OVERNIGHT DATA AND HEADLINES
Global stocks rallied on President Donald Trump's plans to revive the coronavirus-hit U.S. economy and a report about a clinical trial for a potential drug to treat COVID-19, while the USD fell amid investors' growing risk-on sentiment. The bulls charged ahead on a report that patients with severe COVID-19 symptoms had responded positively to Gilead Sciences' experimental drug Remdesivir, lifting Gilead's shares by 9.7%. Analysts and the company have urged caution on drawing any conclusions, however.
U.S. stocks rose on the day and also posted gains for the week. Dow Jones rose 704.81 points (2.99%) to 24,242.49, S&P 500 gained 75.01 points (2.68%) to 2,874.56 and the Nasdaq added 117.78 points (1.38%) to 8,650.14. For the week, the Dow added 2.2% and the S&P 500 rose 3%. The Nasdaq added 6.1%.
Investors gearing up for another week of corporate earnings may give more weight to the words of company executives than headline-grabbing numbers, as Wall Street seeks evidence that corporations can weather the uncertainty caused by the coronavirus pandemic. Around a fifth of S&P 500 companies are expected to report results in the coming week, as investors digest a market surge that has lifted the S&P index 25% from its March lows as of Thursday. Those include major industrial, tech and consumer products companies, as well as streaming company Netflix, whose shares rose to a record high in the past week. Estimates for first-quarter profits have worsened: Analysts expect overall S&P 500 profits to drop by 12.8%, according to IBES data from Refinitiv - a far steeper decline than the 4.7% drop projected as of April 1. But how companies fare against those expectations may have little ultimate impact on their stock prices this time around.
China's economy contracted for the first time on record in the first quarter as the coronavirus shut down factories and shopping malls and put millions out of work. Gross domestic product (GDP) fell 6.8% in January-March year-on-year, official data showed on Friday, a slightly larger decline than the 6.5% forecast by analysts and reversing a 6% expansion in the fourth quarter of 2019. It was the first contraction in the world's second-largest economy since at least 1992, when official quarterly GDP records were first published.
The USD ticked lower as investors regained some appetite for risk. The DXY was last down 0.08% from 99.82 to 99.71.
EUR strengthened towards 1.0890 & GBP also jumped higher from 1.2413 up to 1.2515.
Other safe currencies weakened, USDJPY moving up from 107.30 to 107.64 and CHF from 0.9656 to 0.9682.
CNY held its own against the USD, onshore yuan CNY opened at 7.0695, weaker at 7.0806 but closed firmer 7.0710.
AUD was unable to post further gains after Friday’s 0.6% rebound to 0.6372, remaining largely in a 0.6345/0.6370 range.
NZD also saw a positive boost up to 0.6043 but remained sidetracked within 0.6015/0.6035.
AUDNZD fell from 1.0605 highs down towards 1.0530 lows.
AUDEUR remained firm, largely trading in a 0.5825/0.5865 range.
U.S. Treasury yields rose in choppy trading after the NY Federal Reserve announced a further decline in purchases of Treasuries next week as the market stabilises after heavy central bank interventions last month. The New York Fed said on Friday it plans to purchase $75 billion in Treasury securities next week which brings the daily purchase amount down to an average of $15 billion per day from $30 billion per day.
U.S. 10-year yields rose to 0.652% from 0.611% late on Thursday after dropping earlier in the session to 0.587%, their lowest in two weeks.
Yields on U.S. 30-year bonds were at 1.271%, up from 1.212% on Thursday. Earlier, 30-year yields fell to a two-week trough of 1.183%.
U.S. two-year yields were last at 0.205%, slightly up from Thursday's 0.203%. On Thursday, two-year yields fell to their lowest since September 2011.
The yield curve steepened on Friday, with the spread between the 10-year and two-year widening to 44 basis points from 41 basis points on Thursday.
Gold dropped about 2% after Trump's new guidelines to re-open the U.S. economy and encouraging early data related to a potential COVID-19 treatment. Spot gold was down 1.9% at $1,685.84 an ounce, more than $60 lower than the 7-1/2 peak hit earlier this week.
Dalian iron ore futures rose after miner Rio Tinto said China's demand continues to recover, but grim Chinese economic data showing the impact of the coronavirus outbreak kept investors' optimism in check. The most-traded September iron ore contract on China's Dalian Commodity Exchange ended up 1.3% at 612 yuan ($86.47) a tonne, after rising as much as 2.9% to an eight-month high earlier in the session. Spot iron ore prices have also risen, the benchmark 62% material bound for China settling at $86.50 a tonne on Thursday (highest since March 27).
Copper rose to a one-month high on plans for the U.S. economy to re-open and signs of recovery in China's industrial output. LME 3 month copper was up 1.4% at $5,212 a tonne.
Oil prices were mixed, weak Chinese economic figures and rapidly filling U.S. crude storage offsetting bullishness built on U.S. President Donald Trump's outlines for the U.S. economy to emerge from the coronavirus shutdown. Brent futures rose 26 cents (0.9%) to settle at $28.08 a barrel while WTI crude ended the session down 50 cents (2%) at $25.03.
ECONOMIC CALENDAR TODAY
No Australian Economic data today.
New Zealand - Q1 CPI (last 0.5%, forecast 0.4%). Annual rate to reach 2.1%. Largely pre-dates the lockdown.
Europe - Feb trade balance (last 17.3). The upward trend over 2019 has been largely eroded.
UK - April house prices (last 1.0%). Outlook bleak with an imminent collapse in gross lending.
US - March Chicago Fed activity index (last 0.16, forecast -0.62). The index is set to show growth falling below trend.
AUD THOUGHTS AND TECHNICAL ANALYSIS
AUD settled into a well supported range on Friday, rising towards 0.6372 highs from 0.6320 as a positive risk mood underpinned however further gains were capped as negative economic effects of the pandemic remain. The slowing virus infection rates globally as well as hopes of a virus cure supported price action early Friday morning but it was the comments from President Trump on a ‘3 stage re-opening’ of the U.S. economy that really kept markets sidelined for the most part. Governors in U.S. states hardest hit by the coronavirus sparred with President Donald Trump over his claims they have enough tests and should quickly reopen their economies as more protests are planned over the extension of stay-at-home orders. New York continued to see hospitalisations decline to 16,000 from a high of 18,000, and the number of patients being kept alive by ventilators also fell. There were 507 new deaths, down from a high of more than 700 a day. Demonstrations to demand an end to stay-at-home measures that have pummelled the U.S. economy have erupted in a few spots in Texas, Wisconsin and the capitols of Ohio, Minnesota, Michigan and Virginia. More than 22 million Americans have filed for unemployment benefits in the past month.
Today we have no Australian Economic data releases however a close eye will be kept on New Zealand Q1 CPI - expectations for a 0.4% rise for the March quarter, which would take the annual inflation rate to 2.1%. The quarterly increase is expected to be driven by the annual increases in tobacco excise and education fees, and a bigger than usual increase in food prices. Airfares to register the largest decline, though this is where the effects of the coronavirus pandemic are most uncertain. The highlight for the Australian calendar will be on Tuesday with a speech by Gov.Lowe titled "Economic and Financial Update” and the RBA minutes keenly awaited (looking for RBA guidance on the impact of the shutdown).
For the AUD, opens this morning at 0.6355. Price action remains supported on dips with very little pullback in NY trading (suggesting bulls remain confident). Resistance remains at 0.6380-85, 0.6405-10, 0.6445-50; Immediate supports at 0.6330-35 followed by 0.6305-15.
Technical outlook leans bullish; RSIs rise, 10-DMA supports, rally off March low intact.