OVERNIGHT DATA AND HEADLINES
A stunning 26.5 million Americans have sought unemployment benefits since mid-March, confirming that all the jobs gained during the longest employment boom in U.S. history have been wiped out as the novel coronavirus savages the economy. Initial claims for state unemployment benefits totalled a seasonally adjusted 4.427 million for the week ended April 18. That compared to 5.237 million in the prior week. Economists polled by Reuters had forecast 4.2 million claims in the latest week. Since March 21, 26.453 million people have filed claims for unemployment benefits, representing 16.2% of the labor force. That has led to dire predictions of 30 million job losses during the COVID-19 pandemic and an unemployment rate at levels not seen since the Great Depression. The economy created 22 million jobs during the employment boom which started in September 2010 and abruptly ended in February this year.
U.S. business activity plumbed new record lows in April - the flash U.S. Composite Output Index plunged to a reading of 27.4 this month. That was lowest since the series began in late-2009 and followed a final reading of 40.9 in March. A reading below 50 indicates a contraction in private sector output.
The IHS Markit survey's services sector flash Purchasing Managers Index dropped to an all-time low reading of 27.0 this month from 39.8 in March. Economists polled by Reuters had forecast a reading of 31.5 in April for the services sector, which accounts for roughly two-thirds of the U.S. economy. Factory activity contracted further this month, with the flash manufacturing PMI sinking to 36.9. That was the lowest since March 2009 and following a final reading of 48.5 in March. Economists had forecast the index for the sector, which accounts for 11% of the economy, falling to 38.0 in April.
Sales of new U.S. single-family homes dropped by the most in more than 6-1/2 years in March and further declines are likely as new home sales fell 15.4% to a seasonally adjusted annual rate of 627,000 units last month. The percentage decline was the largest since July 2013. February's sales pace was revised down to 741,000 units from the previously reported 765,000 units. Economists polled by Reuters had forecast new home sales, which account for about 10% of housing market sales, plunging 15% to a pace of 645,000 units in March.
The monthly IHS Markit/CIPS Flash UK Composite Purchasing Managers' Index (PMI) fell to record low of 12.9 from 36.0 in March - not even close to the weakest forecast in a Reuters poll of economists, a reading of 31.4. The picture was similar in France and Germany.
UK factories' mood hit the lowest levels since records began in 1950s, according to another survey on Thursday that showed the coronavirus lockdown has lashed the economy. The Confederation of British Industry's quarterly gauge of business optimism fell to a record low -87 in April from +23 in January. Given the uncertainty over how long the shutdown may have to last, it's little surprise to see businesses putting investment plans on ice as they work hard to get through this intact.
The S&P 500 ended marginally lower - Dow Jones rose 0.17% to end at 23,515.26 points, while the S&P 500 lost 0.05% to finish at 2,797.8. The Nasdaq Composite slipped 0.01% to 8,494.75.
A closely-watched Gilead Sciences Inc experimental antiviral drug failed to help patients with severe COVID-19 in a clinical trial conducted in China, but the drugmaker said the study's results were inconclusive because it was terminated early. Gilead shares fell more than 4% after the data was inadvertently released and first reported by the Financial Times. It comes days after another report detailed rapid recovery in fever and respiratory symptoms in some patients with COVID-19 - the sometimes deadly respiratory illness caused by the coronavirus - who were treated with remdesivir at the University of Chicago Medicine hospital. In the Chinese trial remdesivir, given by intravenous infusion, failed to improve patients' condition or reduce the pathogen's presence in the bloodstream, according to draft documents published accidentally by the World Health Organization (WHO).
The USD bounced higher into late trading, the DXY index edging higher after a choppy session which saw it fall down to 100.06 lows but back up to 100.58 highs.
USDJPY was stronger into the NY close after spiking to 107.96 but gradually came off towards 107.40.
EUR rose towards 108.40 on a weaker USD but gave upon all gains trading back below 108 to a 107.62 low.
GBP rose to 1.2411 early in the session but gave up most gains to trade back to a 1.2335/1.2350 range.
AUD spiked over 0.6400 (0.6403 high) but fell back towards 0.6366 as USD strength regained into the NY close.
NZD jumped up from a 0.5970 low to touch 0.6040, falling back towards 0.6000 later on.
AUDNZD improved up towards 1.0637 but gave up most gains back to 1.0590.
AUDEUR continued its run higher up towards a 0.5910 high.
Longer-term U.S. Treasury yields were slightly lower as investors set aside the latest grim jobs report to focus on how quickly the U.S. economy might reopen amid the coronavirus pandemic.
The benchmark 10-year yield was down 1.8 basis points at 0.6015%, with shorter-term yields still positive.
The yield on the 30-year bond fell as low as 1.168% before recovering.
The two-year U.S. Treasury yield was up 1 basis point at 0.2211% in afternoon trading.
The gap between two- and 10-year yields was at 37 basis points, about a basis point higher than at Wednesday's close.
Yields in core euro zone markets were down slightly too, though German 10-year Bund yields were down 1 basis point at -0.43%
Gold prices jumped as much as 1.5% to more than a one-week high. Spot gold was up 0.8% at $1,726.94 per ounce (touched $1,738.58 earlier in the session, the highest level since April 14).
Benchmark iron ore futures closed higher, aided by higher restocking demand as mills ramped up purchases ahead of the Labour Day holidays next week. Spot prices of iron ore with 62% content rose to $85.5 per tonne.
Copper prices rose alongside oil, but gains are unlikely to be sustained as poor demand prospects are likely to be reinforced by a deterioration in data. Benchmark LME copper traded up 0.6% at $5,164.5 a tonne.
Other metals: Aluminium was flat at $1,515 a tonne, zinc fell 1.1% to $1,874.5, lead slipped 1.1% to $1,649, tin gained 0.9% to $15,000 and nickel added 1.5% to $12,190.
Oil soared, extending its rebound after major oil-producing nations said they would accelerate planned production cuts to combat the dramatic slump in demand due to the COVID-19 pandemic. Brent rose 96 cents, or 4.7%, to settle at $21.33 a barrel, while WTI jumped $2.72, or 19.7%, to settle at $16.50.
ECONOMIC CALENDAR TODAY
No Australian Economic data today.
Japan - March CPI %yr (last 0.4%, forecast 0.4%). Inflation remains stagnant.
Germany - April IFO business climate survey (last 86.1, forecast 80.0). Business climate has soured.
US - March durable goods orders (last 1.2%, forecast -11.1%). New orders to be hit by the contraction in activity.
US - April Uni. Of Michigan sentiment (last 71, forecast 69). Final read set to confirm weak consumer sentiment.
AUD THOUGHTS AND TECHNICAL ANALYSIS
AUD gained to 0.6400 overnight (0.6403) as a weaker USD and risk on buying (particularly in AUDJPY and other key commodities) spurred on early interest to see it higher.
DXY strength prevailed later on as some normalisation returned in the market after the previous record U.S. weekly claims data highlighted a continued deterioration of the U.S. job market.
Oil futures continue to rally after the recent price collapse with gains assisting to lift copper and iron-ore futures, in turn boosting the AUD. Equities gains and USD/CNH trading below 7.0900 are also helping to boost risk sentiment. These factors have combined to lift AUD near the April 20 daily high, which is the final hurdle bulls need to clear before making a run at the April 14 high at 0.6445.
No major data of note scheduled for release today - tonight watching offshore releases but worth noting that much of the deterioration in expectations has been factored in.
For the AUD, opens lower this morning at 0.6370 after reaching 0.6400 resistance overnight. Technicals currently highlight upside risks with a ‘risk on’ sentiment emerging after the U.S. data overnight.
AUD is trading above the 10- and 55-DMAs while daily and monthly RSIs are rising. Should AUD longs clear the April 20 and 14 daily highs the rally off the March low should resume.
Resistance at 0.6670/90 would then be targeted. Rising RSIs, Fibo support, new 6-day high give techs a bullish tint.