Equities in the New York gained another 3% on Wednesday with the Federal Reserve (Fed) meeting minutes showing that the bank is ready for a ‘forceful response’ amid ‘all participants viewed the near-term US economic outlook as having deteriorated sharply in recent weeks and having become profoundly uncertain’. The Fed, that has extended its monetary support to unprecedented levels for bond and credit markets, may pull out more of its magic hat such as additional measures to support the credit flow to households and small businesses. Meanwhile news of more job cuts creep in. This time, Japanese large carmakers said they consider stopping paying thousands of people employed by temporary agencies, which should add up to the skyrocketing jobless numbers in April. Today’s US jobless claims data could confirm a rise of above 5 million last week, following an almost 10 million increase over the past two weeks. Else, the University of Michigan’s is expected to fall to 75 in April, from 89. 1 printed a month ago.
Given the fast deteriorating economic tissue, there are talks in the US and Europe for start releasing some containment measures despite an unexpected rise in the number of new cases following a decline earlier this week. The broad lockdown is taking a heavy toll on economies and lead to heated conversations among policymakers who seem increasingly impatient to see the economic activity getting back to a normal pace. Alas, the time will show if releasing containment measures too early is the right decision, with the risk of prolonging the pandemic and its economic impact in time and in space.
According to a top German research institute, the German economy may slow by a record 9.8% in the second quarter and Europe’s growth engine could print a 4.2% contraction this year. The sputtering German economy will certainly weigh on the entire European sentiment, but there is not much governments can do other than loosening their purses’ strings. The European Central Bank (ECB) will continue giving its full support to the market by massive government debt purchases. So, in the short run, all seems settled from a market point of view, but higher government spending will end up being a serious headache among the EU nations in the medium to long run. For now, the euro remains a touch below the 1.09 mark. Due today, the Italian industrial production data could confirm a 1.7% m-o-m contraction in February and cap the single currency’s upside potential sub-1.10.
Across the Channel, pound traders will be watching a series of important economic data before leaving for Easter break. The manufacturing and industrial production may show a slight improvement in February, as a result of an economic improvement at the start of the year. The GDP may have improved to 0.1% m-o-m from 0.0% printed a month earlier. But investors know that the data will show a drastic downturn in March, and the numbers will likely get worse in April, before starting to get better toward the end of the second quarter. Hence, an encouraging data set could hardly improve the investor appetite. The sentiment in British stock markets will likely depend on the outcome of the OPEC+ meeting – which could potentially be a historical cut in joint production, and the market’s reaction to the decision.
Activity in FTSE futures (+0.95%) suggest some optimism at the open, but this could change rapidly.
Pricing in the oil markets suggest that a cut of 10 to 15 million barrel per day may not satiate investors’ hunger and fail to trigger the desired sustainable recovery in oil prices. WTI crude hovers around the $25 a barrel, slightly better bid relative to recent days. But if today’s decision cannot create the spark that oil producers wish for, then we can see the price of a barrel retreat back to the $20 level in the coming sessions. Intermediate support is eyed at $23 bp.
