Dow Futures Surge as Global Economies Reopen Amid Slowing Coronavirus Infection Rates

Fed Chair Jerome Powell said the U.S. economy is likely to recover firmly into the second half of the year, but a return to full-speed might require an effective coronavirus vaccine.

The Monday Market Minute

  • Global stocks push higher as major economies around the world continue to ease lockdown restrictions as coronavirus infection rates slow.
  • Gold touches seven-year high as investors fret over inflationary impact of trillions in government and central bank spending.
  • Oil prices surge to two-month highs as demand optimism increases and fears of contract-expiry collapse abate ahead of this week's rollover. 
  • Moderna says the experimental COIVD-19 vaccine shows promising results in the phase 1 trial. 
  • European stocks jump more than 2%, while the dollar eases, as investors ride broader market optimism.
  • U.S. equity futures suggest a firm open on Wall Street ahead of a busy slate of retail sector earnings later this week along with home sales and weekly jobless data. 

U.S. equity futures surged higher Monday as major economies around the world -- and several states at home --- continue to ease lockdown restrictions amid warmer spring weather and the steady improvement on coronavirus infection rates.

Stocks were also boosted by a report from Moderna Inc.  (MRNA) - Get Report that indicated positive results from phase 1 data in its coronavirus vaccine study. Shares in the drugmaker were indicated 30% higher in pre-market trading at $86.75 each. 

Gold prices, however, pushed to a seven-year higher in a cautious signal from investors that the trillions being spent by governments and central banks around the world could weaken the value of fiat currencies and stoke near-term inflation. 

Oil markets suggested a more bullish tone, with prices rising to a five-week high on renewed demand optimism and the impact of OPEC cuts, as well as confidence that this week's expiry of the front-month WTI contract would pass without a repeat of last month's historic price collapse triggered by a dearth of domestic storage facilities. 

With Europe basking in an early spring heatwave, which enticed consumers outside over the weekend, and economies from Germany to the United Kingdom cautiously returning to work, investors are starting to see light at the end of a very long tunnel and driving risk markets higher as a result.

Wall Street looks set to follow suit, with futures contracts tied to the Dow Jones Industrial Average indicating a 670 point opening bell gain while those linked to the S&P 500, which is down 11.33% for the year, priced for a 72 point advance.

Federal Reserve Chairman Jerome Powell, however, cast a cautious shadow over market optimism Sunday when he told CBS' 60 Minutes that the current economic downturn might last until the end of next year, and may not abate until there's an effective coronavirus vaccine in place.

His comments, which suggested the need for consumers to gain full confidence in any recovery, underscored the record decline in retail sales last month and the more than 36 American jobs that have been lost over the past two months.

That weakness will put U.S. retail sector earnings in focus this week, with quarterly reports expected from heavyweights such as Walmart  (WMT) - Get Report, Target  (TGT) - Get Report, Lowe's  (LOW,) - Get Report and Home Depot  (HD) - Get Report that will effectively close out the first-quarter earnings season.

U.S. coronavirus cases rose by 1.3% yesterday, Pantheon Macroeconomics noted Monday, down from 1.5% from the same period last week, and the smallest rate of increase since the crisis began. 

S&P 500 companies are on pace to see a 12.1% decline in first-quarter profits, according to data from Refinitiv, a figure that is likely to balloon to around -42% over the three months ending in June. 

Janus Henderson, meanwhile, suggests that, under a best-case scenario, companies around the world will likely reduce their dividend payments by 15%, or $213 billion, this year. That figure could rise to as high as $490 billion in the worst-case scenario, the group estimated.

Still, the bullish momentum from what looks like a sustainable drive to re-start the world's biggest economies helped lift European stocks more than 2.1% higher in early Monday trading, lead by a near 3% gain for Germany's DAX performance index and a 2.4% advance for the FTSE 100 in London.

Gold traded at $1,764.46 per ounce in the overnight session, the highest since October 2012, while WTI crude was seen $3.11 higher from its Friday close in New York and changing hands at a two-month high of $32.54 per barrel.

The U.S. dollar index slipped 0.3% against a basket of six global currencies to 100.11 in overnight trade, while benchmark 10-year Treasury note yields edged higher, to 0.67% in early New York trading.

Overnight in Asia, data from Japan confirmed that that world's third-largest economy fell into recession for the first time in four-and-a-half years last quarter, following a 3.4% contraction, but data suggesting a slowing in coronavirus cases likely means Prime Minister Shinzo Abe won't need to extend his country's state of emergency. 

The Nikkei 225 ended the session 0.48% higher at 20,133.73 points, while the region-wide MSCI ex-Japan benchmark was little changed throughout the session with only modest gains for major markets in China and South Korea.