Month: April 2020

Crude oil prices skyrocketed by 25% on Thursday, for their largest one-day percentage gain on record. The rally was triggered after a tweet from U.S. President Donald Trump saying that he spoke to Russian and Saudi Arabian leaders and expects them to announce an oil production cut of 10 million barrels per day. However, the oil rally had faded, and prices retraced by 5% this morning after both countries denied any talks or cut agreement.

Coronavirus Update:

Global cases: More than 1,011,000.
Global deaths: At least 52,800.
Top 5 countries: United States (242,182), Italy (115,242), Spain (112,065), Germany (84,788), and China (82,432).

Market Reaction:

Crude Oil:

Crude oil prices surged by 25% after Trump’s intervention in the energy market combined with the reports that China will start buying crude oil for its emergency reserves.

The WTI oil contract finished the historic day at $25.32 per barrel, posting its largest single-day percentage gain in record, while Brent price closed at 29.14.

The oil price rally triggered after Trump told CNBC’s Joe Kernen on Thursday that he spoke to the Russian President Putin and Saudi Crown Prince Bin Salman on Thursday and expects them to announce an oil production cut of 10 million barrels and could be up to 15 million. However, Trump didn’t make any reference to the time frame of the cuts and how would be distributed across the oil-producing countries.

Furthermore, Saudi Arabia called for an “urgent” meeting between OPEC and its allies led by Russia with aim of reaching a fair agreement to restore the desired balance of oil markets.

The saddened oil price spike rally faded during the overnight trading, with both oil contract falling by 5%, as energy traders questioned whether a cut of the magnitude Trump is suggesting was even plausible, especially if the U.S. doesn’t participate. The administration would not, in fact, ask domestic producers to cut production, according to a Reuters report.

OPEC countries led by Saudi Arabia proposed last month a production cut of 1.5 million barrels per day as demand waned. However, OPEC ally Russia rejected the cut, sparking a price war between the two powerhouse producers. The production cuts that were previously in place expired on March 31^st. On Wednesday, Saudi Arabia ramped up its production to more than 12 billion barrels per day.

Equities:

The US stock markets surged by 2% on Thursday supported from the massive rally in the energy and financial sectors. The Dow Jones index closed higher by 2.2%, at 21,413 while the S&P 500 and Nasdaq finished also the day up by 2.3% and 1.7%. Major energy stocks such as Chevron, Exxon Mobil and Conoco Phillips rallied by more than 10%, while leading financial company’s shares rose to 4% on relief for their huge exposure in energy loans.

Meanwhile, the Dow index dropped to intraday lows of 20.600 earlier in the session, just after the announcement from the US Labour Department reporting more than 6.6 million people filed for unemployment benefits in the week of March 27, as coronavirus-related shutdowns roll through the country.

However, the US futures and Asian markets were trading lower by 1% this morning as investors worried for the huge increase by 6.6 million in the US jobless claims last week due to coronavirus lockdowns. The Dow futures indicating an opening near 21.100 level, or down by 1.30%.

NFP report:

The Non-Farm Payrolls report for March is expected to be released later today. The economists expect a large decline of 100k in nonfarm payrolls, down from February when the US added 273,000 jobs. If the numbers do come in negative, it will be the first time that jobs have contracted since 2010, ending nearly a decade of labour market expansion.

That would boost the unemployment rate to 3.8% from 3.5% a month earlier due to the impact of pandemic in the US labour market. Still, the March report won’t be a complete picture of the full impact that the coronavirus pandemic has had on the US job market, as the report will include payroll data only through the week ending March 14.

Safe Havens:

Precious metals and US Treasuries extended their gains during Thursday’s session receiving safety flows on higher US jobless claims and pandemic concerns.

Gold price gained almost 2%, climbing near $1.615/oz while Silver gained 4% to $14.50/oz. The US 10-year Treasury yields fell near 0.585 while the yield on the 30-year Treasury bond was down at 1.24%

Forex Market:

The US dollar was the strongest currency across the board yesterday receiving support from pandemic concerns and from the higher oil prices since the US is the largest energy producer in the world. The DXY dollar index managed to break above 100 key resistance level, extending its weekly gains, while the USD/JPY bounced up to 108 resistance level.

The EUR/USD pair hit weekly low of 1.0850 on weaker EU economic data combined with the rising pandemic-related fatality figures in Italy and Spain.

However, the extraordinary surge in the crude oil prices has help the commodity related currencies to bounce off their weekly lows. The Australian and Canadian dollars gained more than 0.5% against Japanese Yen, while the Norwegian Crone extended its recent rally.

Economic Calendar for April 3, 2020 (GMT+ 3:00):

Crude oil prices jumped by 8% on Thursday after US President Donald Trump had talked with leaders of Russia and Saudi Arabia to end their oil price war and save the energy sector from collapse. In addition, the oil prices spiked after reports saying the Chinese government is moving forward with plans to buy crude oil for its emergency reserves. The crude oil prices lost 65% this year on lower petroleum demand from pandemic-related lockdowns and oversupply conditions.

Coronavirus Update:

Global cases: More than 932,600
Global deaths: At least 46,809
Top 5 countries: United States (213,372), Italy (110,574), Spain (104,118), China (82,361), and Germany (77,872).

Market Reaction:

Crude Oil:

The WTI and Brent crude prices rallied by 8% at $22.50 and $27.60 per barrel respectively on Thursday’s European session.

The oil prices showed resilience holding the 18-year lows despite the huge increase in the U.S. crude inventories during US afternoon session. The EIA- U.S. Energy Information Administration reported an increase in the crude inventories by 13.8 million barrels in the week to March 27 to 469.2 million barrels. The figure was the biggest one-week rise since 2016, as the US refineries curb output on lower gasoline and jet fuel demand amid pandemic lockdowns.

Equity Markets:

The US stock markets plunged by 4% on Wednesday as the Manufacturing index fell to 49 in March, signalling a contraction in the U.S. industrial activity during the pandemic. The Dow Jones index closed with 4.44% losses, at 20,943 while the S&P 500 and Nasdaq slid 4.41% to 2,470 and 7,360. The shares of major companies such as stock Apple, Google, JP Morgan and Wells Fargo had more than 5% losses.

However, the US futures were moving higher by 1% this morning on improved sentiment. The Dow futures indicating an opening near 21.200 or 1.2% gains.

The Asian-Pacific markets finished with profits on Thursday morning, following the gains in the US overnight trading and higher commodity prices. The Australian and Korean indices rose by 2% while the Hang Seng followed with 1% gains. The only exemption was the Nikkei index which closed with 1.5% losses.

Safe Havens:

Safe havens Gold and US Treasuries traded higher yesterday due to the stock market sell-off and the weaker economic activity in US and Eurozone. The fast spreading of pandemic in major economies such as US, China and Eurozone have sent investors away from risky assets towards the safety of bullions and bonds.

The Gold price hit intraday highs of $1.600/oz yesterday before retreat to $1.590/oz level, while Silver price extended the gains trading near $14/oz. The yield on the benchmark 10-year Treasury note, dropped below 0.60%, while the yield on the 30-year Treasury bond was pricing near 1.20%.

Forex Market:

The US dollar and Japanese Yen were the strongest currencies across the board during Wednesday session supported from safety bids and the huge losses in the global stock markets. The DXY-dollar index retested the 100 key resistance level yesterday, the USD/JPY pair traded on range between 107-108, while EUR/USD dropped to as low as 1.09 level.

However, the commodities currencies Aussie and Kiwi dollars rebounded this morning following the gains in Asian markets and crude oil prices. The crude oil-related currencies Canadian dollar, Russian Rouble and Norwegian Crone gained more than 0.50% against US dollar.

Economic Calendar for April 2, 2020 (GMT+ 3:00):

The global financial markets fell by more than 1% on Tuesday, ending their worst first quarter on record driven by the pandemic-related sell-off. The unexpected spread of the coronavirus has caused a global health crisis, forcing countries to lock down and placing massive restrictions on the daily lives of millions of people. Therefore, the unprecedented social distancing measures have caused a global economic shock, sending the financial and energy markets to multi-year lows.

Coronavirus Update:

Global cases: More than 856,900
Global deaths: At least 42,081
Top 5 countries: United States (187,919), Italy (105,792), Spain (95,923), China (82,278), and Germany (71,808).

Market Reaction:

The Dow Jones index fell by 1.8% on Tuesday, the S&P 500 ended with 1.6% in losses while the Nasdaq finished the day with only 1% in loss. The three major indices ended March with more than 12% in losses, for their worst one-month declines since the 2008 financial crisis.

In addition, the Dow Jones index posted its worst first-quarter performance ever, losing more than 23% of its value in the first three months of 2020. The S&P 500 fell 20% in the first quarter, to its biggest quarterly loss since 2008, while Nasdaq fell more than 14% in the same period.

The U.S. stock futures extended last night’s losses by falling 3% in the European session, where the Dow futures indicated an opening near 21.200 points. Investors were reacting to the dramatic outbreak of the pandemic in New York state. Overall, the infection cases in the US have reached 180.000 with about 3.500 virus deaths so far. Asian-Pacific stock markets followed the losses of US futures. Nikkei index fell by 5%, while Kospi and Chinese indices lost 3%.

Crude Oil:

Crude oil has registered its worst quarterly performance on record, losing nearly 65% of its value as the pandemic evaporated the global demand for crude oil. The WTI and Brent prices ended March with 50% losses, closing at their lowest level since 2002 as the pandemic impact on the global economies was very negative for crude oil prices.

WTI and Brent crude price traded near multi-year lows of $20 and $25 per barrel on Wednesday morning following the risk-off market sentiment.

The OPEC+ production cut deal of 2.1 million barrels per day expired last night. Therefore, the OPEC members and non-OPEC oil producing countries could ramp up their oil production, flooding the market with unnecessary extra millions of barrels of oil.

Precious Metals:

Gold prices plunged by 3% on Tuesday, moving below the key support level of $1.600 per ounce. The sell-off in gold was intensified after reports that the Russian Central Bank might move from big buyer to possible seller of bullion.

Forex Market:

The US dollar managed to recover this week some of its recent steep losses against major currencies. The EUR/USD pair trades near 1.10 key support level, while the USD/JPY is pricing just below 108.

The DXY-dollar index rebounded from last Friday’s lows of 98.20 towards intraday highs of 100 yesterday. However, it failed to extend the gains, retreating to 99.15 as the Federal Reserve had ensured to provide enough dollar liquidity into the global financial system.

Economic Calendar for April 1, 2020 (GMT+ 3:00):