(03 April 2020)DAILY MARKET BRIEF 1:Eyes on US NFPs after tragic jobless claims data.

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.

By Ipek Ozkardeskaya