Archives of “April 3, 2020” day

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European equity close: Lower with Italy lagging

  
Analysis, Global Indices

Closing changes for the major European markets:

  • UK FTSE 100 -1.4%
  • German DAX -0.5%
  • French CAC -1.6%
  • Italy MIB -2.0%
Italy closed on the lows but the consolidation/wedge continues. This pattern doesn’t look like it will last for long:
Closing changes for the major European markets:
On the week:
  • UK FTSE 100 -1.8%
  • German DAX -1.1%
  • French CAC -4.6%
  • Italy MIB -2.0%
European stocks held up ok but tack on the 3% decline in the euro and it’s not pretty.

IEA says 10 mbpd cut not enough, RIA says OPEC meeting next week may not happen

  
Analysis, Crude

Some negative oil headlines cross

Two headlines have helped to sap some strength from the oil market:
  • IEA says an OPEC+ cut of 10 million barrels per day is not enough to stabilize the oil market
  • Even with the cut they see a potential 15 mbpd build in supplies
  • They urged all countries to fill up strategic reserves
Meanwhile Russian news agency RIA, citing an unidentified person said the April 6 meeting may not happen if the sides aren’t ready.
A key cog is the US and the Texas Railroad Commission is meeting April 14 so they can’t even really come to the table until then.

WTI breaks $28 in the second day of big gains as the crude market embraces socialism

  
Analysis, Crude

Crude oil up more than 10% today

Crude oil up more than 10% today
WTI crude oil broke yesterday’s spike high and ran to the best levels of the day after Russia said it was ready for oil output cuts if the US and Saudi Arabia also join in.
WTI is up $2.62 to $27.98 after hitting $28.56 at the highs.
I’m starting to think we need to tag $30 before it all falls apart again.
The headline that didn’t get enough attention yesterday was from Exxon who said they’re not seeking state intervention in energy markets. They said the free market was the best way of resolving oil imbalances.
They have a meeting with Trump today and I expect them to tell him the same thing. Exxon alone producers 3.833 million barrels per day. They were downgraded from AAA to Aa1 by Moody’s yesterday but they still have a great balance sheet.
It’s in their best interests to kill small and medium US producers and pick up their assets for pennies on the dollar. That’s brutal but it’s capitalism.

The dollar is whipping around in relatively modest ranges after the much weaker jobs report

  
  Analysis

EURUSD, GBPUSD, USDCHF trade to new USD high levels, but bouncing again. USDJPY fell

The dollar dollar is whipping around and a relatively modest range after the -701K job declines.
The EURUSD moved up to over 1.0800 initially (high reached 1.0805) after the report, then fell back down to a new session low to around 1.0775 before rebounding back again toward the 1.0800 level.
The USDJPY fell below its 200 day moving average at 108.298 on its way to a low price of 108.227. The selling could not be sustained and the price rebounded back above the 200 day moving average. Typically a week report like this would send the USDJPY reeling to the downside, but the price action is modest. The high through the volatile price action reached 108.55 so far.
The GBPUSD – like the EURUSD – initially move higher than moved lower to a new session low at 1.2251. The price has since rebounded to a post employment high of 1.22935.  We currently trade at 1.2285.
The USDCHF had a similar price reaction to the EURUSD and GBPUSD. It too snapped back from a brief decline, to a new session high for the day at 0.97824.  The USDCHF is moving away from its 100 day moving average down at 0.97380 today. That is a risk level for longs/buyers now.

In other markets treasury yields are still lower but not moving dramatically:

  • 2 year 0.228%, unchanged
  • 5 year 0.373%, -0 point basis points
  • 10 year 0.585%, -1.1 basis points
  • 30 year 1.224%, -1.6 basis points
US stocks fell and have since rebounded. They area still lower with the S&P down -6 points. The NASDAQ index down -20 points, and the Dow down -86 points
WTI crude oil futures are still higher with gains of $2.60 or 10.23% at $27.92.

Russian producers ready for oil output cuts if US and Saudi also join in – report

  
  Analysis

Bloomberg reports, citing five people familiar with the matter

The report says that Russia is ready to agree to oil output cuts together with Saudi Arabia and other major producers in a bid to try and halt the decline in oil prices.
The sources cited say that Russian producers are ready for coordinated action, although key oil executives in the country will be having a meeting with president Putin later today.
Again, the key thing here is to see all other producers contribute to this pact. However, the big question mark will hang over Trump and the US in that regard.
He doesn’t really have a way to call for shale producers to cut their production so it is either he magically pulls a rabbit out of his hat on that front or he chooses to remove sanctions against Russia in exchange for them coming to the negotiating table next Monday.

OPEC+ delegate said to see a global output cut of 10 mil bpd as a realistic goal

  
Analysis, Crude

Bloomberg with the headlines, citing an OPEC+ delegate on the matter

OPEC
  • OPEC+ wants global oil producers meeting as soon as possible
  • OPEC+ encouraging other producers to join the meeting
The only thing we know for sure is that the virtual meeting is almost certainly going to take place next Monday. There are not much details of who will be participating, not even Russia at this stage let alone other producers such as the US, Canada or even Mexico.
There have been many whispers doing the rounds on what propositions they may be discussing but the range seems to be from around 6 mil bpd to 10 mil bpd worth of cuts – depending on who you ask that is.
Saudi sources are leaning towards being more conservative but other reports so far are suggesting a bigger chunk of output cuts that is to be discussed.
Meanwhile, Russia is also said to be only willing to join if the US contributes. So, make what you will of that speculative information.
For now, all this huffing and puffing is underpinning oil prices as we see oil turn around a 4% loss in Asia Pacific trading to a 4% gain now – rising from $23.70 to $26.40.

Malaysia cuts its GDP forecast range to -2 to +0.5%

  
Analysis, Economy

Central Bank of Malaya (Bank Negara Tanah Melayu)

  • says 2020 headline inflation to average between -1.5% and 0.5% (0.7% in 2019)
  • 2020 GDP growth to be between -2% and 0.5% amid coronavirus outbreak, low oil prices (2019 pace was 4.3%)
  • says it could utilise policy levers as appropriate to cushion impact of economic downturn
  • monetary policy considerations remain guided by evolving downside risks to growth, price stability
  • will ensure enough liquidity in foreign exchange, bond and money markets for uninterrupted financial intermediation
  • will work to avoid excessive volatility in exchange rate
  • economy expected to normalise in 2021 in line with projected global recovery

Malaysia has been very quick with a fiscal response, circa 10% of GDP.

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