The Market Today
Glimmer of Hope Seen in Slower Daily Growth Rate
by Craig Dismuke, Dudley Carter
Vining Sparks Economic Forecast Revision, April 2020
We will host our 2nd Quarter Economic Outlook webinar tomorrow morning at 10:00 a.m. CT. In the webinar, we will detail how the coronavirus outbreak has affected our growth outlook and well as our expectations for interest rates. (Register here)
There is a glimmer of optimism this morning as the number of newly-reported coronavirus cases has slowed in several countries, including Italy. There have been 8,986 new cases confirmed in New York over the past 24 hours, the slowest rate of growth in four days. Globally, there have been 61,069 new cases reported, up just 5.0%. While there has been some day-over-day volatility in the reporting, the trends appear to show a potential peak in some regions.
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There are no economic reports on the calendar today.
Market Sentiment Perks Up: Markets appear more cheerful Monday despite additional evidence of deep economic contraction around the world, as investors found hope in some early signs of improving virus statistics in certain key global hot spots. The gains for global equities started early in Asia and were led by a 4.2% move up in Japan’s Nikkei 225. Japan’s Prime Minister Abe said Monday his government was planning to declare a state of emergency for major regions of the country as soon as Tuesday. He also announced a record stimulus package expected to be worth nearly $1T, roughly 20% of Japan’s GDP according to Bloomberg, and released in phases before and after the virus is contained. According to data released overnight, a measure of consumer confidence in Japan sank to its lowest level since 2009 in March. Reports released in Europe on Monday were equally concerning, with U.K. consumer confidence collapsing to an 11-year low and a broader measure of overall economic confidence in the Eurozone plunging to an all-time low. Despite those drops, and similarly sharp declines in several other metrics, Europe’s Stoxx 600 was up 3% just after 7 a.m. CT.
Some Improved Virus Statistics Eases the Sting of More Dreadful Data: The upbeat market momentum persisted in the face of the dire economic data as investors looked to preliminary signs that the virus could be slowing in some key hot spots such as Italy and Spain. While the economic data reflects what has already happened, or in some cases what is happening at the moment, investors tend to make decisions based on what is expected to happen in the future. With that forward-looking mindset, signs that the virus could be slowing in Italy and Spain gives some encouragement that a peak in cases could be on the horizon and may allow some of the stringent containment measures around the globe to be eased in the weeks ahead. The improved investor spirit had lifted U.S. futures by more than 3.5% and pushed Treasury yields higher and steeper. The 2-year yield was up 2.4 bps to 0.25% at 7:15 a.m. and the 10-year yield had risen 4.8 bps to 0.64%. Oil prices will remain in focus after wild swings already on Monday. The commodity earlier fell more than 10% after a Monday OPEC+ meeting to discuss major cuts to production was delayed. However, prices have recovered somewhat to down 3% after a top Russian official said his country and Saudi Arabia were still close to a deal that will help limit supply.
ICYMI – April 3, 2020 Weekly Market Recap: Markets were relatively well behaved last week considering the growing list of evidence confirming the significant damage COVID-19 has done to the global economy. Global coronavirus cases crossed over the one million mark on Thursday and data from major global economies released throughout the week confirmed the economic cost has been immense. Before the week began, the White House announced it was extending its guidance to stay at home, set to expire early in the week, through April 30. Several economic reports from China showed the country where the virus began saw some recovery in March. However, smaller Asian countries, Europe, and the U.S. remain in the middle of a brutal fight to slow the virus’s spread and limit its human and economic toll. March PMI data confirmed those economies came to near standstills in recent weeks. In the U.S., the economic freeze resulted in another record number of jobless claims, 6.65MM, which took the two-week tally to nearly 10MM, exceeding the cumulative job loss experienced over roughly two years during the Great Recession. Friday’s payroll report confirmed that tragic trend began earlier than expected, with 701k jobs lost even before the spike in claims. Despite the dreary headlines, the S&P 500 slipped just 2.1% and the 10-year yield fell 8 bps to 0.59%. Oil stood out with a record gain on prospects that Saudi Arabia and Russia may soon agree to cut back on swelling global supplies. Click here to view the full recap.