Morning Minutes 4/1/2020

Morning Minutes

Stocks Slide Into April; ADP Payrolls Fall Less Than Feared

April 1, 2020

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

The majority of equity markets around the world have gone into retreat once again even though much of the economic data that has come out overnight has been less catastrophic than feared. US ADP payrolls, for example, fall by 27K last month, less than the 150K decline the street had feared. This could partly be due to the timing of this month’s employment surveys which cover pay periods that included March 12th, and may have ended before the jobless claims started to mount in late March. Tomorrow’s US weekly jobless claims and Friday’s US nonfarm payrolls may shed more light on the employment situation.

Manufacturing PMI reports have also been coming out from around the world. The privately collected China Caixin Manufacturing PMI rebounded to 50.1 from 40.3 in February, beating the 46.0 street estimate. Recall that the government issued Chinese Manufacturing PMI report showed a rebound to 52.0 from 35.7. European manufacturing PMIs for March have dropped into the low 40s. Under 50 they are in contraction territory, but at the same time they have not been as low   as the China February numbers. Some of the survey results include: Italy (40.3 vs previous 48.7), Germany (45.4 vs previous 45.7) and UK (47.8 vs previous 48.0). Manufacturing PMI for Canada is due at 9:30 am EDT (street 53.3 vs previous 51.8), while US ISM Manufacturing PMI is due at 10:00 am EDT (street 49.2 unchanged) along with US construction spending for February (street 0.6% vs previous 1.8%).

Investors remain spooked by comments from US President Trump who warned yesterday of a potentially difficult two weeks ahead in the fight to contain and deal with the COVID-19 pandemic. Dow futures are currently down about 760 points or 3.5% and didn’t get much help, if any, from the positive ADP surprise. Declines in Europe vary between 2.5% for Milan to 4.4% for Paris, with Frankfurt down 4.2%.

Commodities are under pressure again this morning. WTI crude oil is down 1.1% testing $20.00/bbl again, while Brent Crude is down 4.1% trading just above $25.00/bbl. Copper is down 2.75%. Today the old supply OPEC+ supply curbs come off allowing countries to produce more into a declining demand environment. US weekly DOE oil inventories are due at 10:30 am EDT with the street expecting a 3.9 mmbbl build.

Bond prices are rising again today with the US 10-year treasury falling toward 0.65% again. The US Dollar is up against other currencies including gains of 1.3% against the Loonie, 1.0% against the Euro, and 0.25% against Gold and the Pound.


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