwest showed the strongest annual growth at 9.7% in March. In the Cincinnati area, homes are selling for higher than listing price, said Donna Deaton, vice president at Re/Max Victory in Liberty Township, Ohio. Large companies in the area are still hiring, she said.

“For the most part, we’re still [competing against] multiple offers just about on every single thing,” she said.

While many economists expect home sales to tumble this year, many forecasts call for prices to climb slightly or hold flat. Mortgage-finance giant Fannie Mae said in April that it expects the median existing-home price to tick up to $275,000 this year from $272,000 last year. Capital Economics forecasts average home prices this year will fall 3% compared with last year. Zillow said Monday that home prices are likely to drop 2% to 3% from previous levels by the end of the year and recover in 2021.

In a forecast released Tuesday, housing-data provider CoreLogic called for nationwide home prices to rise 0.5% between March 2020 and March 2021. CoreLogic forecast annual price declines in some cities including Houston, Miami and Las Vegas.

A major uncertainty is whether mortgage-forbearance policies will prevent a wave of distressed sales. More than 7% of mortgages were in forbearance in the week ended April 30, according to mortgage-data company Black Knight Inc., and some homeowners can get forbearance for up to a year. But homeowners could struggle to make payments after the forbearance period ends.

“In the next 12 months it’s hard to anticipate price declines because of the mortgage forbearance in place,” said Lawrence Yun, NAR’s chief economist. “You would have to see continuing job losses for a prolonged period leading to foreclosures, and even then we may not have oversupply.”




Global Stock Markets Mixed As Investors Weigh Economic Reopening


World markets were mixed as investors gauged the possible effects of easing lockdowns to combat the coronavirus.

S&P 500 futures rose 0.8% ahead of the opening bell Wednesday, while the Stoxx Europe 600 benchmark was broadly flat. China’s Shanghai Composite gained 0.6% on its first trading day since Thursday, after a five-day holiday.


South Korea’s Kospi Composite rose 1.8%. Australia’s S&P/ASX 200 was down 0.4%. Japanese stocks will resume trading Thursday.

Caroline Yu Maurer, head of greater China equities at BNP Paribas Asset Management, said consumption inside China was showing signs of improvement, but a bigger question for investors in the country’s shares would be the pace and extent of recoveries in the U.S. and Europe.

“If overseas consumption resumes to normality in the next couple of months, then the drag on China exports can be manageable,” Ms. Maurer said.

“The direction for China equities remains murky for the next couple of quarters. The concern is whether there will be global resurgence [of the virus] in autumn and winter,” she added.

Cliff Tan, East Asian head of global markets research at MUFG Bank, said infections could resurge as lockdowns ease, but this scenario hadn’t been factored into markets much.

He said while central-bank support meant stocks were unlikely to fall back to their March lows, they could possibly approach those levels. On the other hand, he said Asian currencies could rally in the third quarter if data showed the pandemic was under control.

The Trump administration is considering disbanding the White House’s coronavirus task force, officials said, despite the virus’s spread around the country.

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The onshore Chinese yuan, resuming trading after holidays, weakened nearly 0.4% against the dollar. The WSJ Dollar Index, which tracks the dollar against 16 currencies, was unchanged, while the Japanese yen firmed 0.2% against the greenback.

Oil futures retreated slightly, after jumping Tuesday. Prices for June delivery of West Texas Intermediate, the U.S. benchmark, fell 0.65% to $24.42 a barrel. The global equivalent, Brent crude, declined 0.6% to $30.78.

The yield on the 10-year U.S. Treasury note rose to 0.662%, from 0.656% on Tuesday.



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Stock Market – Top 5 Things to Watch This Week

The U.S. employment report for April will take center stage this week, laying bare details on the depth of the economic fallout from efforts to contain the spread of the coronavirus pandemic. The figures are expected to be historically unprecedented.

Markets will also be watching the progress of some U.S. states and many European countries as they cautiously take steps to reopen their economies. Trade worries could come back to the fore after U.S. President Donald Trump ratcheted up anti-China rhetoric and oil prices will be watched for signs of sustained strength after record output cuts kicked in on Friday. Meanwhile, the Bank of England is to have a policy meeting on Thursday and publish its latest economic forecasts and financial stability assessment. Here’s what you need to know to start your week.


Labor market wipeout
The Labor Department releases its nonfarm employment report for April on Friday and the overall pictures is expected to be staggering, with economists forecasting the loss of 21 million jobs for the month. That comes after a decline of 701,000 in March, when an historic 113 straight months of employment growth ended. The unemployment rate is expected to jump to 16%.

More than 30 million Americans have sought unemployment benefits in the past six weeks, or more than 18.4% of the working-age population. Restrictions such as stay-at-home orders and social distancing aimed at mitigating the spread of the virus have crippled business activity.

The data will likely add to the enormous pressure on states to reopen even though the number of coronavirus cases is still climbing in many parts of the country.

Trade woes
U.S. President Donald Trump said on Friday raising tariffs on China is “certainly an option” as he considers ways to punish Beijing for its alleged failure to contain the coronavirus.

“A lot of things are happening with respect to China. We’re not happy, obviously with what happened. This is a bad situation — all over the world, 183 countries. But we’ll be having a lot to say about that. It’s certainly an option. It’s certainly an option,” Trump told reporters.

Whether Trump will risk the collapse of his trade deal with China is unclear, but he will be mindful of the threat the coronavirus death toll and economic damage pose to his chances of re-election in November.

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Gradual reopening
Many European countries are gradually reopening their economies, with Italian factories and building sites to reopen from Monday after Europe’s longest lockdown. German schools, museums and churches, will also reopen following the reopening of small shops, while Britain will lay out its exit strategy in coming days.

Governments are wary of a second wave of infections, but with the European Central Bank predicting the euro area economy to shrink by as much as 15% this quarter, authorities are also keen to get activity going again.

Meanwhile, governors in about half of the United States partially reopened their economies over the weekend, with Georgia and Texas leading the way.

As of Saturday, the number of known infections across the U.S. had climbed to more than 1.1 million, including about 65,000 deaths, according to a Reuters tally.

Bank of England to publish new economic forecasts
The Bank of England is not expected to make any changes to monetary policy at its meeting on Thursday, after it cut rates twice in March to a new low of 0.1% and ramped up its government bond-buying by a record 200 billion pounds.

Instead investors will be focusing on the publication of its new economic forecasts and the interim Financial Stability Report.

The BoE will announce its latest monetary policy decision at 06:00 AM GMT, rather than at the usual release time of 12 PM GMT, in order to accommodate the joint publication of the interim Financial Stability Report, which assesses the impact of the coronavirus pandemic on the finance industry.

BoE Governor Andrew Bailey will hold a press conference after the policy meeting.

Will record output cuts bolster oil?
Oil prices climbed on Friday as OPEC and its allies embarked on record output cuts aimed at reducing a supply glut after the coronavirus crisis decimated global energy demand.

The global oil benchmark, Brent crude, has fallen almost 60% percent in 2020 and hit a 21-year low last month as the pandemic squeezed demand and OPEC and other producers pumped at will before reaching the new supply deal that kicked in on Friday.


The Organization of Petroleum Exporting Countries, Russia and other producers, known as OPEC+, has agreed to cut output by 9.7 million barrels per day from May 1. Even so, some analysts doubt whether the reduction, the largest ever agreed, will be enough as demand is unlikely to recover rapidly.


3 Stocks To Watch In The Coming Week: Disney – General Motors – Tesla

After finishing its best month of gains in about three decades, the stock market started May on a sour note as sentiment turned negative on the worsening unemployment situation and increasing tension between the U.S. and China over the spread of coronavirus.

Millions more Americans filed for unemployment benefits last week, sending the six-week total above 30 million since the coronavirus pandemic began to shutter businesses across the country. With that huge economic cost, President Donald Trump threatened to slap tariffs on Chinese imports, blaming the Asian nation for misleading the world about the pandemic.

If Trump acts on his threat, that could again start a trade war between the world’s two largest economies, diminishing prospects for a quick economic recovery. All major U.S. benchmarks, including the S&P 500, Dow and NASDAQ, slumped about 3% on Friday.

In the coming week, we’ll still see a few big names from different sectors of the economy reporting their first-quarter numbers. Here’s what we’re watching:

1. Disney

The Walt Disney Company (NYSE:DIS) reports earnings for the fiscal 2020 second quarter after the closing bell on Tuesday, May 5. Analysts are expecting $18.05 billion in sales and $0.93 a share profit per share.

Disney Stock Price Today

With the entertainment giant’s theme parks closed all over the world due to COVID-19, Disney is expected to report earnings from resorts and consumer products fell by $500 million or more in the period.

The Burbank, CA-based company is also suffering on other fronts: there are no live sporting events for its ESPN network to cover and no theaters currently open where its movies can be shown. Film and TV production has shut down, and its cruise ships are docked.

Faced with these challenges in the coming quarters, Disney probably won’t have much positive news to provide and could avoid delivering future guidance. One bright spot could be the subscriber numbers on its newly-launched streaming service, Disney+ which is benefiting from the stay-at-home environment.

Shares have fallen 27% this year, closing at $105.50 on Friday, after a 2.5% decline for the day.

2. General Motors

General Motors (NYSE:GM) will report results for the first quarter before the market opens on Wednesday, May 6. The carmaker is expected to show $0.47 a share profit on sales of $32.09 billion.

Auto manufacturers are among the worst hit companies in this pandemic. Global lockdowns have forced them to close their plants, while at the same time sales have collapsed.

General Motors Stock Price Today

Last week, GM suspended its dividend and share buyback program as the largest U.S. automaker seeks to preserve cash. The moves announced Monday follow other cash-saving measures taken at the beginning of April, when the company deferred 20% of salaried workers’ pay, cut top executive compensation and put 6,500 employees on leave.

GM shares have plunged more than 45% this year, massively underperforming the benchmark S&P 500 which is down about 13% since the beginning of 2020. The stock fell more than 6% on Friday to close at $20.90.

3. Tesla

Investors in Tesla (NASDAQ:TSLA) are likely to face another volatile week. The electric carmaker’s shares plunged on Friday after its CEO, Elon Musk, said in a tweet that Tesla stock is too high.

Musk posted more than a dozen times in a span of less than a 75 minutes on Friday, claiming he’s selling “almost all” of his physical possessions and won’t own a house. He also renewed his call for reopening the U.S. economy.

Tesla Stock Price Today

It’s not the first time Musk has warned investors about the high price of his own stock. In the three most recent events, Tesla shares remained in the red one year out, while in the 2013 episode, Tesla plunged 30% in the following month. It eventually recovered over the one-year period, According to Baird Equity Research cited by CNBC.

Investors became more confident about Tesla this year, after the carmaker released a better-than-expected earnings reports, raising expectations that the company was in a stronger position to withstand the coronavirus-triggered slowdown. Shares of the Palo Alto-CA company fell more than 10% on Friday, closing at $701.32.


Natural Gas Is Flaring Up

Rising Natural Gas Prices Are a Hot Bet…

Investors, who just weeks ago shunned the fuel and the companies that sell it, are unwinding wagers that prices will fall, bidding up producers’ beaten-down shares and even buying their new bonds.

The reason for optimism: The historic collapse in crude prices thanks to the new coronavirus has energy producers racing to close oil wells.

Shutting in productive wells in crude-drilling regions like North Dakota and West Texas not only keeps oil in the ground and off the flooded market, it also chokes off a lot of gas that is extracted as a byproduct. When crude prices last month dipped below $0, natural gas prices had their best day in more than a year, popping 9.75% on the prospect that many money-losing wells will be capped.

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Meanwhile, coal, not gas, has suffered the worst of the reduced demand for electricity during the pandemic. Coal’s share of U.S. electricity generation is down by about a third from last year, according to Energy Information Administration data.

The result is renewed interest from investors in natural gas and its producers.

Hedge funds and other speculators on April 21 became net long—with more wagers on rising gas prices than bets counting on decline—for the first time since last May, according to Commodity Futures Trading Commission data.

They added bullish positions this week. Though the difference between long and short bets is relatively small, it represents a dramatic shift in sentiment. Gas speculators were piled into their largest net short position on record in mid-February.

Since February, shares of Appalachian gas producers EQT Corp. and Range Resources Corp. have more than doubled while CNX Resources Corp. stock has gained 91%. The broader stock market has been down 4.2% over that same time, and the sector’s benchmark SPDR S&P Oil & Gas Exploration & Production exchange-traded fund has lost 19%. Over the past three months, Cabot Oil & Gas Corp., a top producer in Pennsylvania, has risen 45%, second best in the S&P 500 after Regeneron Pharmaceuticals Inc., which investors have banked on developing a Covid-19 treatment.

SunTrust Robinson Humphrey analysts raised price targets for shares of seven gas producers by an average of 69%. Tudor, Pickering, Holt & Co. recommended shares of EQT, Cabot Oil & Gas Corp. and Tourmaline Oil Corp. in Canada to capture near-term gains related to what the Houston firm estimates will be 6 billion to 7 billion cubic feet of gas a day leaving the market as oil wells are shut.

Debt investors are warming too. EQT’s bonds traded down to 61 cents on the dollar in March but are back up to near par. Last week, the Pittsburgh company launched a $350 million convertible bond offering that generated so much interest that it ended up issuing $440 million of debt, according to CreditSights, which upgraded its rating of EQT. CNX followed with its own offering this week of $300 million of debt that can be swapped for shares.

Natural gas futures for June delivery lost 3% on Friday to close at $1.89 per million British thermal units after climbing to $2.016 in early trading. That’s still too low for many gas wells to be profitable, yet the price is up 22% from the 25-year-low of $1.552 on April 2 and the trend is higher heading into summer, when there’s demand to power air conditioners, and more so in winter, when a lot of gas is burned for heat.

Futures for July delivery reached $2.25 Friday before giving up gains. December gas nosed briefly above $3.

“We think the dry gas producers are attractive,” said Mark Unferth, a portfolio manager at Alpine Capital Research, referring to companies that don’t produce much poorly priced oil and natural gas liquids. “We’ve been adding to our exposure the past six weeks and overall it’s about 5% of our portfolio.”

Companies like EQT and CNX, which make their money selling gas, had to rapidly lower operating costs to keep up with oil-drilling competitors that didn’t particularly care about the price of gas and flooded the market with it when crude prices were higher. As U.S. oil production surged to records, so did gas output. Appalachian gas producers had to adapt to prices first below $3 and then this past winter to less than $2.


Those efficiency gains should translate to profits on even small improvements in gas prices, Mr. Unferth said.

“When gas prices were at $3.50 you could afford to be sloppy but low prices have forced people to be a lot more efficient in the field,” he said.


#CancelRent Is New Rallying Cry for Tenants. Landlords Are Alarmed.

As unemployment soars across the country, tenants rights groups and community nonprofits have rallied around an audacious goal: to persuade the government to halt rent and mortgage payments — without back payments accruing — for as long as the economy is battered by the coronavirus.

The effort has been brewing on social media, with the hashtag #CancelRent and online video rallies, as well as a smattering of in-person protests, frequently held in cars to maintain social distancing.

Representative Alexandria Ocasio-Cortez, a New York Democrat, offered a fervent endorsement of the campaign, encouraging her progressive base to embrace a movement to upend the housing market.

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“It’s not that it’s impossible to do and it’s not that we can’t do it,” Ms. Ocasio-Cortez said in a live video on her Facebook page on Monday. “We lack enough politicians with political will to actually help people who are tenants and actually help people who are mom-and-pop landlords.”

But in New York and other cities, landlords say they too are struggling to pay their bills since many tenants have already been unable to pay rent. They call the advocates’ efforts reckless and say that withholding rent would create cascading consequences, including leaving property owners without the means to pay mortgages and property taxes or to maintain buildings.

Still, from New York to Kansas City to Los Angeles, groups are encouraging tenants to withhold payments on Friday, the due date for May rent, aiming to create pressure for an expansion of affordable housing and tenant-friendly legislation.

To cancel rent and mortgage payments, the federal government would have to take sweeping and possibly unconstitutional intervention in the housing and financial markets, interceding in private contracts and ordering banks and landlords not to collect money.

While the prospect of this happening is low, the campaigns are less about pushing a particular piece of legislation and more about kindling a mass movement akin to the Occupy Wall Street protests that followed the 2008 financial crisis.

“Rent is not being paid, and the organizing strategy is figuring out how we rally around that and politicize it for our benefit,” said Tara Raghuveer, director of the Homes Guarantee campaign of People’s Action, a national network of local advocacy organizations.

Groups from California to New York have amassed a sizable following of renters who say they will skip May rent. They have also received a boost from progressive members of Congress, who introduced a cancel rent bill.

“It’s a moment that people are literally rising up for real transformation in the housing market,” said Cea Weaver, the campaign coordinator at Housing Justice for All, a New York group.

Though nascent, the movement has alarmed landlords, especially smaller property owners who say that they, like many of their tenants, also survive month to month.

“When government officials say, ‘Cancel rent,’” said Jay Martin, the executive director of Community Housing Improvement Program, which represents 4,000 New York City landlords, “they are essentially saying that we are canceling the ability for you to pay the bills we are putting on you.”

Mr. Martin said that if tenants’ rights organizers wanted to target a main driver of high housing costs, they should encourage elected officials to cut property taxes. A recent report by the New York City’s Rent Guidelines Board said that about 30 percent of a landlord’s expenses for rent-regulated apartments go toward property taxes.

New York, which has more housing units than any place in the United States, is a city of renters: There are nearly 2.2 million rental units in the city. Mr. Martin said that no landlord he knows would want to evict a tenant in this economy.

“Landlords are being made the scapegoat for all the problems,” he said.

Joseph Strasburg, the president of the Rent Stabilization Association, which represents 25,000 landlords in New York City, warned that a rent strike would “create an economic and housing pandemic.”

“The city and its residential housing landscape will crumble into an economic abyss worse than the 1970s, when New York was the national poster child for urban blight,” Mr. Strasburg said.

As bad as the economy is, rental payments in April were better than many landlords expected.

As businesses laid off employees, property owners reported a steep drop in rent collections, with close to a third of tenants behind as of the first week of April, according to a survey by the National Multifamily Housing Council, a trade group for big apartment owners.

But by month’s end, after stimulus payments and unemployment checks started flowing, the nationwide nonpayment rate was only three percentage points below where it was a year ago.

Still, those numbers probably understate the stress, as various surveys show that landlords have deferred rent, offered concessions or used security deposits to cover missed payments. And tenants have increasingly used credit cards to cover their bills.

Vinicia Barber, 39, who lost her nanny job for a family in New York City that decided to move to California during the pandemic, said that she has decided to join the rent strike.

She pays $1,877 for a rent-stabilized apartment in Crown Heights, Brooklyn, that she shares with her 14-year-old daughter. There is mold growing on the bathroom walls, and they cannot open windows because of the stench of garbage behind the building, she said.

“Something needs to change,” Ms. Barber said. “If it’s not now during the Covid-19 epidemic, then I don’t know what it’s going to take for the governor and mayor to do something.”

Rent strike or not, tens of millions of people will be under severe rent stress in May.

Looking to rally people digitally, on Thursday, the Action Center on Race & the Economy, which acts as a campaign hub for advocacy organizations, unveiled, a website that will accumulate the various May rent strikes into a nationwide heat map.

People who sign up will be directed to a list of resources and be routed to local housing organizations to try and build more support for the #CancelRent campaign.

“The traditional definition of a rent strike is someone who is choosing not to pay for whatever reason, and we’re defining it more broadly here to help people see that it’s a political choice not to help folks who can’t pay rent,” said Maurice BP-Weeks, co-executive director of the action center.

It’s not as if tenants have lacked support: The $2 trillion CARES Act distributed expanded unemployment insurance and the stimulus payments, along with aid to public-housing providers and grants that states can use for rental assistance.

Still, tenant organizers and landlords are pushing for direct housing assistance.

Representative Ilhan Omar, Democrat of Minnesota, introduced the Rent and Mortgage Cancellation Act, which would relieve tenants of their obligation to pay rent, transfer mortgages to the federal government and allow landlords to recoup their rent costs — but only if they agree to a vast new regulatory program that includes a rent freeze and the inability to collect back payments.





Trump Threatened To Slap New Tariffs On China Over The Coronavirus Crisis

U.S. stock index futures slid on Friday after President Donald Trump threatened to slap new tariffs on China over the coronavirus crisis, while Apple and Amazon became the latest companies to warn of more pain in the future.

Trump said late on Thursday his trade deal with China was now of secondary importance to the pandemic, as his administration crafted retaliatory measures over the outbreak.

The threat pulled attention back to the trade war between the world’s two largest economies that has kept global financial markets on tenterhooks for nearly two years.

Also weighing on sentiment was a 2.6% fall in Apple Inc AAPL.O shares in premarket trading after the company said it was impossible to forecast overall results for the current quarter, even as it reported upbeat quarterly results. Inc shares AMZN.O tumbled 5% after the company said it could post its first quarterly loss in five years as it was spending at least $4 billion in response to the coronavirus pandemic.

Wall Street fell on Thursday as grim economic data and mixed earnings prompted investors to take profits at the end of the S&P 500’s best month in 33 years, a remarkable run driven by hopes of reopening the economy from crushing virus-induced restrictions.

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Markets will also keep a close eye on the ISM’s purchasing managers index (PMI) data, due at 10:00 a.m. ET.

The report comes a day after data showed U.S. initial jobless claims totalled 3.84 million for the week ended April 25 and personal spending tumbled 7.5% in March, the biggest decline on record.

Meanwhile, oil majors Chevron Corp CVX.N and Exxon Mobil Corp XOM.N are expected to post their first-quarter earnings later in the day.






Federal Reserve Expands Business-Lending Program

The Main Street Lending Program, unveiled earlier this month, will now allow larger businesses to participate in the program, and it will relax minimum loan amounts to help more small businesses.

Under the program, businesses can solicit loans of up to four years from banks at below-market rates. Unlike loans under the Small Business Administration’s Paycheck Protection Program, these must be repaid, but payments can be deferred in their first year.

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Businesses with up to 15,000 employees and $5 billion in annual revenue in 2019 are now eligible, up from earlier limits of 10,000 employees and $2.5 billion in revenue. The minimum loan size will also decline to $500,000, from $1 million.

The Fed had initially unveiled two different loan options, one for new debt and one for existing loans. Each of those require banks that make loans and sell them to the Fed to retain a 5% piece of the debt.

On Thursday, the Fed said it would create a third option for firms with higher debt loads. Under that program, banks will have to maintain a larger 15% stake in the debt sold to the Fed.

The Fed hasn’t said when the program will be up and running but said Thursday a start date would be announced soon. The program will be run by the Federal Reserve Bank of Boston.

The central bank had asked for public comment when it produced initial term sheets for the programs on April 9 and said it had received more than 2,000 responses. Several industries, including retailers, energy firms and transportation companies, had lobbied the Fed to expand the programs to include more flexible loan terms and larger businesses.

The changes announced Thursday will allow borrowers to calculate their earnings using measures that account for industry-specific idiosyncrasies, which could allow more indebted firms to qualify. The new loan program will also allow borrowers to use loans to refinance other debt.

But the rules tightened other eligibility requirements. The Fed is adopting definitions of eligible businesses used by the SBA that are likely to exclude private-equity firms and the businesses they own from being eligible for loans.

The Fed also didn’t create an option for firms that rely on asset-based lending instead of term loans, which means many oil-and-gas companies, which had mounted a lobbying effort to be included in the program, will find it difficult to gain access, lawyers and analysts said.

With oil prices down sharply over the past two months, “the shale players are carrying too much leverage,” said Constance Hunter, chief economist at accounting firm KPMG LLP. Banks will be reluctant to extend loans to indebted firms with a bleak revenue outlook given the requirement that they retain 15% of the loan, she said.

“When the Fed is asking the banks to take anywhere from a 5% to 15% stake, they are telling you, ‘We are lending to good companies that are in a tough situation because of the virus,’” said Steven Blitz, chief U.S. economist at research firm TS Lombard. “This is not about helping out levered, distressed sectors.”

The Fed said it is evaluating a separate approach that would extend the program to nonprofit institutions, such as hospitals and universities.

The lending program is designed to fill a void for middle-market firms that are too large to qualify for the Paycheck Protection Program but too small to access debt markets where large corporations borrow and where the Fed is launching separate programs to backstop debt that was rated investment grade as of March 22.

The Fed has backstopped a range of debt markets with nine different emergency lending programs, but the Main Street Lending Program will be its most complicated task, current and former Fed officials say. For the first time since the Great Depression, the central bank has stepped into lending broadly to American businesses through the banks it oversees.


“This is a broad area of the economy with many different kinds of credit needs. So we’re going to keep at that for some time, adding in sectors and lending products,” Fed Chairman Jerome Powell said at a news conference Wednesday. “We’re well aware of the importance of doing it as quickly as possible.”

The Treasury Department is providing $75 billion to backstop any losses on loans the Fed makes in the program.


Financial Markets Sink After Tech Giants Report Earnings

Global stocks slumped Friday after Apple and reported earnings that highlighted the impact the coronavirus pandemic is having on the world’s biggest companies.

Futures linked to the S&P 500 fell 2% early Friday, suggesting U.S. markets could open lower and extend Thursday’s losses. The U.K.’s FTSE 100 dropped just over 2%. Japan’s Nikkei 225 closed down 2.8% and Australia’s S&P/ASX 200 ended 5% lower. Markets in China, Hong Kong and across most of Europe were closed for the May Day holiday.

On Thursday, Amazon announced record revenue but disappointed on profits as coronavirus-related costs such as employee testing and higher wages added to expenses. Apple held off on providing guidance for the current quarter for the first time since late 2003. Both stocks have led markets higher in recent weeks.

“It’s a warning shot across the bow that no company is immune from this even if you’re able to raise your top-line revenues,” said Brian O’Reilly, head of market strategy for Mediolanum International Funds.

Ahead of the opening bell in New York, shares in Apple dropped 3% in off-hours trading and Amazon fell 5.5%.

U.S. stock benchmarks clocked their largest percentage gains since 1987 last month. The S&P 500 was up 12.7% in April, while the Dow Jones Industrial Average gained 11.1%. The tech-heavy Nasdaq Composite jumped 15.5%, its biggest monthly gain since June 2000.

“If you have been involved in the market, there’s a few reasons to take a little bit off the table and a pullback would be healthy,” said Chris Weston, head of research for Pepperstone brokerage in Australia.

Adding to investor jitters Friday were concerns about fresh tensions between the U.S. and China. In an unusual public statement, a U.S. intelligence agency said Thursday that it was investigating whether the coronavirus may have escaped from a laboratory in Wuhan,

“The important thing for investors is that these tensions around trade, these tensions around technology and technology transfers, and tensions around geopolitics more broadly, these issues are going to persist and maybe even heighten as we go forward,” said Joseph Little, chief global strategist at HSBC Global Asset Management.

Investors will watch closely as a string of companies publish results Friday, including energy majors Exxon Mobil and Chevron.

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Mike Bell, global market strategist at J.P. Morgan Asset Management, said the recent rally in U.S. stocks didn’t reflected the gloomy picture painted by economic data.

“There is such a risk from here that perhaps the reopening of the economy, at least in a sustained way, takes longer than the market and people had hoped for,” said Mr. Bell.

Brent crude, the global oil benchmark, dropped 1.8% to $26.02 a barrel, a muted move given wild swings in energy markets in recent weeks. Analysts expect demand for fuel to rise as lockdown rules are gradually lifted and supply eases as output cuts agreed by the Organization of the Petroleum Exporting Countries come through.

The yield on the 10-year U.S. Treasury note fell to 0.608% from 0.619% Thursday. Yields fall as bond prices rise.


EU Chief Backs Investigation Into Covid-19 Origin And Says China Should Be Involved

The president of the European Commission backed calls for an investigation into the origin of the new coronavirus and said China should be involved in the process.

Lawmakers in countries like Germany, Sweden and Australia have called for a probe into how the virus started, which has so far infected over 3.2 million people and killed over 230,000.

Speaking to CNBC, Ursula von der Leyen, the head of the EU’s executive arm, said she would like to see China work together with her organization, and others, to get to the bottom of exactly how it emerged.

“I think this is for all of us important, I mean for the whole world it is important. You never know when the next virus is starting, so we all want for the next time, we have learned our lesson and we’ve established a system of early warning that really functions and the whole world has to contribute to that,” she told Geoff Cutmore in an exclusive interview Thursday.

She called for more transparency in the future and said governments needed to learn lessons from the current crisis.

“One of the lessons learned from this pandemic is that we need more robust data, overall, and we need more centralized than an entity that is analyzing those data so that the early warning mechanism is way better,” she said.

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“For example, at the level of the European Union, we know that we need a more robust data system for such situations as we see it right now with the coronavirus. And for building up a system that is, that you can count on.”

China criticized
The new strain of coronavirus, known as Covid-19, was first reported in December in the Chinese city of Wuhan.

While China has deployed medics and sent equipment to nations struggling with the coronavirus overseas, the country has faced criticism over its own handling of the virus, which experts believe originated in a wildlife market, or wet market.

We did not cover up anything, and did not delay any efforts. Le Yucheng – CHINESE VICE PREMIER

In late January, Chinese authorities announced a temporary ban on the trade of wild animals in wet markets, supermarkets, restaurants and e-commerce platforms — but experts and wildlife organizations have called for a permanent ban to help prevent future pandemics.

China has also been criticized for a lack of transparency throughout the outbreak, amid claims that Beijing was too slow to respond. The WHO has cautioned against blaming individual countries for the spread of Covid-19, warning that pointing fingers at nations with a high number of cases could discourage accurate reporting on domestic outbreaks.

China has denied any wrongdoing. In an interview with NBC Tuesday, Chinese Vice Premier Le Yucheng said: “China has been open, transparent and responsible in its Covid-19 response. We did not cover up anything, and did not delay any efforts. We have already publicized the timeline of how we have shared the information on Covid-19.”

Le Yucheng added that there is no international law that supports blaming a country simply for being the first to report a disease. “Neither does history offer any such precedent,” he said.

In the United States, President Donald Trump said Thursday, without offering any evidence, that he has a high degree of confidence that the coronavirus outbreak originated from a laboratory in China. His comments came after the top spy agency in the U.S. said that the country’s collective intelligence community did not believe the virus was manmade or genetically modified.

EU-China relations
When pressed on whether a probe could lead to a weakening of relations with China, von der Leyen disagreed that this would be the case: “No, I don’t think so, because it’s all on our own interest. I mean, this this pandemic has caused so much damage,” she told CNBC.

“So it’s in our own interest, of every country, that we are better prepared the next time. We will, we do not know when such a crisis occurs again, but we should be better prepared now.”

Her comments come at a time when the European Commission has been under pressure for allegedly softening the tone of a disinformation report around the coronavirus. The institution has denied succumbing to pressure from Beijing, but its foreign policy chief, Josep Borrell, has not denied that China had expressed concerns about the report, Politico reported.


Global Markets – Sentiment Improves After Promising News On A Coronavirus Treatment And Fed Assurances On Lasting Economic Support

Stocks rose Thursday, following a rally in U.S. markets on Federal Reserve assurances it will continue with its stimulus programs and on promising news on a coronavirus treatment.

S&P 500 futures inched up 0.5%, suggesting U.S. markets could open higher. In Europe, the pan-continental Stoxx Europe 600 added 0.6%.

Stock benchmarks in China and Japan rose. The Shanghai Composite Index closed up 1.3% and Japan’s Nikkei 225 ended 2.1% higher. Markets in Hong Kong and South Korea were shut for a holiday.

Sentiment was boosted Wednesday by news from Gilead Sciences that a clinical trial evaluating its drug remdesivir in coronavirus patients had concluded with a positive result.

The Federal Reserve left interest rates unchanged, near zero, and didn’t announce any new measures at the close of a two-day policy meeting. However, it pledged to use “its full range of tools to support the U.S. economy in this challenging time.”

“There’s a good chance that the Fed will put in place more quantitative easing programs in the future and stay committed to keeping interest rates low for some time longer,” said Eli Lee, head of investment strategy at Bank of Singapore. He expects the near-zero interest rate to continue for the next two to three years.

Since mid-March, the Fed has bought nearly $2 trillion in Treasury and mortgage securities, eclipsing any of its similar programs between 2008 and 2014. The major U.S. stock indexes have rallied between about 12% and 15% in April on the back of the supportive Fed actions.

“The rally is a bit too far and too fast,” said Mr. Lee. The poor economic data as indicated by a sharp 4.8% contraction in the U.S. economy for the first quarter of this year suggests things will get far worse before they get better, he added.

Ong Zi Yang, senior macro analyst at in Singapore, said the V-shaped recovery of the markets has led to a disconnect between the financial markets and the economic realities.

“They will continue to diverge with the Fed pumping in so much money,” he said. But he cautioned such supportive measures could be damaging in the long run as a lot of companies that aren’t operating efficiently might be getting help they don’t deserve.

The U.S. has reported nearly 1.04 million infections and more than 60,900 deaths from the new coronavirus, according to Johns Hopkins University. Globally, more than 3.19 million people have been infected, and the death toll stands at more than 227,000.

China, the first to reopen its economy after emerging from the coronavirus crisis, reported a slower expansion in factory activity in April, after a strong rebound in March, due to weak external demand.

Brent crude, the global gauge of oil prices, jumped 5.5% to $25.57 a barrel while U.S. crude surged 10.4% to $16.63 a barrel. Fears have eased about the U.S. running out of storage space, after inventories didn’t climb as quickly as expected.

The yield on the 10-year U.S. Treasury note fell to 0.601%, before drifting up to 0.614% in early morning trading. Yields fall as bond prices rise.


Shell Slashes Dividend For The First Time Since World War II


Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Oil giant Royal Dutch Shell on Thursday cut its dividend to shareholders for the first time since World War II, following a dramatic slide in oil prices amid the coronavirus crisis.

The board at Shell said it had decided to reduce the oil major’s first-quarter dividend to $0.16 per share, down from $0.47 at the end of 2019. That’s a reduction of 66%.

“Shareholder returns are a fundamental part of Shell’s financial framework,” Chad Holliday, chair of the board of Royal Dutch Shell, said in a statement.

“However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the Board believes that maintaining the current level of shareholder distributions is not prudent.”

Shell also reported that net income attributable to shareholders on a current cost of supplies (CCS) basis and excluding identified items, which is used as a proxy for net profit, came in at $2.9 billion for the first quarter of 2020. That compared with $5.3 billion in the first quarter of 2019, reflecting a year-on-year fall of 46%.

Analysts polled by Refinitiv had expected first-quarter net profit to come in at $2.5 billion for the quarter.

Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Last week, Norway’s Equinor became the first oil major to cut its dividend this earnings season. It raised concern that other energy giants may follow suit, although BP, which reported Tuesday, maintained its dividend.

Investors will now be watching U.S. oil majors Chevron and Exxon Mobil, which are both due to release results Friday.

Tamas Varga, senior analyst at PVM Oil Associates, told CNBC via email that Shell had taken the “same approach” as Norway’s Equinor by cutting its quarterly dividend by roughly two-thirds.

“As demand destruction bites, cash is king.” Varga said, adding that suspending share buybacks, slashing capital expenditure and reducing dividends were “becoming the norm.” Shell CEO Ben van Beurden described energy market conditions through the first three months of the year as “extremely challenging.”

“Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell,” he added.

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Alongside the cut to its dividend, Shell announced it would not continue with the next tranche of its share buyback program. Since the launch of the program, the oil major said it had bought back almost $16 billion in shares for cancellation.

“On the face of it, the dividend cut and cancellation of share buybacks may be seen by some shareholders as a negative move in the short term,” David Barclay, senior investment manager at Brewin Dolphin, said in an email.

“However, looking further ahead it could well prove to be the right step as Shell looks to strengthen its financial position and cut costs during a very difficult time.”

The energy giant’s results come shortly after a historic plunge in oil prices.

The May contract of U.S. West Texas Intermediate plunged below zero to trade in negative territory for the first time in history last week. Trading volume was thin given it was the day before the contract’s expiration date, but, nonetheless, the move lower was extraordinary.

WTI futures had fetched more than $60 a barrel at the start of the year. A dramatic fall-off in demand as a result of the coronavirus outbreak has sent oil prices tumbling.

On Thursday, the June contract of WTI traded at $16.55 per barrel, almost 10% higher for the session, while international benchmark Brent crude stood at $23.81, up around 5%.

Earlier this week, BP reported first-quarter net profit had fallen 67% compared to the same period a year earlier.


U.S. Economy Shrank At 4.8% Pace In First Quarter


The decline in seasonally and inflation-adjusted gross domestic product, the broadest measure of goods and services produced across the economy, was the steepest quarterly contraction since the last recession and signaled the end of the longest expansion on record.

Consumer spending drove the drop, falling at a seasonally adjusted annual rate of 7.6%, the largest decline since the second quarter of 1980, the Commerce Department said on Wednesday. The quarter also saw a sharp decline in business investment, with the fall-off in consumer and business spending only partially offset by gains in government spending and residential investment.

“We’re going to continue to watch the economy flounder around for a while before it’s able to find its footing,” said Steve Rick, chief economist at CUNA Mutual Group, in a commentary. “Looking ahead, I still think the worst is probably yet to come for GDP,” he added.

The three-month contraction was the first time quarterly economic output shrank since the first quarter of 2014, when it declined at a 1.1% pace, and represented the steepest rate of decline since the fourth quarter of 2008, during the last recession, when it dropped 8.4%.

The Commerce Department report came hours ahead of a scheduled rate announcement from policy makers at the Federal Reserve, who will conclude a two-day policy meeting later Wednesday.

Stock futures advanced ahead of the Fed meeting’s conclusion, after which policy makers are expected to provide an update on the economy.

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The Commerce Department report said the decline in first-quarter GDP was, in part, due to the response to the spread of the coronavirus and stay-at-home orders issued in March.

“This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending,” the report said.

GDP acts as a scoreboard for the economy by measuring all goods and services produced. Its biggest component is consumer spending, which accounts for about two-thirds of the measure. First-quarter spending fell at a 7.6% annualized rate, after rising 1.8% in the fourth quarter, as social-distancing measures closed bars, restaurants and malls.

“We are in the worst economic event that we have faced as a nation and globally since the Great Depression,” Evan Greenberg, chief executive of insurance giant Chubb Ltd. said during an earnings call last week.

“The economy is shut down. The opening of the economy is going to take time, and it’s not going to happen in a smooth way. And no one knows for sure the shape or size or duration,” he added.

Spending on durable goods like new cars and appliances decreased at a 16.1% pace, while spending on nondurable goods rose 6.9%, likely a reflection of stockpiling on essentials like food and paper towels.

The Commerce Department data also offered evidence of shrinking corporate demand.

Nonresidential fixed investment—which reflects business spending on software, research and development, equipment and structures—fell at an 8.6% rate—marking the fourth straight quarter of decline.

The pace of exports dropped 8.7% in the first quarter, while the rate of imports fell by a greater amount, 15.3%, as Americans cut back on purchases of foreign goods.

The housing sector was a boon to the economy as residential investment rose at a 21% annual pace. The boost likely reflected lower short-term interest rates and mild weather propelling construction and improvements early in the quarter.

Total government expenditures were up at a 0.7% annual rate in the first quarter.

Vacations To Go, a travel agency that specializes in cruises, was coming off its best ever year in 2019 until “the floor fell out” in February as coronavirus outbreaks on cruise ships dealt a punishing blow to the industry, Chef Executive Emerson Hankamer said.

“As news grew, our business began to wane,” he said. The Houston-based company had 950 employees before the coronavirus pandemic, a number that has dropped to about 200.

“We’re hoping it’s a furlough, but there’s not a lot of clarity,” he said, “There’s a little bit of new business, but most of it is taking care of cancellations or rebooking.”

Headed into 2020, Paul Feder, 34 years old, said he could tell his local economy was booming because the waterfront houses on Lake St. Clair in his hometown of Grosse Pointe, Mich., went big in decorating their homes with Christmas lights.

“You could just tell that more people were feeling it,” he said, referring to the strong economy in the Detroit suburb. Mr. Feder was in the second round of interviews for his dream job as a business developer at an online retailer.

Now the company he hoped to work for has implemented a hiring freeze, and Mr. Feder expects to lose his current job as a digital-marketing manager. “It’s a roller coaster, every single day,” he said. “It’s just a lot of uncertainty and very difficult to map out what the future holds.”


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Stock Market Today: Global Stocks Rise Ahead Of Powell’s Comments

Futures tied to the S&P 500 rose, suggesting the blue-chip index could open higher. The Stoxx Europe 600 wavered between gains and losses, as gains for shares in oil-and-gas companies offset losses for utility stocks.

Federal Reserve Chairman Jerome Powell’s comments on the prospects for the economy, when he holds a press conference at 2:30 p.m. ET, will be closely monitored by investors. His views on the tools and options available to the Fed if the situation deteriorates further will be of particular interest as the coronavirus pandemic triggers a pronounced contraction in global output. U.S. officials have largely ruled out experimenting with negative interest rates.

“They’ve done everything they feel they need to do right now,” said Jonas Goltermann, senior markets economist at Capital Economics. “The communication challenge is going to be conveying that they will do more if needed, but that doesn’t mean they have to do more right now.”

After cutting interest rates to near zero in mid-March, the Fed began a torrent of bond-buying programs to stabilize markets, while offering support to other corners of the market to bolster the availability of credit. These measures have helped stocks stage a rapid recovery in the face of a deep recession.

Investors will seek to learn how long the Fed expects the economic downturn to last, said Eddy Loh, senior investment strategist at Maybank Group Wealth Management.

The U.S. is also scheduled to release preliminary data on gross domestic product, a broad measure of the goods and services produced in an economy, at 8:30 a.m. The figures are expected to show the economy contracted in the first quarter. Second-quarter data, which won’t be released until July, are forecast to show a steeper decline.

Also Wednesday, a series of blue-chip companies are due to publish earnings for the first three months of the year, starting at about 6 a.m. General Electric, Spotify Technology, Boeing, Mastercard and Hasbro are due to release their reports before the market opens. Facebook, Microsoft, Qualcomm and Tesla will report after the close of trading.

Among European stocks, International Consolidated Airlines Group, owner of British Airways, fell almost 4% after starting the process of laying off more than a quarter of the carrier’s staff.

Wirecard fell 6.4%, extending a rout that began Tuesday, after a prominent activist investor called for the German financial-technology company to fire its chief executive.

Oil markets remained volatile. Brent crude, the global gauge of oil prices, climbed 3.7% to $23.57a barrel. Futures contracts that will deliver West Texas Intermediate in July, the benchmark for U.S. crude markets, rose 4% to $18.30 a barrel. A contract that will deliver crude in June jumped 14% to $14.04 a barrel. Investors have sold the June contract in recent days to avoid taking hold of physical barrels of oil at a time when storage space is running out.

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Asian stock benchmarks broadly rose. Australia’s S&P/ASX 200 closed 1.5% higher, while the Shanghai Composite Index inched up 0.4%. Hong Kong’s Hang Seng Index ticked up almost 0.3%. Japan’s market was closed for a public holiday.





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Junk Bonds Bounce Back, Raising Hopes—And Concerns

A rally in corporate debt is enabling riskier companies to raise much-needed cash while fueling debate over whether investors have grown overly optimistic about the economy.

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From April 13 through Friday, companies such as Ford Motor Co., AMC Entertainment Holdings Inc. and SeaWorld Entertainment Inc. issued a combined $28 billion of speculative-grade bonds, the fourth-largest two-week total on record, according to LCD, a unit of S&P Global Market Intelligence.

The surge in issuance follows an even bigger boom in new sales of investment-grade bonds, as businesses of all stripes try to stock up on funds to weather a period in which many can expect little to no incoming cash flow. Bond sales have continued despite volatility in oil prices, with investors largely separating the problems of energy companies from those in other sectors.

Speculative-grade companies—which tend to have large debt loads, challenged business operations or both—had gone most of March without issuing new debt, after investors dumped their bonds and potential borrowing costs skyrocketed.

On Feb. 18, the average extra yield, or spread, investors demanded to hold speculative-grade bonds over U.S. Treasurys was just 3.41 percentage points, according to Bloomberg Barclays data. By March 23, it had climbed to 11.0 percentage points. But Monday, it was back down to 7.74 percentage points—still relatively high, but low enough that large numbers of companies can borrow in the market, especially if they back their bonds with collateral.

The yield on the benchmark 10-year U.S. Treasury note settled at 0.610%, according to Tradeweb, compared with 0.655% Monday. Yields fall when bond prices rise.

Along with other assets like stocks, high-yield bonds have been boosted by government and central bank policies. Those include the Federal Reserve’s promise to buy investment-grade corporate bonds and even some lower-rated bonds, provided they were only recently downgraded.

Investors’ analysis of history has also helped. Over the past three decades, high-yield bond investors have been able to generate some of their best returns in the months after large selloffs pushed spreads to about 9 percentage points.

The lesson from that is “you don’t get this opportunity every year, and when you do you’ve got to jump on it,” said Scott Roberts, head of high yield at Invesco Fixed Income.

Improved demand for speculative-grade bonds has already helped some companies.

Prices for Ford bonds collapsed last month when the company shut down car production. On March 24, the company’s 7.45% unsecured bonds due in 2031 traded as low as 62.25 cents on the dollar, according to MarketAxess, translating to a yield above 14%. S&P Global Ratings downgraded the company’s credit rating to below investment grade the next day.

Already wrestling with slowing sales before the pandemic, Ford has estimated it could burn through around $5 billion a month before it gradually restarts production in the second quarter.

The bonds, though, jumped to nearly 90 cents on April 9, when the Fed said it would buy recently downgraded bonds. A week later, Ford issued $8 billion of unsecured bonds, the largest speculative-grade bond sale on record, according to LCD. Its new 10-year bonds came with an interest rate below 10%.

The recent rally in high-yield bonds is part of a broader trend that has lifted the S&P 500 by about 28% since its March lows. As with stocks, however, investors are questioning the durability of the move.

One cause for concern is an unusually large disconnect between what the market is implying about how many companies will default over the next nine to 12 months and what analysts at ratings firms and Wall Street banks are predicting.

According to one model developed by Marty Fridson, the chief investment officer at Lehmann Livian Fridson Advisors LLC and a longtime high-yield bond analyst, the market is currently pricing in a 12-month default rate of 8.1%. A different model produced by research firm CreditSights put the market-implied default rate on Friday at 7.4% over the next nine months.

By contrast, Moody’s Investors Service has forecast a trailing 12-month default rate of 11.8% by the end of the year and 13.1% by the end of next March. Analysts at Goldman Sachs Group Inc. have similarly forecast a 12-month default rate of 13% by the end of this year.

With social and business activity severely restricted across the country, there is little debate about the near-term hit to the U.S. economy. Investors, though, have tended toward optimism about how quickly the economy can recover, with markets consistently rallying on signs that the spread of the virus is slowing or that potential drug treatments are working.

Many economists—and, for that matter, epidemiologists—have been more pessimistic. In their view, the threat from the virus could linger into next year, continuing to depress economic activity and causing bankruptcies and job losses that will further drag on growth.

“My sense is the market is attaching a higher probability to a V-shaped recovery than I would or most economists would at this point,” said Mark Zandi, chief economist at Moody’s Analytics, which produced the economic forecasts underlying the default forecast of its sister ratings firm.

One wild card could be the market’s ability to help create its own reality. The stronger the high-yield market is, the more likely it is that struggling companies such as movie-theater operator AMC will be able to obtain rescue financing, holding down the default rate at least over the near-term horizon.

Still, extending loans to businesses that might otherwise run out of cash isn’t without risk, since adding debt to companies could lead to deeper losses for bondholders if those businesses ultimately file for bankruptcy anyway.

“We don’t know if we are prolonging the inevitable and impairing recoveries at a junior level, or whether we’re providing the Band-Aid to actually get the company through to sustainability,” said Geof Marshall, head of fixed income at Signature Global Asset Management, a division of CI Investments.




Crude Oil Volatile – Dysfunction In The Oil Market Intensified, Sending The Most Popularly Traded U.S. Oil Contract To A Fresh Low

Oil prices recovered some losses Tuesday after traders scrambled to avoid the worst of the damage wrought by volatile markets. The world is awash with too much oil at a time when coronavirus lockdowns on driving, flying and industrial activity has all but eliminated the need for the stuff.

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June futures contracts for West Texas Intermediate—the main U.S. bellwether—dropped nearly 20% and touched $10.24 a barrel before regaining ground to around $13.56 a barrel, up 6% on the day. Brent crude was up 2.9% at $23.72 a barrel. WTI traded at a massive difference to its European counterpart because of severe bottlenecks in storing oil in Cushing, Okla., where WTI contracts are settled.

The earlier drop in WTI briefly put it on track for the lowest closing level for an actively traded contract since at least 1986, according to data provider FactSet. WTI has only ever settled the day below $11 on six occasions, according to FactSet records, which stretch back to 1986. The last time was in 1998. The all-time low was March 31, 1986, when oil traded for $10.42.

A lightly traded futures contract for WTI traded for negative prices last week, spooking markets, and prompting investors to race out of contracts that require them to take delivery of oil in the coming months. Most oil watchers consider the most actively traded contract at any given time as the price that best reflects market conditions.

The selloff picked up steam Tuesday as investors sold the June contract and into ones that are tied to oil delivered in months down the road, said Giovanni Staunovo, commodity analyst at UBS’s Chief Investment Office.

“Everyone’s running out of the contract and they don’t want to be the last ones on the train, so that’s not helping prices,” Mr. Staunovo said.

S&P Dow Jones Indices said in a statement after Monday’s market close that it would remove the June U.S. crude contract during Tuesday trading hours from its widely followed indexes that track the oil market and switch to the July contract.

The move, which S&P said would include the S&P Goldman Sachs Com modity Index, comes earlier in the trading month than usual, and was “based on the potential for the June 2020 WTI Crude Oil contract to price at or below zero,” the index announcement said. BlackRock’s iShares S&P GSCI Commodity-Indexed Trust exchange-traded fund tracks that index and had around $400 million of assets as of April 27, according to the fund website.

BlackRock didn’t immediately respond to a request for comment.

That followed a decision by the United States Oil Fund —the largest exchange-traded fund that attempts to track oil prices—to sell its positions in the June contract and purchase positions in contracts several months away.

The crash in prices, and the dip into negative territory for the May contract last week, highlighted the dangers associated with holding oil futures that expire soon. Some WTI contracts require owners to take delivery of oil when the contracts expire. With oil tanks and pipelines full, some oil investors were forced to unload the right to collect that oil and pay the buyer to do so.

Many fear that negative oil prices could happen again. Prices on WTI contracts for July delivery have also come down in recent days to $18.99 a barrel. Contracts for delivery at the end of the year are at about $27 a barrel.

Government-imposed lockdowns aimed at preventing the spread of the coronavirus have suffocated global oil demand. Oil majors, frackers and national oil companies around the world have raced to shut off wells. A deal among major oil-producing nations to cut due to take effect Friday that will hold back approximately 13% of global supply.

But investors worry these measures won’t relieve the supply glut fast enough.

A lack of space to store oil onshore in the largely landlocked U.S. market has pushed WTI prices lower, said Bjarne Schieldrop, chief commodities analyst at SEB Markets. The hit to Brent prices, which are tied to oil produced in the North Sea, has been less severe. The Brent market is largely seaborne and space to store oil offshore remains. But as long as production continues amid weakening demand, space will run out, Mr. Schieldrop added.

“The final crunch point in time is still ahead of us,” he said. “Supply and demand will be forced to align meaning that production will have to shut down. That will be the final low point, but we are not there yet.”

Investors will keep a close watch on U.S. inventory data due out this week, with American Petroleum Institute stock-level data expected later Tuesday.




UBS Reports Net Income Up 40% As Market Volatility Leads To Higher Trading Volumes

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UBS reported Tuesday a 40% increase in profit for the first quarter of 2020 on the year before, helped by higher trading volumes as market participants reacted to the volatility of recent months.

Net profit attributable to shareholders came in at $1.6 billion in the three months to the end of March, up from $1.1 billion in the same quarter of 2019.

Here are some other key metrics from the results:

Operating income came in at $7.9 billion versus $7.2 billion a year ago
Common equity tier 1 ratio (CET1) — a metric of bank solvency — was 12.8% versus 13% a year ago. Return on tangible equity — a metric of profitability — hit 12.8%, compared with 9.8% a year ago

“We saw a huge pick up in client engagement, despite the logistical challenges. We see that clients are more and more looking for advice,” Sergio Ermotti, UBS’s chief executive officer, told CNBC’s Squawk Box Europe.

Turbulence in the markets helped UBS’s investment bank post the biggest jump in operating profit, across the all the business divisions, on the year before. Operating profit before tax rose to $709 million from $207 million at the end of the first quarter of 2019.

Within investment banking, UBS attributed a 44% rise in revenue in its global markets division to “significantly higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, reflecting the impact of the COVID-19 pandemic on client activity levels.”

Its global wealth management division also increased its operating profit before tax over the last year to $1.2 billion from $863 million. However, invested assets fell to $2.3 billion.

The results come at a time of significant pressure for banks, as the coronavirus pandemic has brought the global economy to a standstill.

The Swiss bank said the coronavirus had “dramatically changed the global economic outlook,” adding that it foresees disruption to many businesses and higher unemployment as a result. Given this, UBS is expecting higher levels of credit loss expenses for the financial sector.

Speaking to CNBC Tuesday, Ermotti said it was “very difficult to make predictions about any quarters going forward.”

“January, February and March were all profitable months,” he said, adding that the bank will seek to be “flexible” in dealing with upcoming challenges.

UBS said earlier this month that it will suspend half of its 2019 dividend payout until later this year, after pressure from Swiss regulator FINMA. The bank’s chief executive officer, Sergio Ermotti, said earlier this month that it was too early to discuss 2020 dividend plans.

UBS’s share price has dropped around 30% over the last 12 months. In February, the bank announced that Ralph Hamers will be taking over as chief executive officer on November 1.




Pandemic Triggers A Wave of Distress, Bankruptcy In Corporate America

What a time to be a restructuring specialist.

Practically overnight, bankers and lawyers who advise companies in distress have become some of the most in-demand workers on Wall Street, ending a long period in which rising markets and abundant capital consigned them to obscurity.

Stay-at-home orders and the shutdown of nonessential business have driven broad swaths of the economy into panic mode. In industries that were already in a precarious position before the crisis, including retail and energy, the coronavirus pandemic has tipped many companies over the edge. A host of oil companies have sought chapter 11 protection, while J.C. Penney Co. JCP 3.69% and Neiman Marcus Group Inc. are expected to file for bankruptcy soon.

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Companies in areas that were previously stable, such as the automotive, travel and leisure industries—and even health care—may soon face similar pressures.

U.S. corporate debt downgraded to selective default, meaning a borrower has failed to meet one or more of its obligations, totaled $64.1 billion for the 12 months ended April 17, according to S&P Global Ratings. That represents only a slight uptick over the pace at the end of January, but the numbers are about to get a lot more bleak.

In the coming months, that figure could top the roughly $340 billion reached at the height of the financial crisis, according to the worst-case scenario estimates from S&P. Even in a less grim scenario, the figure could approach levels reached after the dot-com bust in the early 2000s.

Companies of all stripes are scrambling to avoid a painful reorganization of their capital structures and operations, default or bankruptcy. Many have tapped lines of credit and slashed costs. Some, such as Carnival Corp., Expedia Group Inc. and Airbnb Inc., have issued new equity or debt to public investors or private-equity firms.

For some, those efforts could tide them over until conditions improve. But should the recession prove deeper than envisioned, there could be a second—potentially bigger—wave of corporate distress later this year as companies labor under the weight of additional debt taken on during the shutdown, advisers warn.

“We will definitely see an uptick in defaults and an uptick in restructurings,” said William “Tuck” Hardie of Houlihan Lokey Inc., one of the top banks in restructuring. “The question is: Is it a 2,000-foot mountain or is it Mt. Everest?”

U.S. companies drew down about $230 billion from revolving credit lines from the beginning of March through April 9, according to an analysis by Goldman Sachs Group Inc. The largest portion—around 17%—went to companies in the automotive industry, with about 15% going to retailers and 10% to travel and leisure purveyors.

Those figures don’t include new revolver borrowings by companies without publicly traded bonds or those financed by private lenders, many of which are private-equity-backed and were already highly indebted.

Hard-hit companies have taken on additional debt on top of using their credit lines—and some may have effectively boxed themselves in by doing so. Carnival earlier this month sold $4 billion worth of senior secured notes backed by assets like its cruise ships. Tying up those assets will make it difficult for the company to go back to the debt market if it needs to raise more cash, according to a person familiar with the company’s capital structure.

Another person close to Carnival said the cruise operator believes it still has a number of financing options available to it if cruising doesn’t return by early next year, and it expects to get access to government-backed loans in some of the markets where it operates.

For private-equity-backed companies, which are typically bought using a heavy helping of debt and a relatively small amount of equity, having little to no revenue can be even more painful. Loans to fund new buyouts had average debt of 5.93 times earnings before interest, taxes, depreciation and amortization in 2019—the highest since 2007, when the average was 6.23 times, according to S&P Global Market Intelligence’s LCD.

Working in their favor is the fact that 85% of so-called leveraged loans issued in 2019 were “covenant lite,” giving borrowers more breathing room. That figure has risen steadily over the past decade as investors clamored for yield. In 2010, only 10% of leveraged loans were covenant lite, according to data compiled by J.P. Morgan Asset Management.

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Also backstopping companies owned by buyout funds: Firms have around $2 trillion in unspent cash to invest in private markets, with most of that dedicated to private equity, according to alternative-investments manager Hamilton Lane Inc. Much of the dry powder is in the hands of the biggest firms, however, and companies’ fate will be determined by their owners’ willingness to inject more capital at a time when future prospects are highly precarious.

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And the universe of companies facing distress stretches well beyond the world of private equity, said Steve Zelin, head of restructuring at investment bank PJT Partners. “It doesn’t matter if you were five times levered or two times levered prior to the current crisis if you are now not generating any revenue.”

Investment firms that specialize in distressed investing have been gearing up for more action. Oaktree Capital Group LLC aims to raise $15 billion for what would be the biggest-ever distressed-debt fund, according to a person familiar with the matter.

Apollo Global Management Inc. has already invested more than $10 billion since the beginning of March in credit and private-equity.

James Zelter, the firm’s co-president who heads its $200 billion-plus credit business, says he sees three phases of distress playing out.

The first occurred during the early days of market turmoil in March, when even the debt of companies unaffected by the virus was trading at big discounts. The second is the industry-specific declines that led to the rescue financing companies like Expedia have been receiving.

“The third phase is just beginning,” Mr. Zelter said.




Global Stocks Rise As Countries Begin To Reopen Economies

Global stocks rose Monday, with investors anticipating that stimulus measures and the easing of coronavirus-lockdown measures in the U.S. and Europe may help kick-start economic activity.

Futures tied to the Dow Jones Industrial Average advanced 0.9%. Last week, the benchmark for U.S. blue-chip stocks posted modest losses, dropping 1.9% after a massive rally from late March to mid-April.

Japan’s Nikkei 225 stock index ended the day up 2.7%. The Bank of Japan scrapped its target for government-bond purchases and said it would nearly triple its holdings of corporate debt to aid fundraising by companies affected by the coronavirus pandemic.

European markets climbed as countries including Italy and Spain signaled that they may loosen restrictions in the coming weeks. The pan-continental Stoxx Europe 600 gauge rose 1.7%.

Italy announced a timetable for reopening its economy and restoring daily life beginning on May 4, but warned that a resurgence in cases could lead to a return of restrictions. Spain allowed children to leave their homes after six weeks under one of the strictest lockdowns in the world.

In the U.S., some states allowed retailers, salons and other businesses to reopen over the weekend as new infections appeared to slow.

“We don’t yet know the full scale and the pace of lockdowns being eased, but it’s important for confidence,” said Edward Park, deputy chief investment officer at Brooks Macdonald. “Suggestions that factories will restart sooner rather than later suggests that the pressure on economic output in the data we’ve seen will be a shorter-lived phenomenon.”

Concerns about sovereign debt from Europe’s most debt-laden countries also showed signs of easing. Italian, Spanish and Greek bonds rallied after S&P Global Ratings on Friday held off on downgrading Italy’s credit rating. The yield on Italy’s 10-year bond fell to 1.754% Monday, from 1.903% Friday.

Markets at the tail end of last week were fixated on European political risk, and a run on debt markets triggered by a downgrade for Italy,” said Mr. Park. “The lack of a downgrade offers some breathing space.”

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Oil prices dropped sharply as energy markets remain volatile at the start of a week that will test the world’s ability to house a glut of crude. West Texas Intermediate futures, considered the benchmark for U.S. crude prices, fell over 24% to $12.59 a barrel. Brent crude, the global benchmark, fell 5.3%.

The yield on the benchmark 10-year U.S. Treasury rose to 0.630%, from 0.594% Friday.

Investors will also be closely focused on the outcome from the U.S. Federal Reserve and the European Central Bank’s meetings this week. Recent economic data and forecasts from many countries have been weak, prompting policy makers to take unprecedented steps and allocate huge sums to support businesses and individuals whose finances have taken a hit.

“Normally when you have a recession, there are a number of factors that are reining in credit and stimulus and that’s not the case here,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Later in the week, a flood of U.S. companies—including, Apple and Facebook— are scheduled to report first quarter earnings. They are likely to provide insights on how leaders of the biggest American businesses view prospects for the rest of the year. But the pandemic has made earnings forecasts even less reliable than normal, analysts and investors said.

“Most investors are looking through the earnings reports as somewhat meaningless because we’ve never had this mix of fall-off in demand and central bank, government stimulus support before,” Mr. Haefele said.

Among major European equities, Deutsche Bank AG was the best performer. The stock rose over 10% after the German bank said late Sunday that it will beat analyst expectations and report a first-quarter profit. Higher revenue and lower expenses have helped it offset provisions for credit losses triggered by the coronavirus outbreak.
Across Asia, South Korea’s Kospi Composite advanced 1.8% while Hong Kong’s Hang Seng Index gained 1.9%. The stocks benchmark in Australia climbed around 1.5%.

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China’s statistics bureau Monday released data showing that industrial companies’ profits in March were down 34.9% from a year earlier, a slight improvement from the 38.3% pace of decline in January-February. The country last month began reopening some industrial hubs after closing most factories and companies to curb the coronavirus’s spread. The Shanghai Composite Index closed 0.3% higher.

Central banks’ stimulus policies and other government measures to subsidize wages are all helping to buoy markets and asset prices, said Iris Pang, chief economist for Greater China at ING Bank NV in Hong Kong. “They will take a while to reach the real economy,” she said, adding that the path to increasing consumption is unlikely to be smooth.





The Coronavirus Shutdown Will Induce The Sharpest Economic Downturn And Push The U.S. Budget Deficit To The Highest Levels Since The 1940s

Some degree of social distancing is expected to continue through the first half of 2021, the CBO said.

The economy is likely to shrink 12% in the second quarter—a 40% drop if it were to persist for a year—and the jobless rate will average 14%, the nonpartisan research service said Friday. Job losses will come to 27 million in the second and third quarters.

The federal budget deficit is expected to reach $3.7 trillion by the end of the fiscal year on Sept. 30, the CBO said, up from about $1 trillion in the 12 months through March. Congress has authorized unprecedented deficit spending to offset the shutdown of vast swaths of the U.S. economy.

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As a proportion of gross domestic product, the deficit will end the fiscal year at almost 18%, its highest level since the year after World War II ended and up from 4.6% in 2019, the CBO said.

Federal debt held by the public is projected to hit 101% of gross domestic product by the end of the fiscal year, up from 79% at the end of fiscal 2019, the CBO said.

The silver lining is that interest rates are projected to fall so low that the government’s net borrowing costs will decline even with the dramatic increase in borrowing, the CBO said. It sees the yield on 10-year Treasury notes hovering at 0.7% in the second half of this year and through 2021.

The updated forecasts, published in a blog post by CBO Director Phillip Swagel, rest on assumptions that are “subject to enormous uncertainty.” These include the extent to which the coronavirus is brought under control in the coming months and the possibility of a subsequent re-emergence.

Some degree of social distancing is expected to continue through the first half of 2021, the CBO said. But those measures are projected to diminish by roughly 75% in the second half of this year relative to the April-June quarter and continue easing into 2021.

As a result, economic activity is projected to recover from its current nadir, but only gradually. GDP is expected to contract 5.6% in 2020 from last year and to grow 2.8% in 2021.

The unemployment rate is seen topping out at 16% in the third quarter and declining to 9.5% by the end of 2021. But the CBO cautioned that those numbers understate the extent of damage because they only count people who are actively looking for a job.




Oil Glut Swells Off Asian Trading Hub On Global Storage Scramble

A narrow waterway off Singapore has become even more congested as oil-laden tankers wait out a slump in global fuel consumption that’s crimped demand and boosted the use of ships to store cargoes.

About 60 clean fuel tankers are currently anchored along the busy strait, up from the usual 30-40 ships, according to Rahul Kapoor, head of commodity analytics and research at IHS Markit. Some vessels are being used to hoard fuel at sea as onshore tanks fill up. Others are probably parked, waiting to be redirected to any willing buyer across Asia and the world as the coronavirus pummels economies worldwide.

Ships filled with gasoline to jet fuel are moving from major refinery hubs such as South Korea and China due to a crash in domestic demand and swelling stockpiles. These tankers are finding their way to the Singapore Strait, where the glut is being compounded by offloading delays at the city state. Vessels currently have to wait about two weeks to discharge cargoes in Singapore, compared to the typical 4-5 days, according to shipbrokers and traders, leaving ships stranded in local waters.

Storage options are dwindling globally as onshore tanks rapidly fill to capacity, prompting traders, refiners and infrastructure companies to seek alternatives such as pipelines and ships. Bloomberg earlier reported that those who managed to snag some highly-coveted tanks in Singapore were being charged much higher rates, even as the nation stopped leasing out space to new customers.

Major fuel-exporting countries are facing difficulties finding homes for their surplus barrels,” said Sri Paravaikkarasu, Asia oil head at industry consultant FGE. In Singapore, crude processing rates at refineries have probably dropped to around 60% of capacity, and may drop further to as low as 50% during the second quarter, she said.

The onshore storage squeeze is being seen across the region. In India, tanks were 95% full as of last week as refiners scrambled to find space to hold their excess fuel, even turning to pump stations and depots. In Singapore, fuel stockpiles rose to a four-year high in mid-April.

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Utilizing tankers has become the next best option, with analytics firm Vortexa estimating floating crude oil storage in Asia at a four-year high. Taking into account the waters off Singapore as well as Malaysia, data intelligence firm Kpler saw a 45% month-on-month increase in the volume of clean fuels — comprising naphtha, gasoline, jet fuel and diesel — stored on ships to 6.64 million barrels as of April 23.

Across the world, freight rates for both clean as well as dirty tankers have surged dramatically along with rising demand for floating storage. Also, shippers are using a strategy known as slow steaming, where they deliberately reduce the speed of tankers to increase the shipments’ transit time while awaiting the emergence of buying interest from customers, or save on fuel.



Best Stock Trading Platform In Europe {2020}

Financial Markets – Top 5 Things To Watch This Week

The Federal Reserve, European Central Bank and the Bank of Japan are all set to hold policy meetings this week after the coronavirus induced global economic crisis prompted them to implement aggressive monetary easing measures.

Investors will be on the alert for indications that policymakers may have to do yet more to shield economies from the ongoing economic fallout. First quarter GDP data from the U.S. and the Euro Zone will be the economic data to watch, closely followed by U.S. jobless claims data. Oil prices will also be in focus after U.S. crude plunged into negative territory last week for the first time ever. Here is what you need to know to start your week.

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Fed meeting
The Fed will hold its first scheduled monetary policy meeting since January on Tuesday and Wednesday. But policymakers have met at several unscheduled meetings since then, slashing rates to almost zero, restarting bond purchases and rolling out an unprecedented range of programs to ease credit conditions. The measures have seen the Fed’s balance sheet expand to a record $6.42 trillion.

While the meeting is expected to be less dramatic than the emergency one in March, investors expect to get more details on the Fed’s special lending programs, its asset-purchase program and the forward guidance on the target range for the federal funds rate, analysts said.

Investors will also be looking for indications from the Fed about how severe it thinks the recession may be and what is its outlook for economic recovery.

ECB meeting
The ECB is set to spend just over a trillion euros on asset purchases this year alone, has eased its rules on what it can buy and when, and has ramped up supportive measures for banks.

But pressure on the ECB to step up its monetary easing program is only likely to increase as European Union leaders struggle to agree on fiscal measures to help the continent recover from the pandemic. ECB President Christine Lagarde warned EU leaders last week that the euro-area economy could shrink as much as 15% this year.

Analysts estimate that at the current daily pace, the ECB’s 750 billion euros of emergency bond purchases will be exhausted by October. Some say the ECB will be left with no option but to top up its scheme by a further 500 billion euros soon — perhaps as early as Thursday.

Meanwhile the BOJ is set to kick off its meeting on Monday with analysts expecting that policymakers could scrap their bond-buying target as they take more aggressive action to combat the widening fallout of the health crisis.

U.S. GDP, jobless claims data
First quarter GDP data will be the headline figure to watch on the U.S. economic calendar this week. Economic activity ground to a halt in March, after a strong January and February, with the economy shedding around 27 million jobs in five weeks.

“We look for the economy to have contracted 6% annualized in Q1 with much worse to come in 2Q. We look for a 40% annualized fall in output between March and June even if other U.S. states follow the lead of Georgia, Tennessee, Florida and South Carolina and start re-opening their economies in the next two to four weeks”, analysts at ING said.

The other closely watched report will of course be initial jobless claims.

“We are hoping that after three consecutive declines in jobless claims we will see a much sharper fall this week given some states are starting to re-open” ING analysts said.

Bumper week for Euro Zone data
This week brings data on first quarter GDP, unemployment and inflation for the euro area. The biggest question is how large the contraction in GDP will be after lockdowns were put in place across the bloc since at least the last two weeks of March.

Unemployment figures for March will show how much layoffs contributed to an increase in the jobless rate, while inflation data for April will be difficult to parse with most retailers except for grocery stores closed.

Oil price turmoil set to continue?
Price action this week will be a test of whether the oil market can regain equilibrium after crude, which had never dropped below $10 a barrel in its nearly 40-year history, plunged to minus $38 a barrel last Monday.

Energy traders have been spooked by the fact that oil storage facilities are nearly full amid a growing glut in a market already hit by collapsing demand due to the coronavirus pandemic.

The volume of futures contracts still open for delivery in June has fallen by the equivalent of 217 million barrels, more than a third, since last Monday, Reuters reported.

Cheaper oil could help promote the recovery when coronavirus lockdowns finally end. Cheap oil lowers energy, transport and manufacturing costs, puts money in consumers’ pockets and saves oil-importing countries cash, too, which can then be spent on more useful things.


Making Sense Of A Stock Market Just 16% Off Its High While A Pandemic Costs 26 Million Jobs

Why isn’t the stock market much lower?

This question is occurring to plenty of observers right now, given the apparent contrast between economic realities and equity performance.

A pandemic-driven economic catastrophe of unprecedented speed has cost more than 26 million jobs, which to many seems unreflected in an S&P 500 index that’s up 29% from its low a month ago, down a mere 16% from a record high and resting near levels from late summer 2019 – a time when we were at full employment and record corporate profitability.

Even some on Wall Street are remarking on this perceived Wall Street-Main Street disconnect.

Cantor Fitzgerald strategist Peter Cecchini last week argued, “The equity market just isn’t getting the joke. Three factors make this rally appear somewhat ridiculous because the likely extent of the slowdown will be severe relative to historical experience for three reasons: 1) a pandemic whose duration is unknowable, 2) an oil shock whose impacts on earnings will be deflationary, and 3) an already fragile economy as indicated by an inverted yield curve and already contracting loan volumes.”

Credit Suisse’s Jonathan Golub notes the S&P 500 has been at the current 2800 level a couple of times in recent years, comparing the fundamental context for each visit. When the S&P traded here in both January 2018 and March 2019, forecast earnings over the next year were appreciably higher (meaning stocks now look more expensive) and credit spreads are much wider now (suggesting a riskier environment).

Only when comparing valuations on the profit projections two years out does today’s market look roughly in line with the prior stops at 2800. And it’s probably fair to assume that today’s consensus forecast calling for 2021 earnings growth well above 2019 levels is unadjusted for the full realities of the economic shock underway.

Certainly, the trillions in Federal reserve asset buying has helped enable the rally in risk assets that has lifted equities off their lows and bolstered valuations.

Market internals tell the true story
Yet the way the S&P has returned to 2800 doesn’t truly suggest that the market has rushed to anticipate a roaring economic revival.

If stocks were handicapping such a quick resurgence in the economy, one would expect “early cycle” groups such as autos, banks, consumer durable goods and retail to lead the market. This is the opposite of what’s going on.

Binky Chadha of Deutsche Bank notes that the firm’s early-cycle long-short basket of stocks “after falling massively during the sell-off has continued to fall during the rally.”

Similarly, the Direxion MSCI Cyclicals Over Defensives ETF, a small fund that goes long economically sensitive stocks and short non-cyclical names, has had a fairly feeble bounce after a 38-percent collapse, badly trailing the S&P on the rebound.

Big, steady secular-growth stocks in technology, healthcare and consumer staples are holding things together at the big-cap index level against a steady undertow from shares of cyclical businesses with flagging demand and shakier balance sheets.

This is visible in the gulf between the performance of classic “recession-recovery” plays such as General Motors, flooring-products maker Mohawk Industries and consumer lender Capital One Financial and secular-growth or counter-cyclical names like Amazon, Abbot Laboratories and Campbell Soup.

Amazon exemplifies another dominant trend, the premium being placed by investors on the acclaimed winners of an even more winner-take-all economy that might follow this downturn. Amazon’s $1.2 trillion market value, in fact, now accounts for more than 40% of the entire value of the S&P 500 consumer-discretionary sector.

Of course, just because the market is leaning on sturdy growth businesses rather than outright positioning for a better economy doesn’t mean this theme can carry the market indefinitely higher from here.

Market stalling
The S&P, in fact, has stalled over the past two weeks, chopping sideways just below the rebound-rally highs, as some growth stocks take a breather and short-term overbought conditions are worked off.

It would not be surprising for the indexes to continue digesting the move, assimilating the rush of corporate earnings in coming weeks, with some observers looking for a potential pullback of a few percent from here simply as a matter of technical market positioning.

And at some point, the extreme reliance on the mega-cap growth leaders can go too far. The five largest stocks already make up more than 20% of the S&P, pushing record concentration at the top.

Flows into the ETFS that track the Nasdaq 100, technology, healthcare and utilities have reached extremes, a sign they are getting a bit overheated and are prone to backing off.

At the same time, the market will almost certainly start to anticipate the trough in economic activity well before it seems obvious on Main Street that things are getting better. That would be visible in a rotation out of the crowded stable-growth names and into those distressed, struggling cyclical consumer, financial and industrial groups.

Historically, the stock market has some of its best returns when conditions are shifting from awful to less bad. The recent rally in energy stocks in the face of record-low washout prices in crude oil is an illustration of that.

As Strategas Group technical strategist Chris Verrone notes, “It’s difficult to get worse than worst ever,” and many gauges are, like oil prices, indeed at or near their worst readings on record: unemployment claims, Europe manufacturing indexes, Citigroup Economic Surprise Index.

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Things might soon line up for investors to start making a more aggressive bet the worst will pass before long and the real economy can start the healing process. And perhaps that bet will prove premature for a while once its laid.

But that doesn’t mean that right now Wall Street has already given the economy credit for recovering from an ordeal whose pain and duration are not yet known.



Best Stock Trading Platform In Europe {2020}

5 Mistakes To Avoid In A Bear Market

By bear market standards, the recent sell-off was super-fast. It took 16 days for the Standard & Poor’s 500 stock index to fall 20%, the quickest transition from bull to bear ever. But the size of the drop, at least so far, has been below average. At the bear market low on March 23, the broad market gauge was down about 34%, shy of the 40% dip suffered in bears since 1929, according to S&P Dow Jones Indices.

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Still, this bear market, like all the prior ones, has been unsettling. Nobody feels good about losing a third of their stock portfolio in a three-week span. The good news? You can survive a bear market – if you stick to the basic survival guide that Wall Street periodically pulls from the bookcase when the bear initiates its attack on your money.

What follows is a bear market survival guide that highlights major mistakes to avoid:

Don’t try to call the low
Where’s the bottom? That catchphrase is as popular on Wall Street as Wendy’s “Where’s the beef?” ad was during the burger wars in the ’80s.

There’s just one problem: it’s nearly impossible to call a market low, says Jerry Braakman, chief investment officer of First American Trust.

“One of the biggest money mistakes that investors make in a bear market is thinking they can pick the bottom,” Braakman says.

Bear markets, he points out, are not quick events. (They typically last 21 months, S&P Dow Jones Indices says.)

Bears have frighteningly high volatility. (In a short span in March, the S&P 500 saw average daily moves of more than 5% versus average swings of less than 1% last year.)

It’s not uncommon for big rallies to occur in bear markets before reaching a final low. (The market saw several 20% rebounds during the dot-com stock bear in 2000 and the financial crisis in 2008, Braakman points out. That script could be playing out again, as the S&P’s rebound topped 27% April 14.)

Bottoms often take months to form, Braakman says. It’s not uncommon for the S&P 500 to rally before going back down to “test” the old lows. Often, new lower lows are made.

In the current economic situation, while the economy is shut down, unemployment is rising sharply and the government is providing relief for workers and businesses, picking a bottom will again be extremely difficult, Braakman says.

“Anyone who can tell with certainty how this all reconciles is a charlatan,” Braakman says. “With high volatility, mistakes can be amplified. You should stay disciplined with your long-term asset allocation.

Don’t sell stocks and run to cash
Sure, cash is safe, and stocks are risky in a bear market. But that doesn’t mean cash is the answer to all your financial problems – especially if you’re saving for retirement that’s decades away.

“Another big mistake that investors make in a bear market is moving to cash,” Braakman says.

No doubt, cash minimizes paper losses when stocks are in free fall. But stocks don’t stay down forever. Like New York’s lotto slogan says, “You’ve gotta be in it to win it.” (We’re not equating investing with gambling, but it’s true that you can’t participate in a market rebound if your money isn’t invested.)

“You never know,” Braakman warns, ”the recovery could potentially be quick.”

The problem is most people who get out of the market won’t get back in at the right time, Braakman says.

“In earlier bear markets, it took years for investors who moved to cash to come back, so they missed much of the rebound after selling on the way down,” Braakman said. “The lesson is to stay disciplined in your long-term plan.

Don’t own all risky stuff
Reaching for the biggest gains and investing only in the riskiest stuff is a recipe for disaster.

You must “build some protection into your portfolio,” advises Kelly LaVigne, VP of consumer insights for Allianz Life. Too often, he says, when people are “chasing” returns they forget about the lessons they’ve learned about managing risk.

LaVigne says, “If bear markets teach us anything, it’s that a good retirement portfolio – particularly for those within 10 years of retirement – needs to have a balance of accumulation and protection, to help ensure all those funds you spent time building don’t disappear the next time a black swan event occurs.”

Don’t think your portfolio is conservative when it’s not
That can prove costly, says David Reyes, financial adviser at Reyes Financial Architecture.

“The average investor’s portfolio is way too aggressive for their needs and for their ability to psychologically take on the risks of bear markets,” Reyes says. People end up losing more money than they can afford to lose, even some with a balanced portfolio of 60% stocks and 40% bonds, he says.

Another mistake is not paring back risk as you age and near retirement, says Jeff Soltow, financial planner at Frontier Wealth Management.

“(Many) investors will end up taking too much risk later in life and will suffer losses they won’t recover from,” Soltow says. “This sometimes forces them to continue working or they end up falling short in savings.”

Don’t try to time the market
Getting out at “the” market top and getting back in at “the” market bottom is hard to do. No, it’s pretty much impossible to get the timing exactly right. Don’t even try, says Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance.

“The worst thing investors can do during a bear market is try to time the market,” Zaccarelli says. “It is much more difficult than they realize.”

If you’re truly a long-term investor, stay the course and reap the gains the stock market has historically delivered over time to patient investors, he says.

You’re better off “staying invested than by gambling that (you) will be able to outsmart all of the other investors in the world through (your) unique ability to time things well on both when to sell and when to buy back,” Zaccarelli says.

Nobody can predict when stocks will stop going down and start to climb again, he says. The rebound off the bear market low in 2009 is a good example, he says.

“If people … were honest with themselves, they would remember that 3/9/09 felt as terrible as 2/9/09, 1/9/09, 12/9/08, 11/9/08,” Zaccarelli says. “Little did they know that from the bottom in 2009 that by 3/31/09, the market would be up 18%; by 6/30/09, the market would be up 36%; and by 12/31/09, it would be up by 65%.”

One more thing: Do have patience, LaVigne says, and do prepare now for the next bear attack.

“Much of the financial planning advice you’ll see at the beginning of a bear market revolves around having patience,” LaVigne says. “And with good reason, because for those that suffered significant losses in their portfolio, time will be their greatest ally. Do everything you can to avoid letting the next one – and there will be a next one – decimate your savings. The best way to do that is to build some protection into your portfolio to help ensure that at a minimum, you have the assets necessary to cover fixed costs in retirement.”

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Collapse In Aircraft Demand Drove Down March Factory Orders

Orders for long-lasting factory goods fell sharply in March, driven by a collapse in demand for commercial aircraft and parts as the coronavirus spread around the world.

New orders for durable goods—products designed to last at least three years—declined 14.4% in March from the previous month, the biggest monthly drop since August 2014, the Commerce Department said Friday. New orders for February were revised to 1.1%.

Durable-goods orders are likely to decline further as the full effect of the coronavirus-related shutdowns becomes clear in the coming months.

Orders for commercial aircraft and parts fell by more than $16.3 billion, a 296% decline. Since orders are recorded on a net basis, the figure incorporates canceled orders. New orders for automobiles and parts fell 18.4% in March.

Excluding the volatile transportation sector, orders were down a more modest 0.2%. New orders for nondefense capital goods excluding aircraft—a closely watched proxy for business investment—were up 0.1%.

Analysts said the transportation sector appears to have been the first to bear the brunt of the economic shock related to the coronavirus. Other sectors will probably show similar sharp declines in the months ahead, said Gregory Daco, chief U.S. economist at Oxford Economics.

“We’re going to see steep drops across different categories,” he said.

The March durable goods data cover the month when the coronavirus outbreak started causing massive shutdowns across the U.S. economy.

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When Will Disneyland And Other Parks Reopen?

Swiss banking giant UBS told clients Monday that Walt Disney Co. is likely to wait until Jan. 1 to open its theme parks and predicted the Burbank media company will see only about 50% of 2019 attendance.

“Moreover, we now believe the lingering effects of the outbreak — including crowd avoidance, new health precautions, etc. — will dramatically reduce the profitability of these businesses even after they are reopened until a vaccine is widely available,” the report said about Disney’s parks.

In this uncertain time, HPE Financial Services has options to alleviate the strain felt by businesses.

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Stay-at-home orders by state and local governments will dictate when parks can consider reopening. Disney said its parks will remain closed until further notice. Universal Studios Hollywood and Universal Orlando Resort announced plans to stay closed until at least May 31.

Theme park operators have been tight-lipped about what the future holds for their parks, but they have clearly been discussing plans for opening day.

Annual passholders for Universal Orlando Resort said they received a survey last week asking how likely they are to return to the park under various restrictions, such as requiring guests to wear masks or limiting park attendance to 50% of normal.

In an interview with Barron’s, Disney Executive Chairman Bob Iger said his parks would require “more scrutiny, more restrictions” so customers would feel safe to return. He suggested the idea of taking the temperature of each visitor before allowing entrance.

“Just as we now do bag checks for everybody that goes into our parks, it could be that at some point we add a component of that that takes people’s temperatures, as a for-instance,” Iger said.

On several online Disney discussion forums, theme park fans say they have uncovered a plan, presumably leaked by a Disney employee, for allowing guests to return to the Walt Disney World Resort in Florida.

The plan, titled the Secure Circuit protocol, would reopen the park with limited capacity, no parades, no castle shows, no firework displays and health checks performed at every security checkpoint. In addition, the protocol would require guests to sign a form, clearing Disney of any liability for potential exposure to the novel coronavirus.

Disneyland representatives declined to discuss whether the Secure Circuit protocol is legitimate or any plans being developed to reopen the parks.

The process of taking temperatures of entering visitors (using non-contact thermometers) has already been adopted in theme parks in Asia that closed only briefly. At Janfunsun Fancy World in Taiwan, people who have a temperature of 99.5 degrees or higher are denied entry.

At Everland Resort in South Korea, workers take visitors’ temperatures and encourage them to wear masks.

The resort’s attraction queues include markings on the ground to show how far apart each person must stand to maintain social distancing. Rides and stores are disinfected hourly. Hand sanitizer dispensers are set up around the park.

Theme park insiders have been so focused on reopening after the crisis subsides that a webinar on strategies for reopening theme parks and other attractions drew nearly 500 industry workers this month.

The April 15 webinar was hosted by Gateway Ticketing Systems, a Pennsylvania company that develops ticketing systems and consults for theme parks, zoos, museums and other attractions. “Everyone is just spinning out large contingency plans,” said Randy Josselyn, a principal at Gateway Ticketing who hosted the webinar.

Among the speakers on the webinar was Eddie Jones, a support specialist at Atlanta Botanical Garden, who said the garden has already devised a plan for reopening by allowing only 50 people to enter the gardens every 15 minutes.

The plan would cut capacity in the gardens from the normal daily attendance of about 7,000 to about 2,500, he said. A back gate would be opened so that guests could leave without creating a bottleneck at the entrance.

Industry experts say putting limits on capacity would almost certainly be a requirement so that people do not crowd together at reopened parks.

Bill Coan, chief executive of Itec Entertainment, a developer of theme park attractions and shows, said he doesn’t think capacity limits will be difficult to enforce because park fans will not be rushing back once the theme parks reopen.

“I don’t think those numbers are going to occur for some time,” he said of previous attendance numbers.

Coan echoed other theme park experts who said parks will probably open in stages, with some attractions closed in the early stages and rules imposed on how tightly packed visitors can be in lines and in stores.

But limiting capacity and hiring additional workers to take temperatures, enforcing anti-crowding rules and sanitizing rides would be expensive and could make operating theme parks unprofitable, said Martin Lewison, a business administration professor and theme park expert at Farmingdale State College in New York.

Some parks might be able to get by with fewer workers if capacity is vastly reduced, and higher ticket prices might become a profit-bolstering option, but it’s difficult to know for sure because theme park operators aren’t talking.

“These are the kind of practical ideas that I imagine operators are working through, deciding what is practical,” he said.

Whatever procedures are adopted by theme parks, Lewison said some fans will stay away but many others will be ready to return quickly.

“There is a chunk of America who says, ‘Let’s take that risk.’” he said.

For Alexandria Grable, 19, who had an annual pass for the Disneyland Resort for the last three years, the closing of the resort in mid-March convinced her that the coronavirus outbreak was a serious health threat.

But the Santa Clarita teen said she would return if Disneyland reopens.

“I think I would go,” Grable said. “I trust Disneyland enough to know they would not put their guests in harm’s way.” Other theme park devotees are less likely to rush back even if health and social distancing restrictions are added.

“Will anyone want to spin their teacup or the Roger Rabbit taxicab or Buzz Lightyear blasters, knowing how many other hands have touched them?” asked Matthew Gottula, a longtime Disneyland fan from Altadena, who said he doesn’t go anywhere without a container of hand sanitizer attached to his belt.

Another Disneyland fan, Aaron Goldberg, who has written several books on Disney parks and the Disney family, said he wouldn’t return to the parks without wearing a mask and gloves. “Maybe I’m a bit more neurotic, but it’s impossible to avoid touching just about everything at Disneyland and all of the parks,” he said.

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Global Stocks Traded Lower, As Signs Of The Coronavirus Pandemic’s Impact On Jobs And Business Activity Weighed On Markets

Futures tied to the S&P 500 ticked down 0.3%, suggesting the blue-chip index may slip after a volatile day of trading on Thursday. European stocks fell, pushing the Stoxx Europe 600 down 1.3%.

In Asia, Japan’s Nikkei 225 closed 0.9% lower, while South Korea’s Kospi Composite eased 1.3%. China’s benchmark Shanghai Composite fell 1.1% and Hong Kong’s Hang Seng Index lost 0.4%. The exception was Australia, where the S&P/ASX 200 rose 0.5%.

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The Nikkei retreated 3.2% on the week, its first pullback in three weeks, while the S&P/ASX 200 shed about 4.5%, its first such decline in five weeks, and the Kospi Composite fell 1.3%. Benchmarks in Hong Kong and Shanghai were also on track to post weekly drops for the first time in several weeks.

U.S. stocks had a turbulent session Thursday, closing flat after early gains were wiped out by reports of a setback for a key drug to treat Covid-19.

“The market has been getting its head around how much permanent damage is to be brought by the virus. And the latest figure tells us the U.S. labor market is in a bloodbath,” said Govinda Finn, an economist at Aberdeen Standard Investments.

Data published Thursday showed about 4.4 million Americans sought unemployment benefits last week, bringing the total claims for the past five weeks to more than 26 million.

Separate figures showed business activity, as measured by surveys of purchasing managers, plunged in the U.S., Europe and Japan.

Mr. Finn said his institution projected U.S. unemployment would peak at 19% by the middle of this year, as the pandemic was battering the economy much more quickly than the global financial crisis.

Layoffs directly hit consumption and social distancing was also discouraging spending. The size and persistence of the shock will cause some permanent scarring to the U.S. economy, with consumption accounting for roughly 70% of gross domestic product, he said.

Zheng Fang, chief investment officer at Keywise Capital Management, a Hong Kong-based hedge fund, said after recent rallies, neither earnings nor the progress with coronavirus treatments justified further gains in U.S. or mainland Chinese stocks.

The yield on the 10-year U.S. Treasury note slipped to 0.589% from 0.613% Thursday. Yields move in the opposite direction to bond prices.

Oil prices extended a rebound that began Wednesday. U.S. crude-oil futures for June delivery added 1.9% to $16.82 a barrel. Brent crude, the global gauge, rose 1.7% to $25.20.

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Oil Prices Soar As Traders Prepare for Wild Ride to Continue

West Texas Intermediate futures that will deliver oil in June, the U.S. benchmark, rose 20% to $16.47 a barrel. Brent crude futures, used to set prices for oil throughout global energy markets, rose 8.6% to $22.12 a barrel.

Helping prices regain some lost ground: signs of a recovery in demand for oil in China, which is emerging from coronavirus lockdowns, and tensions between the U.S. and Iran. The two nations engaged in a new round of antagonism Wednesday, when Tehran said it had launched its first military satellite into space.

“When you look at China, road traffic and refinery operations are back up,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “Don’t forget the geopolitical side too,” he added, referring to the potential for U.S.-Iranian tensions to disrupt the movement of oil through the Strait of Hormuz, a vital channel for tankers.

The advance in prices Thursday continues a period of outsize moves in global energy markets, which have rippled through to oil producers, bond markets and currencies. The price of the most actively traded WTI futures contract has moved up or down 10%, on average, on each trading day since the start of March.

That compares with an average move in either direction of 1.5% in 2019 as a whole, according to FactSet data.

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Traders and analysts say prices will continue to swing. One gauge of how volatile WTI futures prices are expected to be over the next 30 days, the Cboe Crude Oil ETF Volatility Index, has soared more than 730% this year to its highest level on record.

Like the better-known VIX index tracking volatility in the stock market, the index uses options prices to calculate how far traders are expecting prices to move over the next month.

The oil volatility options aren’t tied to oil futures prices directly but instead to United States Oil Fund LP, an exchange-traded fund that aims to match U.S. crude prices. The fund has been at the center of the oil price drama in recent days. It accumulated a huge position in the futures market thanks to a rush of cash from individual investors.

The pandemic has stopped the world from consuming tens of millions of barrels of oil it would otherwise use every day, and storage space is filling up. Production cuts by the Organization of the Petroleum Exporting Countries and its allies, led by Russia, won’t immediately offset this decline in demand.

U.S. crude prices remain 41% lower than they were at the end of last week. In an aberration of historic proportions, the lightly traded May WTI futures contracts fell below $0 for the first time on Monday, meaning traders had to pay buyers to take oil off their hands.

“We’re close to capitulation,” said Marwan Younes, chief investment officer at Massar Capital Management. “We’re getting close to the point when people just stop trying to buy this,” he added, referring to U.S. crude oil futures.

Crude-oil stockpiles in the U.S. climbed by 15 million barrels to 518.6 million barrels last week, the Energy Information Administration said Wednesday, putting them about 9% above the five-year average. Production fell by a modest 100,000 barrels a day.

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Another 4.4 Million Americans Sought Unemployment Benefits Last Week

Workers have filed more than 26 million jobless claims since start of coronavirus-related shutdowns.

About 4.4 million Americans applied for jobless benefits in the week ended April 18, the Labor Department said Thursday. Jobless claims, which are laid-off workers’ applications for unemployment-insurance payments, had reached 5.2 million a week earlier. Since the pandemic led to widespread shutdowns in mid-March, workers have filed more than 26 million unemployment insurance claims.

Some economists say unemployment claims likely peaked in late March when they reached nearly 7 million. Most states recorded a declining number of new claimants last week.

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Others expect a fresh surge of claims in future weeks as workers who were previously unable to file because of backlogged state systems are counted, and as states begin to accept applications from people who are newly eligible under a $2 trillion stimulus package, such as independent contractors and self-employed individuals.

The number of workers receiving unemployment insurance continues to rise as states process applications. In the week that ended April 11, a record 16 million Americans received unemployment payments, up from 12 million the previous week. The data date back to 1967. So-called continuing claims are reported with a one-week lag.

“These unbelievable numbers are masking a lot of the true demand, and that’s what we’re going to continue to see play out over the next month,” Maria Flynn, president of Jobs for the Future, a workforce development nonprofit, said before Thursday’s data.

Washington state offers a window into the potential impact of the federal stimulus on jobless claims. The state saw more unemployment-benefits applications on Saturday night through Sunday than during its biggest week on record, as it launched a “massive update” to its computer systems to start processing expanded unemployment benefits.

Gig-economy workers, self-employed people and those seeking part-time work were among those newly eligible to apply as the state began implementing a key provision of the law.

Rhode Island also experienced a sharp surge in claims when it began accepting applications included in the expanded unemployment assistance.

Compared with other states, Hawaii, Michigan and Rhode Island have seen a relatively large share of their labor forces apply for unemployment benefits in the past month.

Dennis Fithian, 49 years old, of Detroit, was able to register for unemployment insurance benefits relatively quickly after he was laid off from his job at sports radio station 97.1 The Ticket in early April.

Despite high claims volume in Michigan, Mr. Fithian said his wife was persistent in helping him apply online. “She would get up at 2 or 3 in the morning and keep hitting ‘refresh’ until she was able to get in,” he said.

The couple’s biggest immediate concern is losing his health insurance at the end of April—a worry made even more acute by the fact that his 14-year-old daughter suffers from a rare, incurable disease. “I mostly worked for the love of the job. It wasn’t for the great money, so we’ve always budgeted. But just looking at the summer ahead, the health insurance—that’s going to get really pricey,” he said.

The steepest employment losses appeared to occur between mid- and late March, when the economy shed about 13 million jobs, largely in leisure and hospitality, according to Federal Reserve research. By comparison, about 9 million jobs were lost over the course of the 2007-9 recession.

Oxford Economics estimates that the pandemic will result in 27.9 million lost jobs, including between 8 million and 10 million in industries such as manufacturing and construction that most states haven’t ordered to close.

The federal stimulus package was designed to blunt the economic damage from the coronavirus. As of Monday, more than 40 states were paying recipients an additional $600 a week in enhanced unemployment benefits on top of usual state payments, Labor Secretary Eugene Scalia said earlier this week.

The extra $600, which is paid in addition to regular unemployment benefits, could lead to a larger weekly paycheck than many lower-wage workers would typically earn. For others, like Joshua Price, of Syracuse, N.Y., it amounts to much less than they were previously making.

Mr. Price, 46, began receiving unemployment benefits in late March after he lost his homebound math teaching job due to government-mandated public school closures.

He gets a total of $1,104 in weekly benefits, including the extra $600 a week, which works out to 56% of his previous income.

Mr. Price normally tries to save $750 a week, but with tax bills and insurance bills, he is now saving very little. “I don’t believe I should have to go into my savings to pay bills when it’s a government-mandated work stoppage,” Mr. Price said.

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Global Stocks Steady As Oil Prices Recover

Global stocks were little changed as oil prices regained more ground after days of turmoil.

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Futures for the S&P 500 were flat, suggesting moves in U.S. stocks later Thursday could be muted. The pan-continental Stoxx Europe 600 fell flat. Major benchmarks in the Asia-Pacific region were mixed: Japan’s Nikkei 225 closed 1.5% higher, while indexes in Australia and Shanghai showed little change. Hong Kong’s benchmark gained 0.5%.

The yield on the 10-year Treasury note rose slightly to 0.622% from 0.618% in the previous session. Yields fall as bond prices rise.

Oil prices built on Wednesday’s rebound, which was sparked by the prospect of fresh U.S.-Iran tension. Strains in the Middle East can boost crude prices by signaling potential disruptions to shipments of oil around the world and possible supply shortages.

U.S. crude-oil futures for June delivery advanced 6.9% to $14.71 a barrel. Brent crude, the global equivalent, rose 5.3% to $21.45 a barrel.

Eli Lee, head of investment strategy at Bank of Singapore, said markets had been buoyed by hopes that economies could quickly get back to normal as the coronavirus pandemic came under control, and by hefty support from the Federal Reserve, even extending to riskier assets like lower-rated bonds.

However, Mr. Lee said: “The path towards normality is going to be very gradual.”

History tells us that the market correction during prolonged recessions of more than one year tends to be far deeper” than seen so far, he added.

Fresh coronavirus outbreaks in Asia have added to uncertainty about how quickly governments can safely resume normal economic activity. In the U.S., President Trump said Wednesday that he strongly disagreed with the governor of Georgia’s decision to allow some nonessential businesses to reopen as soon as Friday, saying this was too soon.

Frank Benzimra, head of Asia equity strategy at Société Générale, said China offered a template for economies reopening. “Even if things are getting back slowly to normal, the borders aren’t open, so free circulation of goods and trade isn’t coming back quickly.”

The Dow Jones Industrial Average clawed back some of this week’s losses Wednesday, gaining 2% as oil prices rose and investors looked to corporate-earnings reports to gauge the health of U.S. businesses during the coronavirus pandemic.

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Euro Zone Business Activity Crashes To ‘Shocking’ Lows On Coronavirus Pandemic

Euro zone business activity hit another record low during April in another sign that the coronavirus pandemic is causing severe economic damage across the region.

The IHS Markit Purchasing Managers’ Index, which measures both the services industry and manufacturing, dropped to 13.5 in April, according to preliminary data. In March, the same index had already recorded its biggest ever single monthly drop to 29.7. A contraction in PMI figures — a figure below 50 — indicates a likely fall in economic growth overall.

Earlier in the session, Germany’s flash index came in at 17.1, a record low, versus a figure of 35.0 the month before. This was worse than analysts had been expecting with Phil Smith, principal economist at IHS Markit, saying it “paints a shocking picture of the pandemic’s impact on businesses.”

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European Central Bank Headquarters And Frankfurt's Financial District Ahead Of Comprehensive Bank Assessment

Mortgage Demand Stalls, Even With Interest Rates At A Record Low

Mortgage volume appears to be settling into a new normal, as refinance demand stays high and purchase demand sits at a five-year low.

Total mortgage application volume decreased 0.3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 70% higher than a year ago, but that’s all because of refinances.

Refinance demand did slip 1% for the week but was a sharp 225% higher than one year ago, when interest rates were over 1 percentage point higher. Refinance demand is also surging because some homeowners want to take cash out of their homes, worried that the economic downturn could worsen.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less remained unchanged at 3.45%, as were points at 0.29, including the origination fee, for loans with a 20% down payment. That’s a low for the survey, which began in 1990.

Mortgage applications to purchase a home did increase 2% for the week but were 31% lower than the one year ago.

“The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround,” said Joel Kan, an MBA economist. “This has resulted in reduced buyer traffic, less inventory, and March existing-homes sales falling to their slowest annual pace in nearly a year.”

California and Washington, two of the states hardest hit by the coronavirus, saw mortgage demand rise but were still over 40% below the same week one year ago. Demand in New York, which is seeing the worst of the pandemic, continued to fall.

The refinance share of mortgage activity decreased to 75.4% of total applications from 76.2% the previous week. The adjustable-rate mortgage share of activity increased to 2.8% of total applications.

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Dow, S&P 500 Stabilize, Oil Recovers

U.S. stocks rallied Wednesday, clawing back some of this week’s losses, as oil markets calmed and investors looked to corporate earnings reports to gauge the health of U.S. businesses during the coronavirus pandemic.

The Dow Jones Industrial Average added 370 points, about 1.6%, after dropping more than 1,200 points to start the week.

The S&P 500 rose 1.6%, and the Nasdaq Composite added 1.9%. The gains were broad, with all 11 sectors of the S&P 500 rising, led by the energy group, and all 30 members of the Dow Jones Industrial Average in the green.

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“The psychology is ‘buy on the dip’ and that’s what’s fueling this bear-market rally,” said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham. ARBB 1.52% Some fund managers only have experience investing in the prolonged bull market of the past decade and have grown to expect a quick rebound, he said.

After days of turbulence in the oil markets, Brent crude, the global gauge for oil, was up 11% at $21.56 a barrel, after briefly plunging earlier in the day to levels last seen in 1999. The U.S. crude benchmark jumped 27% to $14.66 a barrel, following its lowest close in 21 years.

Investors are looking to corporate earnings for insight on how the pandemic is affecting U.S. businesses as a broad swath of blue-chip companies report their results.

Shares of Snap soared 22% after the social-media company reported a surge in the number of users as people who are homebound turned to its chat app for communicating with friends and family. Netflix shares ticked down 2.9% after the streaming giant on Tuesday evening said it ended the first quarter with nearly 16 million new subscribers. The stock has rallied sharply this year.

Expedia shares rose 8.6% after The Wall Street Journal reported the company is in advanced talks to sell a stake to private-equity firms as widespread travel bans hit the online-booking company’s business.

Confidence is likely to remain fragile while analysts and investors are still slashing profit forecasts for 2020, according to Ken Peng, head of Asia investment strategy at Citi Private Bank. He expects global earnings to fall by about 50% this year, but consensus forecasts are still far from this figure.

“The markets will have more confidence, and more sustainably rally, once this revision momentum slows down,” he said.

Investors are continuing to focus on oil after US. oil futures on Monday plunged below zero for the first time.

Oil prices rose Wednesday after President Trump said on Twitter that he had instructed the U.S. Navy to destroy Iranian gunboats “if they harass our ships at sea.” Despite large percent moves, prices remain low.

“It’s a geopolitical piece of news that has lifted the price at a time when the market has been heavily sold,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The ministers of major oil-producing nations didn’t reach any decisions on starting production cuts as soon as possible following an informal call on Tuesday, according to Warren Patterson, head of commodities strategy at ING. Meanwhile, forecasts suggest that the Energy Information Administration’s data on Wednesday may show that the increase in U.S. crude-oil inventories exceeded 10 million barrels for the fourth consecutive week.

The Trump administration is considering offering federal stimulus funds to embattled oil-and-gas producers in exchange for government ownership stakes in the companies or their crude reserves, The Wall Street Journal reported. But the plan faces long odds given likely opposition from congressional Democrats to using stimulus funding for the oil industry. Separately, Texas regulators on Tuesday deferred a decision on whether to make operators curtail production for the first time since the 1970s.

Some investors questioned how effective support from the U.S. government would be in shielding oil producers, or propping up the price of energy stocks.

“It’s not realistic to expect there won’t be any casualties from this type of move in the oil price,” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. “If you do see government intervention, the pressure on corporates to avoid dividends and buybacks for a long period of time will be very strong.”

The yield on the 10-year Treasury note inched up to 0.595%, from 0.571% Tuesday, in a sign that risk appetite may be returning.

Overseas, the benchmark Stoxx Europe 600 index climbed 1.3%. In Asia, Japan’s Nikkei 225 closed 0.7% lower, while benchmarks in Hong Kong, South Korea and Shanghai ended higher.

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Oil Collapse Continues As Brent Plunges More Than 15%

Oil prices continued to plummet Wednesday as concerns over limp demand and limited remaining storage capacity lingered.

In the afternoon of Asian trading hours, international benchmark Brent crude futures dropped 15.57% to $16.32 per barrel. Meanwhile, the June contract for West Texas Intermediate shed all of its earlier gains as it dropped 6.66% to $10.80 per barrel. The July contract for WTI also declined and was last trading below $19 per barrel.

Per Magnus Nysveen, senior partner and head of analysis at Rystad Energy, warned that the situation in the oil markets is “going to be worse.”

“The world is running out of place to store the oil,” Nysveen told CNBC’s “Street Signs Asia” on Wednesday, adding that storage acts as “a kind of buffer.”

“When the supply and demand balance is positive or negative, then you can build or draw from storage,” he said. “But when the storage gets full, then there is no buffer for this very strong imbalance that we’re seeing.”

Pictet Wealth Management’s Jean-Pierre Durante agreed with Nysveen’s assessment of the situation, commenting in a Wednesday note that the “world is overflowing in oil” despite a recent decision by the Organization of the Petroleum Exporting Countries and its allies — known collectively as OPEC+ — to cut oil supply.

“World storage capacity will rapidly reach saturation point,” said Durante, who is head of applied research at Pictet Wealth Management.

Global demand for oil has fallen dramatically, with major economies worldwide effectively frozen as a result of coronavirus-induced lockdowns imposed by authorities scrambling to contain the spread of the disease.

Wednesday’s moves in oil followed recent sharp declines in the sector. The May contract for WTI, which expired Tuesday, plunged below zero for the first in history before clawing its way back into positive territory. The June WTI contract plunged more than 40% on Tuesday while international benchmark Brent dropped from levels above $24 per barrel.


US Oil Fund Plunges 38%, Halted For Trading Repeatedly

Trading in the United States Oil Fund, a popular exchange-traded security known for its ‘USO’ ticker which is supposed to track the price of oil and is popular with retail investors, plunged nearly 40%.

At one point, trading was halted in morning trading after USCF, the manager of the fund, said that it was temporarily suspending the issuance of so-called creation baskets. It was then halted periodically during the trading day for volatility.

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Creation baskets are how an ETF creates new shares to meet demand. The baskets hold the underlying securities which in this case are plummeting oil futures. With the halting of these creation baskets, the ETF will essentially now trade with a fixed number of shares like a closed-end mutual fund.

On Friday, USCF changed the structure of the USO fund so that it can hold longer-dated contracts. Per a regulatory filing, around 80% of the fund will be in the front-month contract, with 20% in the second-month contract.

John Davi, founder and CIO of Astoria Portfolio Advisors, said the new structure was implemented as a way to try and protect investors from plunging crude prices. The coronavirus pandemic continues to sap worldwide demand for crude, which has sent prices to their lowest levels on record.

According to Davi, the USO is primarily owned by retail investors, which can be dangerous for those who believe they are betting on oil prices moving higher over time, without fully understanding the dynamics in the commodity market.

“To buy USO you have to understand the oil futures market,” Davi told CNBC. “They [retail investors] just buy the ETF because they think the price of crude will go up, but they don’t understand the drivers, which are fairly complicated.”

USCF did not provide a comment.

On Monday, the May contract for oil fell to a negative price, an unprecedented event wreaking havoc on the oil markets. The contract expires today. USO likely had already sold that contract because it has stated in the past that it would invest in the next contract two weeks before expiration. So it owns futures for the June month and now likely the July month, given the revised structure.

June futures began cratering as well on Tuesday, pressuring the fund. June futures expiring in a month dropped 50% to under $10 on Tuesday. July contracts fell 27%. The May contract, however, recovered a bit and was trading with a positive value again of $9.

USO could run into trouble if those contracts also fall to a negative value as they near expiration, mimicking the May contract’s plunge ahead of its expiration.

Negative futures value is unprecedented and it is unclear how products like exchange-traded funds built for the retail investor to participate in the market will handle such events.

Hayman Capital Management CIO Kyle Bass has been warning investors about the danger of exchange traded funds that track oil prices.

“Retail has been plowing into these oil contracts thinking they’re buying spot crude oil when they’re buying the next front month. So they’re paying $22 a barrel when the spot market’s negative $38. Retail investors are going to get fleeced if they continue to fly into these oil ETFs,” he said Monday on CNBC’s “Closing Bell.”

Following Monday’s price action, Bass, who said he holds short positions against some energy-focused ETFs, tweeted that he would demand 100% collateral.

Warren Pies, energy strategist at Ned Davis Research, sounded a similarly cautious tone.

“At best, they are expensive ways to gain programmatic futures exposure,” he said of commodity-based ETFs on Monday. “At worst, they are designed to implode. Still, money continues to flow into the USO ETF. As of last week, USO’s assets reached an all-time high of more than $5 billion. To reiterate: In this environment, USO is a train wreck. Stay away,” he said.

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Oil-Price Crash Deepens, Weighs On Global Markets

The crash in global oil prices deepened Tuesday, as pain spread to currencies of major exporters and shares in energy producers.

Brent crude futures, the international benchmark for oil markets, dropped 15% to $20.67 a barrel, their lowest level since 2002. The decline came a day after the price of West Texas Intermediate, the U.S. crude benchmark, dropped below zero for the first time in history.

U.S. oil markets came under further pressure. The June WTI futures contract, now the most actively traded, dropped 17% to $17.03 a barrel. The May contract, which settled at a historic minus $37.63 a barrel Monday, rose to minus $6.30 a barrel in thin volumes on its final day of trading.

The convulsions in oil markets underlined the huge hit that government-imposed lockdowns designed to stall the spread of the coronavirus have dealt to oil demand. With producers unable to shut wells fast enough, and OPEC and G-20 production cuts not due to take effect until early May, traders say that the world is essentially running out of space to store oil.

“Whatever oil analysts and oil traders have learned over the course of the last 50 years or 100 years was all of a sudden put in question” by Monday’s negative oil prices, said Eugen Weinberg, head of commodities research at Commerzbank. “Everyone has been shocked.”

Oil futures, used by investors to bet on the direction of prices and by producers to protect against market swings, had performed better than the physical oil market for several weeks. Now, they are being stung by the slide in demand for actual barrels of crude.

“This is the market signaling to producers that you need to cut off more production faster because we’re drowning in oil at this point,” said Saad Rahim, chief economist at Swiss commodities trader Trafigura.

The drop in oil prices rippled through to the currencies of oil-producing nations. Russia’s ruble dropped 1.7% to trade at 76.81 a dollar, extending its depreciation against the greenback this year to 19%.

The economy of Russia, the world’s second-largest oil producer in 2019, stands to suffer from lower oil prices. A weak currency could prevent the Bank of Russia from cutting interest rates as much as it would like to bolster growth at a monetary-policy meeting on Friday, said Piotr Matys, a strategist at Rabobank.

U.S. stock futures and European equity markets were down Tuesday, led lower by shares in energy companies. Shares in Noble Energy Inc. fell more than 5% in New York in premarket trading, as did shares in oil-field services provider Schlumberger Ltd. Among Europe’s oil majors, BP PLC lost 4.6%, Royal Dutch Shell PLC 4.5% and Total SA 3.5%.

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The underlying problem for energy markets remains the collapse in demand caused by the coronavirus, which has grounded planes, stopped billions of people from driving and disrupted global trade. Economists have forecast a deep global recession and international oil organizations estimate that demand will shrink in the coming weeks.

“We’re running out of storage,” said Bob McNally, president of consulting firm Rapidan Energy. “Demand is contracting two or three times as fast as supply.” The drop in prices is a “brutal but efficient” mechanism to “persuade producers to keep oil under the crust,” Mr. McNally said.

The drop below zero makes it more likely that President Trump will impose tariffs on oil imports into the U.S., added Mr. McNally, a former White House adviser.

Market mechanisms that might help rectify the slump appear to be breaking down because of the lack of storage space and demand for oil globally.

Typically, low U.S. prices would encourage traders to buy cheap American oil and sell it at a higher price in Europe or Asia. The way Brent crude prices sank in tandem with WTI on Tuesday suggests “the world doesn’t want to take U.S. barrels,” said Vincent Elbhar, co-founder of Swiss hedge fund GZC Investment Management.

Monday’s moves also prompted urgent discussions between Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries about whether to cut production as soon as possible. OPEC members are considering bringing forward the start date for production cuts from May 1.

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3 Million Americans Are Not Paying Their Mortgages Right Now

The number of Americans struggling to pay their mortgages has skyrocketed as the economy reels from the coronavirus pandemic, with nearly 3 million Americans behind by at least one month on their mortgage payments in the week ending April 12, according to the Mortgage Bankers Association.

Nearly 6% of all mortgages were in forbearance, the industry term for being behind on payments. The week before, 3.7% of home loans were past due by at least a month. The first week of March, just 0.25% of such loans were past due by a month.

This high a figure on a nationwide level is unprecedented, said Mike Fratantoni, MBA’s chief economist.

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“You might have seen this high of a share in Houston after Hurricane Harvey, but it was always a local phenomenon,” he said. “What’s different this time is it’s national. To have 6% of mortgage loans in forbeareance, that’s about 3 million homeowners saying they can’t make their mortgage payments due to COVID-19.”

Fratantoni expects that number to keep rising, citing an additional 1.8% of homeowners who called banks to request forbearance last week.

“As we get to the time when May payments are due, I expect to see those numbers going up again,” he said. “We are hopeful that, now that some of the stimulus payents are arriving and unemployment benefits are expanded, that can provide some cushion to keep these numbers from going higher too fast.”

More than 22 million Americans have filed for jobless benefits in the past month, and homeowners are taking advantage of a provision in the CARES Act that bars eviction of homeowners whose mortgages are backed by Fannie Mae or Freddie Mac. The law also lets homeowners ask for their payments to be reduced or deferred for 12 months with no penalties.

More than 8.2% of mortgages backed by Ginnie Mae were in forbearance, according to the MBA survey, compared with 4.64% of mortgages backed by Fannie Mae and Freddie Mac.

The CARES Act does not protect mortgages that are not backed by the government, which make up about half of all mortgages nationwide.

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U.S. Crude Futures Turn Positive After Historic Plunge

U.S. oil prices hobbled back into positive territory on Tuesday after sinking below $0 for the first time ever, but international benchmark Brent dipped as the global coronavirus crisis severely reduces demand for crude.

U.S. West Texas Intermediate (WTI) crude for May delivery (CLc1) was up $38.99 in thin trade at $1.36 a barrel by 0622 GMT after settling down at a discount of $37.63 a barrel in the previous session. The May contract expires on Tuesday and the more-active June contract rose 94 cents, or 4.6%, to $21.37 a barrel.

Global benchmark Brent crude for June delivery was down 48 cents, or 1.9%, at $25.09 per barrel.

“Demand destruction from COVID-19 will see a slower than expected reopening of the U.S. economy,” said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices. “The WTI crude June contract was able to hold the $20 a barrel level and is seeing a modest gain following the painful rollover of the May contract.”

Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30% worldwide. That has resulted in growing crude stockpiles with storage space becoming harder to find.

The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks.

Following the collapse in oil prices, U.S. President Donald Trump said on Monday that his administration was considering halting Saudi crude oil imports as a way to help the U.S. drilling industry.

Today it’s pretty clear that a major issue in the market is a glut in the United States and lack of storage capacity,” said Michael McCarthy, chief market strategist, CMC Markets in Sydney.

Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd). But that will not take place before May, and the size of the cut is not viewed as big enough to restore market balance.

Supply and inventories are expected to tighten in the second half of the year, while “severe storage distress is likely to drive wild price realizations,” in the next 4-6 weeks, Citi Research said in a note.

Meanwhile, U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, according to five analysts polled by Reuters. Analysts expected gasoline stocks to rise by 3.7 million barrels last week.

The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday, and the weekly report by the U.S. Energy Information Administration is due at 10:30 a.m. on Wednesday.





A Blast Of Earnings News Is Coming… But The Market May Be More Focused On When The Economy Will Reopen

Earnings from IBM, Netflix, Coca-Cola and dozens of others are expected in the week ahead, but as the state shutdowns now reach the one-month threshold, the market is more likely to trade on virus headlines and news about reopening the economy.

There are also some important economic reports, including existing home sales on Monday and durable goods on Friday. But it is the weekly jobless claims data that will again be most relevant, as economists watch to see whether the number of workers seeking claims has now peaked and whether there are any signs some are returning to jobs, as government funds reach the hands of business owners.

In the past week, stocks were higher, but there was a divergence with the Dow up just under 2.2% at 24,242, and Nasdaq, surging 6%, lifted by tech and biotech. The S&P 500 gained 3% for the week and is now 31% off its March lows.

Stocks gained amid signs the virus outbreak has peaked and some reopenings could start slowly in the next few weeks.

The market also bounced Friday as the results of an early study of a Gilead drug showed promise with severe cases of coronavirus. Technology stocks were up about 4% for the week, and health care was up more than 5% while consumer discretionary stocks led with a gain of more than 6%.

“As the virus news goes, so go risk assets. People expect bad economic data,” said Patrick Leary, chief market strategist at Incapital. “The data is all expected to be horrible. The only economic data we can really look at now and start to measure is the claims data on Thursday.” As of April 11, more than 22 million workers claimed unemployment benefits over a four-week period, as states shut down and schools, restaurants, stores and many other businesses closed or were forced to cut back.

Charts are important
Analysts who watch stock charts say technical levels will continue to have a powerful pull on the market, since so many traders have set their computers to trade around those numbers.

For instance, the S&P 500 had a hard time breaking through the 50-day moving average Friday, and fell back after it initially edged near 2,862 in morning trading. But at the end of the trading day, it smashed through that level, surging to close at 2,874, a positive sign for Monday’s open. The 50-day literally is the average closing price for the S&P over the previous 50 sessions. Technical analysts believe watching moving averages gives them an important tool for price trends and momentum.

Bob Doll, Nuveen’s chief equity strategist, said he believes the market hit its bear market low on March 23, but it could take another dive towards lows at some point.

“My [low] target was 2,350. We spent 36 hours below that and got to 2,192. If there’s a secondary low, then probably the lowest chance is 2,350,” he said. “I’m not sure we’re going to go there, based on two things, the power of the rally and two, the stimulus. It’s been awesome.”

Doll said after the first blow-off phase to the March low, the second phase of a bear market is the type of choppy trading that results in swings both higher and lower.

“Then you get phase two, which is a whipsaw fashion and it bounces all over the place. … You kind of get dizzy, then you make the secondary low.” Doll said. Then ultimately, the market moves on to where price-to-earnings ratios and earnings in general will matter again.

“What’s driving the market is not earnings. What’s driving it is technicals,” said Doll.

What about earnings
First quarter earnings began to roll in during the past week, starting with major banks. So far, based on actual reports and forecasts, first quarter earnings are expected to be down 14.5% in the first quarter, the worst quarter since the more than 15% decline in the third quarter of 2009. As for the second quarter, a much sharper 27.3% decline is expected, according to I/B/E/S data from Refinitiv.

IBM reports Monday, while Coca-Cola, Netflix, Travelers, and Texas Instruments release results Tuesday. AT&T, Delta Airlines, and Intel, Blackstone and Eli Lily are reporting Thursday. American Express and Verizon are expected Friday.

Doll said he expects the market to listen to comments from corporate executives on conference calls but ignore the actual earnings. “The market is going to pay a lot more attention to what can a rebound look like, and what can 2021 numbers look like,” he said. “They’ll be selling on that versus how deep is the hole going to be in the second quarter. The macro questions around that are recurrence, therapeutics, and vaccine and how fast can the economy come back, and nobody knows the answer to that.”

President Donald Trump laid out guidelines for reopening the economy, but left the decision making up to the states, which are facing varied levels of new infections. One issue is the lack of testing, and American businesses have pressed for more availability of test kits so workers can be brought back more safely.

Doll said he is partial to health care and technology stocks, and one reason is because of the Fed’s quantitative easing programs. “We’re now in QE4. We had QE1, QE2, QE3, and six months after QE 1, 2 and 3, there were two sectors that outperformed-technology and health care, and there were two that underperformed, utilities and REITs,” he said.

Doll said he also is looking at how stocks might come through the virus shutdowns. “Part of what you want to make sure is the company is going to make it through, and make sure the industry has decent demand getting out of it. If it has decent demand during it, that’s a good thing, and that takes you back to health care and technology,” said Doll.

Leary said he expects companies to be scrutinized somewhat differently by analysts this quarter, and balance sheets will be more important.

“Its going to be on a case-by-case basis about how analysts are going to look at them. This is not a typical recession. Recessions seem to hit different sectors,” he said, “This one one is different in that it really has several losers like airlines and travel and entertainment companies. It has some real winners too. I like health care and pharma. Anything that’s defensive in nature is going to perform well.”

Companies have been tapping the corporate bond market at a record pace to boost their cash piles to help them through the economy’s shutdown, and the coming week should be no different.

The corporate debt market has been open for business and spreads have narrowed since the Fed announced a program to buy corporate debt. Companies have issued more than $160 billion in investment grade bonds so far this month, with JP Morgan issuing $10 billion this past week in the biggest bank deal ever, according to Credit Flow Research.

More are expected in the coming week, as companies report earnings and exit the blackout period.

“I think what corporate treasurers know is the window of opportunity for issuing debt at reasonable rates will quickly close once the economy starts opening,” said Leary. He said balance sheets and earnings will be more scrutinized once things start to become more normal.

“They won’t have an excuse anymore … right now, everything is expected to unexpected,” he said, “I think that window will close, and we’ll have to take a look at the bond market again. Their ability to issue will be impacted by their balance sheets…[now] there’s plenty of cash coming at them. The Fed will step in to support.”

Leary said some of the interest in corporate bonds is from investors who are fearful of buying stocks right now but may want to invest in a company through the safer play of its bonds. Leary said energy bonds are among the least desirable, with the huge drop in crude prices.

West Texas Intermediate crude futures for May settled at $18.72 per barrel, it lowest level since January, 2002. But that contract expires Tuesday. The June contract settled at $25.08 per barrel, and will resume trading there next week as the active contract.

“It’s just a reflection of physical market conditions,” said John Kilduff of Again Capital, of the big decline in the May contract. He said it shows that futures traders do not want to actually take delivery of the commodity, due to an increasing lack of storage space.

Week ahead calendar


Earnings: IBM, Steel Dynanics, Equifax, Zions Bancorp, Ally Financial, Halliburton, Infosys, Royal Phillips, Truist Financial


Earnings: Coca-Cola, Netflix, Travelers, Texas Instruments, Chubb, Lockheed Martin, CIT Group, SAP, HCA Healthcare, Manpower, Prologis, Comerica, Emerson Electric, Synchrony Financial, Snap, Canadian Pacific Railways, Interactive Brokers, Teradyne

8:30 a.m. Philadelphia Fed nonmanufacturing

10:00 a.m. Existing home sales


Earnings: AT&T, Las Vegas Sands, Alcoa, Boston Beer, Kinder Morgan, Delta Air Lines, Baker Hughes, Quest Diagnostics, Kimberly-Clark, Nasdaq, Discover Financial, Netgear, Seagate Technology, SLM, TD Ameritrade, CSX, Biogen, Thermo Fisher, LM Ericsson

9:00 a.m. FHFA home prices


Earnings: Intel, Blackstone Group, Eli Lily, Credit Suisse, Invesco, Huntington Bancshares, Tractor Supply, Capital One, FirstEnergy, Hershey, Southwest Air, Union Pacific, Citrix, Domino’s Pizza, PulteGroup

8:30 a.m. Weekly claims

9:45 a.m. Manufacturing PMI

9:45 a.m. Services PMI

10:00 a.m. New home sales


Earnings: American Express, Verizon, Sanofi, Eni

8:30 a.m. Durable goods

10:00 a.m. Consumer sentiment


Bets Against the Stock Market Rise to Highest Level in Years

Short sellers have revived their wagers against the stock market in recent weeks, taking their most aggressive positions in years.

Bets against the SPDR S&P 500 Trust, the biggest exchange-traded fund tracking the broad index, rose to $68.1 billion last week, the highest level in data going back to January 2016, according to financial analytics company S3 Partners. That was up from $41.7 billion at the beginning of 2020 and $41.2 billion a year ago.

Short sellers borrow shares and sell them, hoping to repurchase them at lower prices and keep the difference as profit. Among the individual companies they have targeted in recent weeks are travel-related firms, including Carnival Corp., Royal Caribbean Cruises Ltd., Marriott International Inc. and Wynn Resorts Ltd.

The Little Book That Beats the Market

Those bets come during a wild year for investors who are struggling to reconcile the impact of the coronavirus pandemic on the population and economy. The S&P 500 suffered its fastest drop from a record to a bear market in history—ultimately falling 34% between Feb. 19 and March 23. Its 28% rebound since then has also been brisk, leaving some investors anxious about the strength of the rally when so much remains unknown.

“We’ve really seen a significant bounceback in the last three weeks at levels that I think are too quick,” said Jerry Braakman, chief investment officer at First American Trust. His firm recently bet against the Nasdaq-100, on the belief that technology stocks have fallen too little to reflect the probability of a recession. The index is up 1.1% in 2020.

“When we see a strong move in one direction, where we think the fundamentals and the news can turn ugly, especially during an earnings cycle, we think that’s an opportunity where we could see a 5, 10% selloff again,” he said.

Investors are bracing for the possibility of more volatility this week, as earnings reports from companies including Coca-Cola Co., Netflix Inc. and Delta Air Lines Inc. give another glimpse at how the coronavirus is reshaping the landscape for U.S. business.

The outsize market swings of late require vigilance from investors who sell shares short because they can face losses when prices rise. Short sellers incurred total mark-to-market losses of $108.8 billion over three days in late March when the S&P 500 surged 18%, according to Ihor Dusaniwsky, head of predictive analytics at S3 Partners.

But with the potential for additional declines ahead, many investors have decided that the ability to hedge their portfolios—or simply bet on a selloff—is wise.

“Things will go back to normal eventually and these positions will decrease but not until we start seeing less volatility in the market,” Mr. Dusaniwsky said of the rise in short positions against the SPDR S&P 500 Trust. “No one’s going to give up their insurance until they see the chances of catastrophe are in the rearview mirror.”

The portion of available shares sold short against the SPDR S&P 500 Trust has also risen, climbing to 27% in early April, the highest level since November 2016 and up from 14% at the beginning of 2020.

The increase in bets against the market coincides with a push in other countries to temporarily curb short selling. At times of heightened volatility, critics often argue that the practice exacerbates downward pressure on stock prices. But Jay Clayton, the chairman of the Securities and Exchange Commission, has argued short selling is needed to facilitate ordinary market trading.

To be sure, coronavirus has upended entire industries in recent weeks, leaving investors scrambling to reassess the growth prospects of companies from Marriott to Clorox Co. to Inc. to Carnival.

With the pandemic devastating global travel, hotel, casino and cruise stocks have been among the hardest hit—and seen some of the biggest additions to the short positions against them.

Many hotels and casinos temporarily closed their doors when demand evaporated, furloughing employees and curbing spending plans, and the Centers for Disease Control and Prevention has extended a no-sail order for cruises into July.

Short sellers have added a collective $797 million to their short positions against Carnival, Royal Caribbean, Marriott and Wynn over the past 30 days, according to data Friday from S3 Partners.

Alex Lee, a San Francisco resident who manages a family sandwich shop in Oakland, Calif., and his wife had previously dabbled in short selling but have recently devoted more attention there. They made bets against Marriott, along with other stocks.

“Because of Marriott’s price at the time, it seemed like it had more room to fall and because of its heavy presence in Europe and the United States, we just thought that that company itself would be more vulnerable to falling more,” he said.

Over two rounds of shorting Marriott stock in March and April, they made a profit of about $15,000, Mr. Lee said. Marriott recently said about 25% of its hotels are temporarily closed, and North American occupancy levels are around 10%. Its shares are down 44% this year.

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Among the stocks that saw big drops in short positioning in March were stodgy consumer-staples shares, which got a bounce as Americans stocked their pantries to wait out the pandemic at home.

“We had a lifetime of trading in the month of March,” said Mitch Rubin, chief investment officer at RiverPark Funds. He said he had previously bet against shares of Kroger Co., Walmart Inc., Clorox and Campbell Soup Co. but covered those positions in late February and early March as it became clear those companies would perform well with consumers sheltering in place.

“Their business is healthier than it was before the crisis because the demand for their products has increased,” he said. “The amount of times you clean high-touch surfaces with a chemical disinfectant is going to go up for some period of time, maybe for the rest of our lives.”




Oil Falls More Than 10% To Lows Not Seen Since 1999

Crude oil futures fell on Monday, with U.S. futures touching levels not seen since 1999, extending weakness on the back of sliding demand and concerns that U.S. storage facilities will soon fill to the brim amid the coronavirus pandemic.

The oil market has been under pressure due to a spate of reports on weak fuel consumption and grim forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency.


The volume of oil held in U.S. storage, especially at Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is rising as refiners throttle back activity due to slumping demand.

The front-month May WTI contract (CLc1) was down $2.62, or 14%, to $15.65 a barrel by 0142GMT. At one point, the contract had fallen as much as 21% to hit a low of $14.47 a barrel, the lowest since March 1999.

That contract is expiring on Tuesday, and the June contract , which is becoming more actively traded, fell $1.28, or 5.1%, to $23.75 a barrel. Brent (LCOc1) was also weaker, down 21 cents, or 0.8%, to $27.87 a barrel.

The plunge in crude oil prices reflects a glut at the main U.S. storage facilities at Cushing and a big drop in demand, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“It hasn’t reach capacity but the fear is that it will,” he said, adding that once the maximum capacity is reached, producers will have to cut output.

Production cuts from OPEC and its allies such as Russia will also kick from May. The group has agreed to reduce output by 9.7 million bpd to stem a growing supply glut after stay-at-home orders and business furloughs to curb the COVID-19 pandemic that has killed more than 164,000 people worldwide sap fuel demand.

The oil industry has been swiftly reducing production in the face of an estimated 30% decline in fuel demand worldwide. Saudi Arabian officials have forecast that total global supply cuts from oil producers could amount to nearly 20 million bpd, but that includes voluntary cuts from nations like the United States and Canada, which cannot simply turn on or off production in the same way as most OPEC nations.

Numerous majors have announced supply reductions, including Chevron Corp (NYSE:CVX), BP plc (LON:BP) and Total SA (PA:TOTF). But economic growth is sagging, and physical crude markets and an estimated record 160 million barrels of oil stored onboard ships suggest prices will keep falling.

“There’s still some concern that the 10 million barrels per day cut won’t be enough to offset demand destruction so the outlook for oil prices remain subdued,” McCarthy said.

North American exploration and production companies have cut their budgets by roughly 36% on a year-over-year basis, according to a Sunday note from James West, analyst at Evercore ISI, while international companies have cut budgets by 23%.






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Financial Markets – Top 5 Things To Watch This Week

While dozens of earnings reports are expected in the coming week and economic data will bring more insights into the impact of the coronavirus the main focus will still be on developments relating to the virus and how soon the economy can reopen.

Around 20% of S&P 500 companies are expected to report results in the coming week and there are also some important economic reports, including U.S. jobless claims, durable goods and existing home sales. The euro zone is to release PMI data for April along with reports from Germany’s ZEW and Ifo, while the U.K. is set to publish figures on unemployment, inflation and retail sales. Here’s what you need to know to start your week.

Some states to begin lifting coronavirus restrictions
U.S. President Donald Trump said on Saturday that Texas and Vermont will allow certain businesses to reopen on Monday while still observing coronavirus-related precautions.

Demonstrations to demand an end to stay-at-home measures spread to Texas on Saturday. Trump appeared to encourage protesters with a series of Twitter posts on Friday calling for them to “LIBERATE” Michigan, Minnesota and Virginia, all run by Democratic governors.

Trump has touted a thriving economy as the best case for his re-election in November.

Several states, including Ohio, Michigan, Texas and Florida, have said they aim to reopen parts of their economies, perhaps by May 1 or even sooner, but appeared to be staying cautious.

Vice President Mike Pence said on Friday the U.S. had the capacity to do a sufficient amount of testing for states to move into a phase one of reopening, but Governors and state health officials say there is nowhere near enough test kits and equipment available.

The U.S. has by far the world’s largest number of confirmed coronavirus cases, with more than 720,000 infections and over 37,000 deaths.

Earnings deluge
Around one hundred S&P 500 companies are expected to report results this week, as investors digest a market surge that has lifted the S&P index 25% from its March lows as of Thursday. Those include major industrial, tech and consumer products companies, as well as streaming company Netflix (NASDAQ:NFLX), whose shares rose to a record high in the past week as widespread stay-at-home orders drove demand for online streaming services.

Some of the companies also reporting are among those worst hit by the pandemic’s fallout, including airlines such as Delta Air Lines (NYSE:DAL) and Southwest Airlines (NYSE:LUV).

Investors are bracing for brutal first-quarter earnings but will also be on the lookout for indications of how soon business can get back on track.

U.S. initial jobless claims may ease
Initial jobless claims could slow again this week as the initial reaction to shutdowns starts to ease. More than 22 million Americans have filed for unemployment benefits in the past month as closures of businesses and schools and severe travel restrictions have hammered the economy.

Durable goods orders are expected to plunge, given recent weakness in manufacturing data and the collapse in the oil and gas sector caused by tumbling commodity prices.

The calendar also features updates on new and existing home sales and PMI data, which is expected to drop further.

Meanwhile, the Federal Reserve is in blackout mode ahead of its next scheduled policy meeting on April 29th.

Euro zone PMI pain
Thursday’s advance readings of euro zone PMIs for April are likely to make for painful reading.

Composite euro zone PMIs, comprising services and manufacturing, dropped to a record low of 29.7 last month, the biggest monthly drop since the survey began in July 1998.

In addition to the PMI data reports from Germany’s ZEW and Ifo Institutes will shed more light on the health of the bloc’s largest economy as it prepares to ease virus lockdown measures.

Euro zone finance ministers are to meet on Thursday to continue discussions about an EU fund to boost the recovery. The issue of joint European debt, or corona bonds, is likely to come up again, but the chance they will ever see the light of day remains slim.

UK data to give first real look at economic hit
The scale of the economic fallout from coronavirus pandemic in the UK is likely to be both larger, and much more rapid, than that of the Global Financial Crisis.

With that in mind, some economists expect Thursday’s retail sales figures to show a decline of around 10%, but this number could be much larger based on other spending indicators already released. PMI data is also expected to point to a steep slowdown in activity.

The week will also bring what will be closely watched updates on unemployment and inflation.





Europe Needs At Least 500 Billion Euros For Recovery

Europe will need at least another 500 billion euros from European Union institutions to finance its economic recovery after the coronavirus pandemic, on top of the agreed half-a-trillion package, the head of the euro zone bailout fund said.

In an interview with Italy’s Corriere della Sera paper, published on Sunday, European Stability Mechanism Managing Director Klaus Regling said the easiest way to organize such funds would be via the European Commission and the EU budget.

“I would say that for the second phase we need at least another 500 billion euros from the European institutions, but it could be more,” Regling told the paper.


“For that, we need to discuss new instruments with an open mind, but also use the existing institutions, because it is easier, including in particular the Commission and the EU budget. Rethinking European funds can go a long way in keeping the European Union together,” Regling said.

European Union finance ministers agreed on April 9th on safety nets for sovereigns, companies and individuals worth in total 540 billion euros.

They also agreed that the euro zone, which the IMF predicts will plunge into a 7.5% recession this year because of the pandemic, will need money to recover, but they had different ideas on how much is needed and how to raise it.

EU leaders are to discuss that at a videconference on April 23. The idea around which a compromise may emerge is likely to involve the European Commission borrowing on the market against the security of the long-term EU budget and leveraging the money to achieve a bigger effect.