(01 April 2020)DAILY MARKET BRIEF 1:Souring market mood despite glimmers of optimism in China.

US stock indices reversed earlier gains in New York and closed Tuesday’s session in the negative territory. The Dow fell 1.84%, as the S&P500 and Nasdaq gave back 1.60% and 0.95% on news that the number cases in New York surpassed Wuhan, signaling that the US is not out of the woods just yet.

Asian stocks kicked off the new quarter on a mixed note. Nikkei lost 1.31% as the Tankan index fell to a seven-year low of -8 in the first quarter from 0 printed previously, although the number was slightly better than the -10 expected by analysts.

Stocks in Sydney gained past 2% as the minutes from the latest Reserve Bank of Australia (RBA) policy meeting pledged that the record low rates won’t be increased until a concrete progress toward full employment and inflation back to the 2-3% range.

CSI 300 (+0.69%) and Shanghai’s Composite (+0.30%) recorded timid gains as the most recent data gave signs of stabilization in China. The Caixin manufacturing index printed 50.1 in Mach, up from a record low of 40.3 a month earlier and significantly better than the 45.5 expected by analysts.

But, even with the glimmers of optimism from China, energy and oil markets remained under a decent selling pressure. WTI crude traded a touch above the $20 a barrel, while COMEX copper was down by 1.21%. As such, oil closed the first quarter on the biggest slump on record, with 66% decline since the beginning of the year amid an unprecedented plunge in oil demand due to the coronavirus-led slowdown in activity. Today’s data should show that the US crude inventories may have risen by another 3.7 million barrels last week adding to an increasing global glut faced with an anemic demand on factory shutdowns and grounded planes.

Activity on FTSE futures (-2.59%) hints that the persistent selling pressure on oil and commodity markets should weigh on the energy-heavy blue-chip index at the open.
Due today, the March final PMI figures across Europe and America should only confirm the sharpest declines in manufacturing and services sectors on record. And investors know that with the confinement measures being extended in time and space, the March figures will certainly not be a bottom.
In the US, the ADP report should show a meaningful fall in new private jobs in March. A consensus of market expectation hint that the US economy may have lost 150’000 private jobs last month, versus +180’000 printed a month earlier. Tomorrow’s weekly jobless claims may print a 3.5-million rise in claims, versus 3.283 million printed a week earlier and Friday’s non-farm payrolls data is expected to reveal 100’000 nonfarm job losses in March. It is possible that the market expectations haven’t adjusted to a rapidly evolving situation across the United States. Therefore, we believe that there is room for a decent disappointment in this week’s US jobs figures.

Soft economic figures should weigh on the market mood, and turn the investor attention to US Congress, which, after having signed a historical $2-trillion rescue package last week, would be demanded to move quicker on the $600-billion additional aid that it is being discussed at the moment. With the situation deteriorating in the US, investors will fiercely pursue any dime that could be injected in the market, whether it comes from the fiscal or the monetary channel.

By Ipek Ozkardeskaya