OVERNIGHT DATA AND HEADLINES
The novel coronavirus crisis continues to pummel the U.S. labour market, with the number of Americans filing for unemployment benefits falling less than expected last week, suggesting a second wave of layoffs in industries and jobs not initially impacted by business closures caused by the pandemic. Initial claims for state unemployment benefits totalled a seasonally adjusted 2.981 million for the week ended May 9, the government said. While that was down from 3.176 million in the prior week and marked the sixth straight weekly drop, claims remain astoundingly high. Economists polled by Reuters had forecast applications for unemployment benefits totalling 2.5 million in the latest week. Claims have been gradually decreasing since hitting a record 6.867 million in the week ended March 28. The latest numbers lifted to 36.5 million the number of people who have filed claims for unemployment benefits since mid-March, or more than one in five workers losing their job. Claims will be closely watched in the coming weeks for signs whether companies rehire workers as businesses reopen.
U.S. President Donald Trump signalled a further deterioration of his relationship with China saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with the world's second largest economy. In an interview with Fox Business Network broadcast on Thursday, Trump said he was very disappointed with China's failure to contain the disease and that the pandemic had cast a pall over his January trade deal with Beijing, which he has previously hailed as a major achievement. "They should have never let this happen," Trump said. "So I make a great trade deal and now I say this doesn't feel the same to me. The ink was barely dry and the plague came over. And it doesn't feel the same to me.” "But I just – right now I don't want to speak to him," Trump said in the interview, which was taped on Wednesday. "There are many things we could do. We could do things. We could cut off the whole relationship," he replied. "Now, if you did, what would happen? You'd save $500 billion," Trump said, referring to estimated U.S. annual imports from China, which he often refers to as lost money.
Britain's economy shrank by a record 5.8% in March as the coronavirus crisis escalated and the government shut down much of the country. The monthly drop in GDP was felt in almost all sectors - from the country's shuttered restaurants and bars to its building sites and factories - and was the largest since comparable records began in 1997. In the first three months of the year, GDP contracted by 2.0% from the last three months of 2019, the biggest drop since the depths of the financial crisis in late 2008, the Office for National Statistics said
Wall Street surged as investors weighed the prospect of economic recovery against bellicose remarks from President Donald Trump regarding U.S.-China trade and a whistleblower's dire warnings about the U.S. response to the coronavirus pandemic. While all three major U.S. stock indexes ended the session solidly higher, they see-sawed for much of the day, with reopening state economies and the possibility of additional stimulus doing battle with revived trade war fears and bleak economic data. Dow Jones rose 377 points, or 1.62%, to 23,625, the S&P 500 gained 32.5 points, or 1.15%, to 2,852.5 and the Nasdaq added 80.55 points, or 0.91%, to 8,943.72.
The USD rose to a three-week high as markets overlooked another week of roughly 3 million new jobless claims. DXY index reached 100.56 but settled lower at 100.35.
EUR was down 0.14% at 1.0803, recovering from an initial fall at 1.0775.
GBP tumbled below the 1.22 line for the first time in more than five weeks but later recovered, last trading down only 0.05% at 1.2230.
USDJPY traded up 0.22% from 106.77 towards a 107.37 high but ended down at 1.7.23.
AUD traded to a 0.6403 low before gaining on the weak USD back up towards a 0.6465 high.
NZD followed AUD up higher from a 0.5957 low to touch 0.6000.
AUDNZD bounced back up towards a 1.0780 high after falling down towards 1.0742.
AUDEUR surged higher, from 0.5938 up towards 0.5987 high.
Investors pushed U.S. Treasury yields lower as they took stock of another grim jobs report and tried to gauge the success of efforts to reopen the economy in the face of the COVID-19 pandemic.
The benchmark 10-year yield was down 3.1 basis points in afternoon trading at 0.6202%.
The 2 year U.S. Treasury yield was down less than a basis point at 0.153%.
The gap between yields on two- and 10-year Treasury notes was at 47 basis points, about 2 basis points lower than Wednesday's close.
Euro zone bond yields fell further as global markets remained wary of a second wave of coronavirus infections, while European analysts focused on the policy response to the pandemic.
Safe-haven 10-year German bond yields fell more than 1 basis point to -0.55%, a six-day low, before stabilising. Italian 10-year bond yields were last up 1 bps at 1.82% after falling to a near 10-day low at 1.77%.
Gold climbed to a three-week high, propelled by safe-haven demand. Spot gold rose 0.9% to $1,730.20 per ounce, having earlier hit a high since April 23 at $1,735.96.
Chinese iron ore futures gained on hopes for more stimulus to shore up China's economy and expectations of higher demand from the government's infrastructure push. The most-actively traded iron ore futures contract on the Dalian Commodity Exchange rose for a third straight session and closed up 1.1% to 648 yuan ($91.30) a tonne. Spot prices of iron ore with 62% iron content for delivery to China rose by $1.50 to $90.30 per tonne.
Copper extended losses after U.S. officials flagged an extended economic downturn brought on by coronavirus. Benchmark LME copper was down 0.5% at $5,199.50 a tonne. LME aluminium eased 0.2% to $1,477 a tonne, zinc dropped 0.6% to $1,963, lead gained 1.4% to $1,622.50, tin shed 0.9% to $15,035, and nickel fell 1.5% to $12,065.
Oil prices settled higher after the International Energy Agency (IEA) forecast lower global stockpiles in the second half of 2020, although worries remain that a second surge in coronavirus infections could occur in coming months. Brent crude futures settled up $1.94, or 6.7 percent, to $31.13 a barrel. U.S. West Texas Intermediate (WTI) crude futures settled up $2.27, or 9%, to $27.56 a barrel.
ECONOMIC CALENDAR TODAY
No Australian Economic data today.
New Zealand - April manufacturing PMU (last 53.2). Likely to fall sharply vs Feb
New Zealand - April REINZ house sales (last -16.5%).
China - April industrial production YTD %yr (last -8.4%, forecast -4.8%).
China - April retail sales (last -19.0%, forecast -12.0%).
Europe - March trade balance & Q1 GDP (last -3.8%, forecast -3.8%).
US - April retail sales (last -8.7%, forecast -11.0%).
US - May Fed Empire State index (last -78.2, forecast -65.0).
US - April industrial production (last -5.4%, forecast -11.4%).
US - March business inventories (last -0.4%, forecast -0.3%).
US - May Uni of Michigan sentiment (last 71.8, forecast 67.5).
AUD THOUGHTS AND TECHNICAL ANALYSIS
AUD traded to an initial 0.6403 low after the release of the U.S. jobless claims data overnight but a spike in U.S. equities and a turn in the USD saw AUD rally back towards No Australian data to digest today however Chinese data releases will be watched carefully (retail sales and industrial production). Friday brings to an end a week that has seen US equities so far give up their recent gains, the AUD follow suit demonstrating marginal weakness and commodities such as Oil and Iron Ore continue higher despite the renewed sabre-rattling in US-China relations. Given the lack of local data today, we look offshore for reasons to buy or sell the AUD and China could be the catalyst. Failure to advance through the 0.6470/80 area should see the sellers emboldened on the next move higher. AUD moved to the bottom of its recent range overnight and bids towards 0.6400/20 were filled as risk sentiment struggled before Trump headlines pushed the AUD back to intraday highs. AUD opens this morning at 0.6460, markets digesting much of the noise and moves from overnight. Technicals overall lean bearish; daily, monthly RSIs drop & AUD below the 10-DMA. A move through 0.6400 targets key support near 0.6370, if cleared 55-DMA, April 21 daily low targeted.