Optimism and more stimulus plans drives markets higher
Thu, 09 Apr 04:29 PM EST/09:29 PM GMT
Animal spirits were reanimated this week leading to the largest weekly percentage gains for US stocks since the 1970s. Underlying sentiment was buoyed by the fact that coronavirus infection curves continued to signal that stringent government lockdown measures have started to gain traction in slowing the spread. Investors were further heartened by a resurgence in corporate bond markets. A series of high yield corporate bond offerings for some of the firms hardest hit by the Covid-19 crisis were successfully tapped by investors, albeit at significantly elevated rates. Crude prices attempted to stabilize off the recent lows on hopes OPEC+ producers could reach an agreement to cut production, paving the way for broader coordinated production cuts at Friday’s G20 energy meeting.
Thursday saw the Fed’s latest ‘shock and awe’ announcement overshadow another historically dismal weekly initial jobless claims reading of more than 6M. The US Federal Reserve and Treasury announced details of a new Main Street lending facility that could unlock more than $2T in loans. The new program includes an extraordinarily broadened range of assets that are now eligible as collateral, including CMBSs, CLOs, ETFs, and corporate debt, including high-yield. Chairman Powell emphasized yet again that there's really no limit to the Fed’s ability to lend and that the Fed will not be in a hurry to withdraw the new relief programs as the economy rebounds. Coming into the session, US stock markets were already higher by nearly 10% on the week and continued to move higher as the Fed announced the long-anticipated Main Street measure. The S&P tested the 50% retracement of the decline off February’s all-time high to the March 23rd low. The HYG high yield ETF surged 7% while sectors like mortgage servicers, retailers, and travel saw another influx of buying. Gold prices broke out to a fresh 7-year high. For the week, the S&P surged 12.1%, the DJIA rose 12.7%, and the Nasdaq climbed 10.6%.
In corporate news this week, ExxonMobil announced it would reduce its capex by 30% to $23B in order to address low oil prices and weaker demand. McDonald’s saw its SSS drop 22% in March amid the COVID-19 pandemic and also announced a cut to its capex. The return of Boeing’s 737 MAX ran into new hurdles as regulator test flights were postponed to May and two new software issues were discovered, though unrelated to its anti-stall MCAS system. The Saudi Arabia Public Investment Fund disclosed a stake in Carnival Corp., boosting shares of the cruise line. Gilead announced it is ramping up production of its experimental coronavirus drug Remdesivir, while Novavax accelerated the initiation of its first-in-human coronavirus vaccine trial to mid-May. Despite Zoom Video’s booming popularity during the global lockdown, shares came under pressure recently amid privacy concerns and potential congressional scrutiny. Disney+ global paid subscriber count passed 50M members, nearly doubling since early February. Nintendo suspended its shipments of the Switch game console in Japan amid supply chain disruptions and demand surge caused by COVID-19.
SUN 4/5 (RU) Russia and Saudi Arabia with other large producers said to be in talks for a deal that will stop the price of oil from declining, despite remaining negative in the press - financial press
MON 4/6 (US) US agencies announce changes to the community bank leverage ratio; community bank leverage ratio requirement won't be re-established at greater than 9 percent until 2022 (US) New York state reports 130,689 confirmed coronavirus cases, +7% (prior 122,031, +7.3% d/d); deaths rise to 4,758, +14.4% d/d (up from 4,159, +14.4% prior) (UK) UK PM Boris Johnson taken to intensive care as COVID-19 condition worsens; asks Foreign Sec Dominic Raab to be deputized for him where necessary - press 005930.KR Reports prelim Q1 (KRW) Op 6.4T v 6.2Te (+2.7% y/y); Rev 55.0T v 55.4Te (+5% y/y)
TUES 4/7 066570.KR Reports Q1 prelim (KRW) Op 1.09T v 876Be, Rev 14.7T v 15.3Te NIO Reports Mar deliveries 1.5K units, +116.8% m/m XOM Cuts FY20 Capex by 30% to $23B, cash Opex by 15%; Maintains long-term outlook and dividend *(US) FEB JOLTS JOB OPENINGS: 6.882M V 6.500ME (US) Sen Maj Leader McConnell: calls for immediate funding increase for PPP for small business loans, wants it as soon as Thurs *(US) FEB CONSUMER CREDIT: $22.3B V $14.0BE
WEDS 4/8 HEIA.NL Withdraws all guidance for FY20 due to Covid-19; Guides Q1 total consolidated volume -4% organically with beer volume around -2%; Impact to worsen in Q2 NVAX Identifies Coronavirus Vaccine Candidate; Accelerates initiation of first-in-Human Trial to Mid-May MCD COVID-19 update: Q1 SSS -3.4%, SSS declined significantly in March; withdraws FY20 outlook, reducing capex (US) NIH's Fauci: beyond this week, should see beginning of a turnaround; expected coronavirus deaths now look less than thought earlier, no doubt due to social distancing *(US) DOE CRUDE: +15.2M V +9.5ME; GASOLINE: +10.5M V +5ME; DISTILLATE: +0.5M V +1ME (US) Bernie Sanders reportedly dropping out of presidential race - press
THURS 4/9 UBSG.CH Guides Q1 Net ~$1.5B v $1.14B y/y; To pay 2019 dividend in 2 installments following request from Switzerland regulator FINMA; to pay dividend of $0.365/share and special dividend of $0.365/share [the total equals the previously announced 2019 dividend of $0.73/share] (UK) Treasury and BOE temporarily extend a Ways and Means Facility to provide a short-term source of additional liquidity (US) NIH's Fauci: fatalities looking more like 60K than 100-200K; think we are at beginning of NY turning virus corner and flattening of virus curve *(US) MAR PPI FINAL DEMAND M/M: -0.2% V -0.4%E; Y/Y: 1.3% V 0.5%E *(US) INITIAL JOBLESS CLAIMS: 6.61M V 5.50ME; CONTINUING CLAIMS: 7.46M V 8.24ME *(US) FED TAKES ADDITIONAL STEPS TO PROVIDE $2.3T IN LOANS TO SUPPORT ECONOMY; TO OFFER $600B IN LOANS THROUGH 'MAIN STREET LENDING PROGRAM'; TO INCREASE PRIMARY AND SECONDARY MARKET CORPORATE CREDIT FACILITIES; TO SUPPORT STATE AND CITY FINANCES WITH $500B FACILITY (US) Fed Chair Powell: Fed will act forcefully, proactively, and aggressively until recovery is at hand - prepared remarks (US) Fed Chair Powell: economy's performance will be dictated by how virus evolves; there's really no limit to Fed lending as long as it's agreed upon with Treasury and supported by the law - Q&A OPEC+delegate: members agreed to cut production by 23% during May and June; Saudi and Russia will apply the 23% cut from an 11M bpd base (implies cutting to about 8.5M bpd) (EU) Reportedly EU Fin Mins agree to a €500B economic support package - press