The Monday Market Minute
- Global stocks steady as investors brace for a longer-than-expected period of coronavirus disruption to the world economy as infections near 750,000.
- President Donald Trump says CDC guidelines on social distancing will remain in place util the end of April, while UK Prime Minister Boris Johnson warns "the worst is yet to come".
- The U.S. dollar edges higher, following the worst week against its peers since 2009, while benchmark 10-year Treasury notes rally to 0.632%
- U.S. oil prices approach $20 a barrel for the first time since 2002 as crude markets continue to tumble.
- U.S. equity futures suggest a modestly firmer open on Wall Street ahead of pending homes sales data at 10:00 am Eastern time.
U.S. equity futures turned higher Monday, following softer sessions in Europe and Asia, as investors begin to re-set portfolios for a longer-than-expected period of coronavirus disruption to the global economy.
Stocks found firmer ground, however, after Johnson & Johnson (JNJ) - Get Report said it's identified a leading coronavirus vaccine candidate that could result in more than a billion doses available to address the global pandemic.
President Donald Trump said Sunday that CDC guidelines on social distancing, which he had hoped would be vacated by Easter, will now extend to at least the end of April.
Similar warnings from world that the pandemic, which has infected nearly three quarters of a million people worldwide and killed at least 34,000, will last well into the Spring, and possibly beyond, are starting to change investor focus as the economic damage mounts and central banks and governments pledge trillions in additional support.
Market moves this week, however, could be more affected by calendar effects than coronavirus, even as the mortality rate in U.S. hotspots such as New York and Louisiana continues to increase and Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned of a U.S. death total that could reach 200,000.
With the first quarter heading to a close, and fund managers light on equity allocation amid the broader market turbulence, the first two days of this week could see portfolio re-balancing that is supportive to stock prices even as data continues to warn of severe coronavirus damage to the domestic economy.
Wall Street futures for Monday suggest an opening bell gain of around 160 points for the Dow Jones Industrial Average, while those linked to the S&P 500 suggest a 27 point gain for the broader benchmark, but with equity volatility still rising -- and the VIX marked 5.6% higher at 64.40 points -- those levels are unlikely to last throughout the Monday session.
Equity risk appetite may also be tested by gains for the U.S. dollar, which is fresh off its worst week against a basket of its global peers since 2009. The dollar index was marked 0.75% higher at 99.13 in early European trading, while benchmark 10-year Treasury note yields were last seen trading firmer at 0.635%.
Global oil prices, as well, suggest a significant amount of caution in terms of investor sentiment on world economic growth, with U.S. crude set to dip below $20 a barrel for the first time since February 2002 amid a flood of supply from U.S. and middle east producers and collapsing demand amid the ongoing coronavirus shutdowns.
Brent crude futures contracts for May delivery, the benchmark reference for around 60% of global crude purchases, were last seen $2.12 from their Friday closing price in New York and changing hands at $22.81 per barrel in early European trading.
WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked $1.29 lower at $20.22 per barrel, after briefly trading below $20 a barrel for the first time since February 2002.
European stocks, which opened weaker, also turned positive with U.S. futures, with the Stoxx 600 rising 0.2% in Frankfurt while Britain's energy-heavy FTSE 100 falling 0.1% in London following a weekend warning from quarantined Prime Minister Boris Johnson that stricter lockdown rules may yet be put in place for the U.K. economy.
Overnight in Asia, Japan's Nikkei 225 ended its Monday session 1.57% lower at 19,048.97 points as the safe-haven yen rallied to 107.85 amid a defensive start to regional trading, while a sharper-than-expected repo rate reduction in China, the most in five years, gave late-session support to stocks as the MSCI ex-Japan benchmark traded 0.41% lower heading into the close.