Eyes on US NFPs after tragic jobless claims data. UK’s services PMI could be revised lower.
The US jobless claims shot up by 6.6 million last week, as businesses stopped due to the coronavirus shutdowns leaving millions of Americans seeking for benefits. This was the double of last week’s claims and this week’s expectations.
As predicted, the US dollar gained following the largest jump in US jobless claims on record; the Dow and the S&P500 ended a volatile session up by 2%. Nasdaq gained 1.72%.
Energy stocks (+9%) led gains in New York, as oil soared 35% after Donald Trump twitted that he expects Saudi and Russia to curb production by as much as 15 million barrels to halt the meltdown in oil. His tweet didn’t mention if this amount would be per day, or over an extended period. And given the very significant number, we wouldn’t be surprised to see investors disappointed by a much smaller action, if there is any in the first place.
Good news is Saudi actually called an emergency OPEC+ meeting with Russia. Even though Saudi is gaining market share, the shrinking size of the overall pie will certainly encourage the world’s cheapest oil producer to strike a lower-production deal to improve the global oil prices, hence its revenues. Having seen the dramatic consequence of its last month veto, Russia has interest to agree on a cut as well. And the intervention should be at least near 5-mio bpd to match at least the slump in demand due to halted transports and grounded planes worldwide.
From the market perspective, WTI crude met solid offers at $28 a barrel and settled near the $25 following yesterday’s short squeeze. Expectation of an OPEC+ agreement could keep the downside supported near the $22 level. Investors are waiting in ambush to hop on the next bullish wave. Hence, any positive news, or speculation is enough to trigger another swing to the upside, but $28/30 offers will be hard to clear as long as the world remains swamped with coronavirus news and related shutdowns.
The Asian session didn’t pay heed to Mr. Trump’s tweet. Stocks in Tokyo, Shanghai, Hong Kong and Sydney traded in the red, as all three US majors were pulled lower. The Caixin services PMI confirmed a slower contraction in the Chinese activity, but the number also illustrated that life in China has certainly not gotten to a normal pace juts yet, with the manufacturing being an exception to this.
Trading in FTSE futures (-0.67%) hint at a soft start to Friday’s session. Energy stocks will likely give back a part of Thursday’s gains on the back of a 5% retrace in oil prices.
Meanwhile, gold is doing its own thing. Fairly detached from what’s happening in other asset classes, the precious metal swings up and down. Gold’s yesterday surge to $1610 could be explained by poor economic data, but again, the surge in risk assets point that the gold market is moving on a complete different dynamic.
In the currency markets, the US dollar defines the overall direction for all. And the greenback remains strong as the risk-off behaviour reigns.
Due today, the US nonfarm payrolls are expected to unveil 100’000 job losses in March. But looking at the devastating jobless claims figures, it is possible we see significantly worse figures. As we mentioned in our earlier reports, the US dollar should not fall from grace with bad US data, in contrary, as investors have no safer place to flee. Hence, we may see a reversed relationship between data and the USD appetite. A better data would be more efficient in softening the US dollar before the weekly closing bell.
The EURUSD heads toward the 1.08 on the back of a strengthening US dollar. The final PMI figures should hide no surprise for euro traders this morning, other than confirming the sharpest fall on record. The NFP read could however shake the EURUSD later in the session. Any disappointment could increase the safe haven outflows toward the USD and pull the pair below the 1.08 mark. A better-than-expected data, on the other hand, could encourage a recovery toward the 1.10 resistance.
Across the Channel, Cable treads water a touch below the 1.24 mark. The services PMI figure in the UK could be revised lower to 34.7 from 35.7 printed earlier, given that the announcement of the British lockdown came just after the release of the latest PMI figure. Provided that up to 80% of the British economy is made up by services, inevitable weakness in services data could weigh on the pound.