Morning Minutes 4/7/2020

Morning Minutes

Stocks and Gold Rally For a Second Straight Day; Exxon Cuts Costs

April 7, 2020

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

Positive momentum coming out of Monday’s world market rally has continued overnight and into this morning. Signs that the growth of coronavirus cases may be peaking in North America and likely has peaked in several European countries has been helping to ease investor fears.

US index futures are up 2.5% to 3.4% this morning led by a 750-point advance for Dow futures as they look to build on yesterday’s 1,627-point, 7.75% rally.  Major European markets are also in the green today with Frankfurt up 3.6%, Milan up 3.3% and London up 2.8%.

The flight of capital into US cash and bonds appears to be subsiding. The US 10-year treasury yield as moved back up toward 0.75% from 0.60% yesterday, indicating a slide in bond prices. The US Dollar is also retreating today, falling 1.0% against the Pound and Euro, 0.75% against the Loonie and 0.3% against the Yen. Gold is also benefitting from the greenback backsliding with a 0.7% move back up above $1,700/oz.

Crude oil is up again this morning with WTI advancing 1.50% toward $26.50/bbl and Brent gaining 2.2% toward $33.75/bbl. Investors continue to anticipate a production deal between OPEC and Russia, possibly as soon as Thursday. There have been rumblings about the US potentially getting involved in a deal, but regardless of whether the country officially signs on or not, US companies may be forced to deal with low prices by cutting production on their own. This morning, for example, Exxon Mobil has announced a 15% cut to operating expenses and a 30% cut to its 2020 capital spending program to $23B which is deeper than the cut to $29B the street had been expecting. We could see more cuts in the coming days and weeks with the shale sector looking particularly vulnerable following the Exxon news and last week’s bankruptcy announcement from Whiting Petroleum.

 

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