Top 5 Things to Know in the Market on Wednesday, March 11th

The number of coronavirus cases in the U.S. topped 1,000 as the administration began talks with House Democrats on a bipartisan package of economic support measures. Global stocks fell after President Trump failed to deliver the package of measures he flagged on Monday, but bounced after the Bank of England announced a half-point rate cut and other measures. Joe Biden cemented his lead in the Democratic primaries and Saudi Arabia signaled it wants to ramp up oil production even more. Here’s what you need to know in financial markets on Wednesday, March 11th.

1. U.S. Coronavirus cases hit 1,000; Treasury seen extending April tax deadline

The number of confirmed coronavirus cases in the U.S. topped 1,000, according to data compiled by Johns Hopkins University. It says there have been 28 deaths and 8 complete recoveries. The U.S. Center for Disease Control and Prevention is still not publishing nationwide data.
Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have begun talks on what would be likely to be a bipartisan plan for stimulus measures. Senate Leader Mitch McConnell signaled that Senate Republicans would likely go along with whatever those two agree.
The Wall Street Journal reported that the Treasury is considering extending the April 15 deadline for filing 2019 taxes, in a move that would amount to a de facto bridging loan from the government to business and households struggling with short-term cash flow issues. It said the full details of the plan hadn’t been finalized.
The number of cases in Italy, meanwhile, passed 10,000, and continued to rise sharply in Germany, France and Spain. By contrast, South Korea followed China in reporting a sharp drop in the number of new cases. South Korea also reported a jump in new cases to 242, reversing a recent trend that had seen them drop from a peak of over 800 to below 200 within a week.

2. Bank of England announces emergency policy package

The Bank of England cut its key rate by 50 basis points to 0.25%, aiming to support an economy that is set to be hurt by fallout of the spreading coronavirus.
After an emergency meeting on Tuesday, the Bank also said it will offer a new term funding scheme with additional incentives for small and medium-sized enterprises, something it said could inject over 100 billion pounds.
In addition, the BoE will waive the existing Countercyclical Capital Buffer of 1%, aiming to avoid a credit squeeze to the real economy.
The moves came on the same day that the government is expected to announce a big increase in public borrowing in its annual budget, albeit largely unrelated to Covid-19 factors.
The pound rose to $1.2946 from $1.2937 immediately before the announcement. The 10-Year U.K. Gilt yield rose to 0.28% from 0.24%, while the FTSE 100 rose 0.4% to 5982 points.

3. Global stocks turn lower after Trump’s no-show, bounce after BoE action

U.S. stock markets are set to open lower, after President Donald Trump failed to present the package of policy measures that he had flagged on Monday, reviving fears that the coronavirus will have a major impact on the U.S. economy. Trump repeated to reporters that the strength of domestic consumption was likely to minimize the virus’ impact on the economy.
By 6:20 AM ET (1020 GMT), Dow 30 futures were down 440 points or 1.8%, while the S&P 500 Futures contract was down 2.0% and the Nasdaq 100 was down 1.9%. That was still up clearly from overnight lows.
All three indices had risen nearly 5% on Tuesday in anticipation of the administration’s measures.
Overnight, China’s CSI 300 index had fallen 1.8% and Japan’s Nikkei had fallen 2.3%. However, Europe’s markets rose after the Bank of England’s announcement, which strengthened expectations of further action from the European Central Bank on Thursday.
The European Commission had signaled on Tuesday after a call with government leaders that it would temporarily relax state aid policy and push member states to speed up spending of EU budget funds. ECB President Lagarde warned on the same call that Europe faced a 2008-style crisis if governments don’t step in to support the economy.

4. Biden consolidates lead in primaries

Former Vice President Joe Biden won the primaries in Michigan, Idaho, Missouri and Mississippi by a convincing margin, giving him what could be a decisive lead in the race for the Democratic Party’s presidential nomination.
His rival Bernie Sanders took North Dakota and had a slender lead in Washington state with 70% of votes counted. However, he now trails Biden by 160 in the tally of pledged delegates.
The results put pressure on Sanders to concede defeat and bring the campaign to an early close. Sanders didn’t make a public statement after the results.

5. Saudi Arabia prepares to ramp up output even more

Saudi Arabia ratcheted up the oil price war that broke out at the weekend. National oil company Aramco (SE:2222) said it had received instructions to increase its maximum sustainable capacity to 13 million barrels a day, up from 12 million currently. The current ceiling has never been tested in earnest.
The move comes only a day after Aramco said it would sell over 12.3 million b/d in April, up some 2.5 million b/d from what it was producing under the previous output restraint deal between OPEC and Russia.
The company didn’t say how long it would take to reach this new level of capacity.
U.S. crude futures turned lower on the news. By 6:25 AM ET, they were at $33.27 a barrel, down 3.2% on the day. Brent crude was at $36.05 a barrel, down 3.1%.
The U.S. government’s inventory data are due at 10:30 AM ET, while OPEC is due to release its monthly report at some time during the day.
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08.07.2020 15:14
Forex — Dollar Edges Higher as Virus Cases Grow

The dollar edged higher in early European trade Wednesday, with the safe haven currency in demand as a resurgence of the coronavirus in the United States cast doubt over the strength of the economic rebound.

At 3:050 AM ET (0705 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 96.873.

EUR/USD was up 0.2% at 1.1280, while USD/JPY was flat at 107.52.

There are almost 11.8 million COVID-19 cases globally as of July 8, according to Johns Hopkins University data, of which the U.S. has the highest known numbers of cases and deaths in the world.

A number of Federal Reserve officials expressed concern Tuesday that the surge in infections could adversely impact the economy just as some stimulus programmes are set to expire.

Atlanta Federal Reserve Bank President Raphael Bostic warned that the spike in the number of cases has made business owners “nervous again” and that ‘there is a real sense this might go on longer than we have planned for.”

Still, the rise in cases is not simply a matter for America. The AUD/USD pair lost 0.2% to 0.6935, with the Australian dollar weakening after the country’s second-largest city Melbourne re-imposed lockdown measures to curb the outbreak.

Elsewhere, GBP/USD gained 0.2% to 1.2559 after Prime Minister Boris Johnson said that the U.K. remains committed to working hard to find an agreement over trade with the EU. Chancellor of the Exchequer Rishi Sunak is due to announce details of the country’s latest fiscal stimulus package later Wednesday.

Sterling has gained around 0.6% this week against the dollar and 0.4% against the euro, but still remains one of the weakest G7 currencies as doubts still remain as to whether a trade deal will be signed by the end of the year.

Additionally, skepticism exists that a proposal by some of Donald Trump’s advisers to undermine Hong Kong’s currency peg would come to fruition, as such a move would be difficult to implement and risk hurting U.S. interests as much as it would punish China.

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08.07.2020 13:12
Risk aversion sends gold higher, oil downwards

Oil retreats slightly on risk aversion
With one eye on the equity markets overnight, oil markets mirrored the response of currency markets, giving up some of their recent gains and slipping into range trading mode. Brent crude fell slightly by 0.70% to 42.90 a barrel. WTI eased by 0.70% to USD 40.50 a barrel.
Both contracts are unchanged this morning in Asia, with critical resistance on Brent crude at USD 44.00 a barrel, and on WTI at USD 42.00 a barrel. Only a fall below USD 40.00 a barrel for Brent crude, or USD 37.00 a barrel for WTI, would suggest that the rally in oil prices has run its course.
Oil prices continue to remain balanced between Covid-19 induced growth concerns, and recovery expectations in Asia and Europe. Oil’s downside is likely to be limited unless the US situation deteriorates dramatically. OPEC+ discipline is high, and the grouping will no doubt find the willingness to extend the headline cuts if the situation calls for it.

Excitement builds for gold longs as USD 1800.00 approaches
Anticipation is building in the gold fraternity, with Covid-19 concerns giving a haven boost to prices overnight. Gold rose 0.60% to USD 1795.00 an ounce, having tested USD 1797.00 an ounce earlier in the session. Gold’s grind higher is remorseless and pleasingly, appears to have detached itself from negative equity price action for now.
The USD 1800.00 an ounce region will be a tough nut to crack though. It capped gold’s advance multiple times from 2011 to 2012. I do not doubt that there will be substantial option related offers ahead of it to defend USD 1800.00 strikes. Nevertheless, gold is girding itself for the long-awaited assault on this critical resistance level. Gold had support at USD 1775.00 an ounce. Only a daily close below here would delay proceedings. Should USD 1800.00 an ounce give way, gold is likely to move quickly to the USD 1820-1830 zone, driven by stop loss and algorithmic buying.
Gold is unchanged in Asia today in yet another moribund session. It will probably be left to the New York market to get the job done.

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07.07.2020 12:23
Oil prices fall on demand concerns from U.S. coronavirus case surge

Oil prices fell on Tuesday, erasing earlier gains, on concerns that the surge in coronavirus cases in the United States, the world’s biggest oil user, will limit a recovery in fuel demand.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures fell 17 cents, or 0.4%, to $40.46 a barrel at 0340 GMT, after earlier rising to as high as $40.79.

Brent crude (LCOc1) futures declined by 19 cents, or 0.4%, to $42.91, after hitting an intraday high of $43.19.

With 16 U.S. states reporting record increases in new COVID-19 case in the first five days of July, according to a Reuters tally, there is mounting concern that public health measures to limit the virus spread will curb fuel demand.

Florida is re-introducing some limits on economic reopenings to grapple with rising cases. California and Texas, two of the most populous and economically crucial U.S. states, are also reporting high infection rates as a percentage of diagnostic tests conducted over the past week.

«The potential for demand destruction as lockdown re-instatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices,» said CMC Markets’s Chief Market Strategist Michael McCarthy in Sydney in an email.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, collectively known as OPEC+, are lowering output by 9.7 million barrels per day (bpd) for a third month in July.

However, those cuts are set to taper to 7.7 million bpd starting next month, adding supply at the same time U.S. fuel demand, especially for gasoline, remains impacted by the COVID-19 outbreak.

«Summer driving demand in the U.S. is low, keeping gasoline demand subdued, and a reintroduction of lockdowns is a major headwind,» ANZ said in a note.

Data from the American Petroleum Institute industry group later on Tuesday and the U.S. Energy Information Administration on Wednesday are expected to show a 100,000 barrel rise in gasoline stockpiles, six analysts polled by Reuters estimated.

The U.S. crude market faces some uncertainties from a court decision on Monday ordering the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to Midwest and Gulf Coast regions, over environmental concerns.

Market sources in the Bakken said the closure of the 570,000-bpd pipeline, while a thorough environmental impact statement is completed, will likely divert some oil flows to transportation by rail.

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