April 9, 2020
COVID relief rally fades
All eyes on jobless claims
Nikkei -0.04% Dax 0.42%
UST 10Y 0.74%
Asia and the EU
GBP UK GDP -0.1% vs. 0.1%
North America Open
USD Weekly Jobless Claims 8:30
CAD Employment 8:30
Global markets gave up their COVID relief rally gains in Asian and early European trade today as traders steeled themselves for a fresh round of negative economic data from the US.
Earlier in the session stock index futures were up as much 1.5% on news that Spain and Italy may be starting to flatten their curves as the rate of new infections has declined. The news led Italian PM Salvini to speculate that the country may able to start a slow return to normalcy as soon as the end of April.
But the positive sentiment is starting to face the harsh reality that even with the threat of virus greatly diminished – an assumption that is in no way assured – the economic damage caused by the lockdown may take months perhaps even years to repair.
Even if most of the OECD goes back to work in May, it will be under very different conditions than existed before. Most of the social distancing rules will likely stay in place, making commerce awkward and difficult and entertainment almost impossible to resume. Whole swaths of the global economy from tourism to cinema restaurants and hospitality may not be able to operate under the previous conditions for perhaps months going forward. That along with the massive hit to the labor market could create a much difficult environment than the bulls presume.
In any case, the immediate focus will be on the jobless claims which are due 12:30 GMT with the market looking for another extraordinary hit of 5M or more. The negative shock of the data may be offset by the speech of Fed Chair Powell who may offer yet more support to the market by essentially assuring traders that the Fed will remain the buyer of last resort in order to maintain liquidity in the markets.
Still with the holiday weekend ahead for the market, uncertainty in both Eurozone and OPEC as well as the risk of COVID infection rates spiking up, traders may prefer to flatten out capping any rally for the day.