Weekly Jobless is the New NFP – Markets Remain Risk Off

Posted on

March 26, 2020
Senate passes stimulus bill
Jobless claims the new NFP
Nikkei -4.51% Dax 1.86%
UST 10Y 0.811%
Oil $23/bbl
Gold $1602/oz
BTCUSD $6609

Asia and EU
GBP UK UK Retail Sales -0.5% vs. -0.2%

North America Open
USD Weekly jobless claims

Its been a quiet, almost sedate night of trade in financial markets in Asian and early Europeans sessions with equities only moving 1-2% and most FX pairs contained to 50bps ranges.

Overnight, the US Senate passed the coronavirus bill and it looks almost certain that the House will pass the legislation on Friday. The stimulus will come as welcome news to more than a third of Americans now sheltered in place who are unable to earn income, but just how much lost capacity the bill will make up remains to be seen.

Although the President and his staff have grandiosely claimed that it will comprise as much as 10% of US GDP – the actual figure is far more modest, as those estimates conflated the various credit rescue programs by the Fed which comprise the vast majority of the funds and will have no direct impact at all on the consumer but will rather be used to prop up financial markets.

The actual direct outlay to workers and small businesses is significant but in the grander scheme of things will only act as a stopgap measure and in our opinion will be much more difficult to administer than claimed. Treasury Mnuchin stated that most businesses would be able to obtain forgivable loans almost instantly upon the passage of the bill but given the lack of capacity in the Small Business Administration, we expect massive bottlenecks that will likely weigh on financial markest over the next month or so as businesses struggle to obtain working capital.

In the meantime all eyes today will be on the weekly jobless claims as markets focus on the first true economic measurement of the shelter in place directive that hit the country last week. Estimates range from 3M-5M job losses which are Depression-like numbers but of course have to be taken in the context of the health emergency. Markets have steeled themselves for a large number but if jobless claims print at 5M or above the shock is likely to send equities lower and create a fresh wave of selling in risk assets.

Boris Schlossberg
Managing Director

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