Morning Minutes 4/2/2020

Morning Minutes

US Jobless Claims Soar, Oil Bounces Back

April 2, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

World markets stabilized overnight and have started to claw back some of yesterday’s losses in another sign of bulls bending but not breaking. Asia Pacific markets were mixed with Soeul gaining 2.3%, Shanghai rising 1.7% but Tokyo losing 1.4%. European markets have been more broadly moving higher led by a 1.3% gain for Milan while Frankfurt is up 0.4%.

The big overnight move has been a 10% gain in the price of oil after US President Trump commented on the potential for a truce in the coming days in the Russia-Saudi Arabia price/production/market share war in the face of falling demand. It’s important to recognize that oil is bouncing off a very low level and that a 10% gain for WTI is based on a move from $20.00 to $22.00 so it still remains at a very depressed level relative to where it was in 2019 or even earlier this year. Investors may also keep an eye on the potential for lower US production in future after Whiting Petroleum became the first US shale producer to file for bankruptcy protection yesterday.

Trading in US index futures has been choppy this morning around the US weekly jobless claims report which showed a spike of 6.6 million claims last week, up from a 3.2 million increase in claims the week before. This was higher than the 3.5 million street estimate but in line with unofficial “whisper” estimates/guesses. Continuing claims of 3.0 million were lower than the 4.8 million the street had been expecting. This spike of 9.8 million claims in two weeks is likely what politicians and central bankers have been rushing to get in front of with their and monetary support packages, its unclear at this point whether they have done enough.

Dow futures had been trading higher overnight then dropped from near 21,300 toward 20,900 around the employment news and are currently trading near 20,950, still up about 200 points or 1.0% from yesterday. S&P and NASDAQ futures are up about 0.9%. So far the market damage from this has been relatively contained suggesting that a big spike in claims had already been priced in by yesterday’s 4.4% selloff in US markets that saw the Dow lose 975 points.

There is still more potentially significant economic news to come this week. Service PMI reports from around the world are due tomorrow and may potentially have a higher impact than usual because non-manufacturing sectors have been hit harder initially by coronavirus closures than manufacturers. For example, when China reported its February PMI numbers, non-manufacturing dropped to 29.6, which was lower than the 35.7 low for manufacturing, before both bounced back above 50 in March.

US nonfarm payrolls are due on Friday with the street expecting a 100K decline. The smaller than expected drop in ADP payrolls suggests that the nonfarm survey may also have been done before the really big layoffs started. As such, for the next few weeks, investors may focus more on weekly jobless claims data rather then the monthly numbers.

 

New Video: Market Commentary and Portfolio Update – April 1, 2020

With Jeremy Fehr – Founder and CEO, and Ted Bader – President of SIA Wealth Management

Click Here to watch a new webinar of Jeremy Fehr, founder of SIACharts and SIA Wealth, discussing current trends in world markets, and the impact going forward. SIA Wealth President Ted Bader discusses investment strategies related to the portfolios that SIA Wealth Management sub-advises for BMO Global Asset Management. A PDF version of the presentation is available.

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