Morning Minutes 3/31/2020

Morning Minutes

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March 31, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Some of the biggest questions overhanging world markets of late have included: How long could the coronavirus last? How deep could a slowdown be? Can economies recover from this, and if so, can we expect a quick rebound or a long, drawn out recovery? It could still be a while before the answers to these questions become clear, but the monthly Purchasing Managers Survey (PMI) results for China have given an early indication.

Asia Pacific stock markets rebounded last night after Chinese PMI reports returned to expansion territory in March bouncing back quickly from a steep contraction in February. China Manufacturing PMI for March of 52.0 beat the 45.0 street estimate and was up from 35.7 in February. China Non-Manufacturing PMI for March of 52.3 beat the 37.8 street estimate and was up from 29.6 in February.

This news sparked gains of 1.9% for Hong Kong, 2.2% for Seoul and 0.1% for Shanghai. Commodities also rebounded on this news with WTI crude oil rallying up off of $20.00/bbl again toward $20.90, on an 3.9% gain, Brent crude climbing 2.5% and copper bouncing 1.1%.

Positive overnight momentum has faded into European and North American trading, however. Across the pond, early gains have been erased and currently Milan and Frankfurt are down about 0.9%, while London is down 0.5% and Paris is down 1.50%. US index futures have also slipped back into the red with Dow futures down 1.2% or 268 points, giving back some of yesterday’s 3.2%, 690-point gain.

Today is the last day of the calendar quarter, and also the fiscal year end for many companies in the investment industry (brokerages and asset managers), which could influence trading today. Also, investors may be looking ahead to some of the key economic numbers coming out this week. Although China may be starting to come out the other side of its coronavirus slowdown (and the jury is still out on that), North America and Europe, where the outbreaks ramped up later than China, are still in the lockdown phase and upcoming data could reflect this.

First up, the Chicago PMI report is due at 10:00 am EDT today. This is often seen by trades as a leading indicator for the national Manufacturing PMI report due tomorrow. For Chicago, the street is expecting a drop deeper into contraction territory toward 42.0 from 49.0 last month. Canada GDP for January increased by 0.1% in line with expectations but may be ignored as it reflects the pre-pandemic period.

Tomorrow morning brings Manufacturing PMI reports from around the world, and the US ADP payrolls report. For ADP the street is expecting a decline of 154K jobs for March, down from a 183K increase in February. The ADP and Nonfarm payroll surveys cover pay periods which include the 12th of the month., while there was a moderate increase in US unemployment claims for the week of March 10-14 (the main survey week), claims didn’t spike up into the millions until the week of March 17-21. Because of the timing of the surveys, we may see moderate job losses in the monthly reports coming out this week, but the really big losses may not show up until next month’s figures. At this point, it’s anyone’s guess as to what the number may be and how the markets may react to it.


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