Gains fading before non-farm payrolls
Asian shares dipped on Friday and markets in Europe are opening lower. Global coronavirus cases have topped one million and there is an unwillingness to hold market positions through the weekend for fear of more bad news.
We’re waiting for the data to confirm what we already know. The record one hundred-month plus stretch of jobs growth in the US has come to screeching halt. The non-farm payroll figure for March is expected to turn negative. Because the data was collected in the first half of the month, it's unlikely to capture the full damage from forced lockdowns and stay home advice. The really hideous stuff will probably show up in the April numbers.
Oil price bottom has funding secured
Oil prices surged by over 20% for the biggest daily gains ever on the possibility of a deal between Saudi Arabia and Russia. The way the US President put the news out there was unusual. It had a bit of an Musk-style “funding secured” feeling to it. One can only assume the 10 million barrel per day cut is happening, if not more for the President to announce it. It would represent a massive 10% cut to global output. The question is how much has demand dropped because the coronavirus lockdown? 50%? 10 million barrels is probably still not enough. We will need to see US producers also reduce output, however such an agreement would not be allowed under US anti-cartel rules. It’s unclear what combination of carrot and stick Trump has used with the Russians and Saudis. It’s possible we could soon see some US sanctions lifted on Russia.
Energy leads Wall Street despite layoffs
Shares finished higher on Wall Street despite huge layoffs that saw 6.6million Americans claim jobless insurance for the first time.
Large cap energy shares led a rebound in the S&P 500, not just yesterday but from the March lows. On March 23, while the S&P 500 was making new lows, the S&P 500 energy sector didn’t. The smart money has been looking for something from the United States to bring Saudi Arabia and Russia together. Severely depressed demand would suggest oil shares cannot carry stock markets that much higher. Now that we could be on the verge of a supply deal, its unclear what leads the next leg higher in the stock market rebound.
Opening Calls
FTSE to open 31 points lower at 5449
DAX to open 66 points lower at 9504
S&P 500 to open 30 points lower at 2496