It was not a good start for US equity markets as the second quarter began as grim headlines about the global economic crisis and numbers of COVID-19 cases and death tolls continue to rise. As a result, it witnessed some huge losses in US stocks resulting in the worst start to a quarter for stock-market bulls ever. The Dow Jones Industrial Average ended around 974 points lower. Stocks have fallen sharply in late February and March with Dow dropping more than 23% for its biggest first-quarter decline on record and largest quarterly fall since 1987. This morning the focus will be on jobless claims for the week ending March 28. Economists are now expecting this number to be between 4 and 5 million, increasing from the 3.2 million who submitted claims last week. The data will be released at 8:30 am, EST. The USD is trading a bit lower this morning after trading a bit higher in earlier overnight trading. USD safe-haven purchases are still out there as traders see risks from the pandemic not easing for a while. After yesterday’s fall, DOW Futures are now pointing for a higher opening later this morning of around 350 points. US Treasury yields are lower this morning, ahead of the jobless claim release. The yield on 10-year notes is lower at 0.5830% and the 30-year yield is lower at 1.2112%.
EUR/USD is trading towards the lower end of its overnight range, as virus cases continue to grow. Italy has seen its cases plateau, but France and Spain have reached new highs. Restrictions on movements have been extended in Italy and Germany, as Eurozone countries continue to argue over how to add stimulus, and the European Commission is attempting to come up with an alternative to “corona-bonds”. The present ECB stimulus package has been deemed insufficient by analysts and the continuing crisis is weighing on the European economy. Expect pressure to continue on the EUR as poor US numbers could push traders in the USD. Support levels will be tested today.
GBP/USD is trading higher this morning, near its overnight highs. US PM Boris Johnson is coming under pressure for the way the government is handling the pandemic. The death toll in the UK rose above 2,300. Criticism over the “delayed” lockdown has risen as has negative comments over the way the National Health Service is handling the viral outbreak. The GBP seems to be reacting to the US equity markets and if the “positive” mood seen early this morning in US equity reverses after the jobless claim announcement, the GBP will be under renewed pressure.
USD/JPY trading off overnight lows, but no real follow-through here is expected. Early morning positive US equity futures are currently weighing on the safe-haven status of the JPY. Technicians point towards the USD/JPY heading lower. Japan’s monetary base rose 2.8% year-on-year in March, which was lower than the expected number of 3.7% year-on-year. Japan’s economy is feeling the effect of the virus and as their economy weakens, the safe-haven aspect of JPY may not last long.
USD/CAD also trading mid-range bouncing off support levels reached earlier in overnight trading. Pressure on the Canadian Dollar as Markit PMI showed a record downturn in Canadian manufacturing output during March, falling to 46.1 in March from 51.8 in February. As a reminder, a number below 50 indicates an economy heading towards a recession. No surprise here. Oil prices were higher overnight as Brent crude rose $2.81 to $27.55 after President Trump said he expected a deal to be reached between Russia and Saudi Arabia. West Texas Intermediate was also higher by $2.03 at $22.34.
The figures that China has released regarding the Coronavirus are now being called into question. According to a report from Bloomberg, U.S. intelligence sources are saying that the numbers released by China concerning the virus are not the true numbers and that there were more deaths than reported. This is an ongoing story that will be watched in the next few days.