The Wednesday Market Minute
- Global stocks slump as factory data reveals the breadth of coronavirus damage as pandemic cases top 860,000..
- Manufacturing PMI data from Tokyo to London shows likely contraction in all major economies, leaving little doubt of a global recession in the months ahead..
- The US dollar continues to rally despite Fed efforts to ease greenback funding costs with targeted repos, while benchmark 10-year Treasury note yields hit 0.614%.
- European stocks tumble, with Britain's FTSE 100 leading the decliners after all of its major banks agreed to scrap dividends to improve their capital buffers
- .Global oil markets extend slump, despite efforts from President Donald Trump attempts to broker a truce between Russia and Saudi Arabia on crude prices, as domestic stocks rise by 10.5 million barrels last week.
- U.S. equity futures suggest a notably weaker open on Wall Street on the opening day of the second quarter and ahead of mortgage market data at 7:00 am Eastern time..
Wall Street futures extended declines Wednesday, while global stocks slumped on the first trading day of the quarter, as optimism over slowing coronavirus infections gave way to the reality of its damage to major economies around the world.
Factory data from Tokyo to London Wednesday revealed contraction-level outputs from nearly every major economy as supply chains buckled, plants were shuttered and workers stayed home for fear of contracting the deadly virus, which has reached more than 860,000 people around the world and killed more than 42,000.
With the prospect of a global recession no longer in doubt, and the only question remaining surrounding its breadth and depth, investors retreated from risk markets around the world following two relatively tame sessions earlier this week that closed out the first quarter.
Safe-haven assets, including the U.S. dollar, rallied firmly Wednesday, even after the Federal Reserve pledged to ease dollar-funding costs with repo operations aimed at foreign central banks.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.6% higher at 99.625, a worrying move following the Fed's action and likely part of a broader trend that could accelerate losses for Asian and emerging market stocks.
President Donald Trump also warned last night that Americans face a "very, very painful" two weeks ahead, noting that it is "absolutely critical for people to follow the guidelines for the next 30 days".
"It's a matter of life and death," he said, as White House coronavirus lead Deborah Birx indicated nation-wide deaths could rise to between 100,000 to 240,000.
On Wall Street, investors are likely to return to dumping equities now that the re-balancing of pension and investment fund portfolios heading into the end of the first quarter, which propped up markets earlier this week, has been put to bed.
Futures contracts tied to the Dow Jones Industrial Average suggest an 830 point opening bell gain, a move that would extend its year-to-date decline to around 26%, while those linked to the S&P 500 indicate a 96 point decline for the broader benchmark.
“The sharp weakness in equities over the last 24 hours is a timely reminder that, although policymakers have made tremendous strides in addressing the ongoing collapse in demand and disruption to financial conditions, markets remain uniquely fragile and susceptible to higher drawdowns than normal," said Timothy Graf, head of global macro strategy EMEA at State Street Global Markets.
European stocks were also off to a weak start to the second quarter, with the Stoxx 600 benchmark falling 3.1% in Frankfurt following PMI data for the Eurozone that indicated a steeper-than-expected contraction for the region's manufacturing sector.
In Britain, the FTSE 100 was marked 3.7% lower, lead to the downside by energy and financial stocks, after the country's major banks agreed to suspend dividend payments in an announcement coordinated with the country's financial regulator and the Bank of England.
Global oil prices also resumed their 2020 slump Wednesday, despite lengthy comments from President Trump last night that suggested he could broker an agreement on output between Saudi Arabia and Russia.
The two nations have been locked in a price war since the collapse of their three-year production cut agreement following last month's OPEC meeting in Vienna.
They’re going to get together and we’re all going to get together and we’re going to see what we can do,” Trump told reporters in Washington. “The two countries are discussing it. And I am joining at the appropriate time, if need be.”
Brent crude futures contracts for May delivery, the benchmark reference for around 60% of global crude purchases, were last seen $1.14 lower from their Tuesday closing price in New York and changing hands at $25.21 per barrel in early European trading.
WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked 18 cents higher at $20.30 per barrel, after briefly trading below $20 a barrel for the first time since February 2002 during the Monday session.
Overnight in Asia, a rally for the safe-haven yen, as well as reports that Tokyo could be the next major city ordered on lockdown to prevent the spread of the coronavirus, hammered stocks on the Nikkei 225, which ended the session 4.5% lower at 18,065.41 points.
Factory output data from around the region, which showed contraction in every major economy apart from China, also kept stocks in the red, with the MSCI ex-Japan benchmark last seen 1.3% lower heading into the close of trading.