The Thursday Market Minute
- Global stocks mixed as Asia rides Wall Street rally, but Europe slumps after historic collapse in April economic activity.
- Europe's April PMI reading collapses to 13.5, the lowest on record and a tally that suggests a Q2 contraction of 7.5%.
- Asia PMI data also falls to record lows, with South Korea recording its largest quarter-on-quarter GDP contraction in history.
- Congress will vote on $484 billion in support for small business and hospitals damaged by the coronavirus pandemic later today following Senate passage on Wednesday.
- Weekly U.S. jobless claims show that another 4.2 million Americans filed for unemployment benefits last week.
- Wall Street futures suggest a weaker open ahead of first quarter earnings from Eli Lilly and Raytheon before the bell and Intel after the close of trading.
U.S. equity futures turned higher Thursday after a modestly better-than-expected reading of weekly jobless claims, but a dismal reading for economic activity in Europe and Asia continues to underscore the depth of the damage wrought by the global coronavirus pandemic.
Just over 4.4 million filed for unemployment benefits last week, taking the five-week total past 25 million and the four-week average to 5.786 million. The headline figure, however, suggests an 810,000 decrease from the week ending April 11.
The U.S. jobs figures followed data that showed economic activity in the Eurozone slumped to just 13.5 points over the month of April, according to Markit's benchmark PMI reading, the lowest on record and a staggering 26.5 points below the 50 mark which generally separates growth from contract.
“The extent to which the PMI survey has shown business to have collapsed across the eurozone greatly exceeds anything ever seen before in over 20 years of data collection," said Markit's chief economist, Chris Williamson, who noted the April reading is consistent with a second quarter GDP collapse of around 7.5%. "The ferocity of the slump has also surpassed that thought imaginable by most economists, the headline index falling far below consensus estimates."
The grim assessment in Europe was preceded by the weakest readings on record in Australia and Japan, as well as an all-time quarter-on-quarter contraction for the South Korean economy that highlights the damage that the virus has inflicted on global trade, not to mention the 2.5 million people infected around the world and the 178,000 lives lost from the mysterious disease.
With PMI readings for the U.S. economy slated for 9:45 am Eastern time, and a relatively light corporate earnings calendar ahead, investors are likely to focus on both the weekly jobless claims tally and the broader macro-economic weakness heading into the Thursday session.
Futures contracts tied to the Dow Jones Industrial Average, which gained more than 450 points on Wednesday, are priced for a modest 80 point gain while those linked to the S&P 500 suggest a 15 point bump for the broader benchmark.
Oil and energy stocks could provide some early support, however, as global oil prices trended higher for second consecutive session Thursday, even as analysts continue to warn that dwindling storage space around the world will keep markets awash with crude for the foreseeable futures.
Prices rose further after Iran's top military figure, Revolutionary Guard Commander Hossein Salami, told state television Thursday that his country's navy would "destroy" any U.S. warship that threatens its security. The comments followed a threat from President Trump Wednesday to "shoot down" any Iranian ship that 'harasses" an American vessel.
Front-month WTI futures contracts -- the new benchmark for U.S. prices that would have owners taking delivery of crude in June -- were last seen $2.69 higher from their Wednesday close in New York and changing hands at $16.47 per barrel in early European trading.
Brent futures for June delivery, which benchmark around 60% of global crude purchases, were marked $1.75 higher at $22.12 per barrel after briefly trading as low as $15.98 per barrel on Wednesday, the weakest since 1999.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.05% higher at 100.442 while benchmark 10-year Treasury note yields eased to 0.627%.
European stocks gave back earlier gains following the PMI data release, with investors now eyeing an EU Leaders Summit later in the day that could provide the region with a definitive financial rescue plan following weeks of debate over how member states should access funds from Brussels.
The Stoxx 600 edged 0.2% higher in mid-morning trading, even with a 0.1% decline for the trade-sensitive DAX performance index, while Britain's FTSE 100 fell 0.1% in London.
Overnight in Asia, Brent crude's rebound allowed the safe-haven yen to ease against the U.S. dollar, as well as its regional peers, providing a boost for the export-focused Nikkei 225, which closed 1.15% higher at 19,429.44 points even as the Jibun Bank services PMI reading fell to the lowest level on record this month.
The broader MSCI ex-Japan benchmark was also in the green, rising 0.43% into the close of trading thanks in part to modest gains in Hong Kong and another solid 0.74% advance for the South Korean KOSPI.