OVERNIGHT DATA AND HEADLINES
The U.S. economy shed 701,000 jobs in March, abruptly ending a historic 113 straight months of employment growth as stringent measures to control the novel coronavirus outbreak shuttered businesses and factories, confirming a recession is underway. The Labor Department's closely watched employment report on Friday did not fully reflect the economic carnage being inflicted by the highly contagious virus. The government surveyed businesses and households for the report in mid-March, before a large section of the population was under some form of a lockdown, throwing millions out of work. The plunge in payrolls, which was the steepest since March 2009 and snapped a record streak of employment gains dating to September 2010, was led by 459,000 job losses in the leisure and hospitality industry, mainly in food services and drinking places. There were also decreases in health care and social assistance, professional and business services, retail trade, manufacturing and construction payrolls. Adding a sting to the report, the economy created 57,000 fewer jobs in January and February than previously reported. The worst is still to come, with a majority of Americans now under "stay-at-home" or "shelter-in-place" orders. A record 10 million Americans filed claims for unemployment benefits in the last two weeks of March. Economists expect payrolls will sink by at least 20 million jobs in April, which would blow away the record 800,000 tumble during the Great Recession. There are also perceptions that the recent fiscal package, which makes generous provisions for the unemployed, and the federal government's easing of requirements for workers to seek benefits could encourage some not to work.
The unemployment rate rose 0.9% percentage point, the largest single-month change since January 1975, to 4.4% in March. The BLS said the rate could have been 5.4% if it were not for a misclassification error during the survey of households. With the ranks of the unemployed ballooning, economists say the jobless rate could top 10% in April. The labor force participation rate declined by 0.7 percentage point in March to 62.7 percent. The employment-to-population ratio fell by 1.1 percentage points over the month to 60.0%.
Wage growth picked up in March, but that is all in the rear view mirror. Average hourly earnings increased 0.4% in March after increasing 0.3% in February. That lifted the annual increase in wages to 3.1% last month from 3.0% in February. The average workweek fell to 34.2 hours last month from 34.4 hours in February, with the workweek in the leisure and hospitality industry being shortened by 1.4 hours.
The Federal Reserve Bank of New York plans to purchase approximately $200 billion in Treasury securities this week. The Fed plans to make an average of $50 billion per day in Treasury purchases April 6 through April 9, down from an average of $60 billion per day made on Thursday and Friday of last week.
Global stock markets sank following more signs that the COVID-19 pandemic would take a massive toll on economic growth, while oil prices continued to rally on hopes of a cut to global supply.
Wall Street's main indexes fell more than 1.5% as the coronavirus abruptly ended a record U.S. job growth streak of 113 months, intensifying fears of a deep economic slowdown. Dow Jones fell 360.91 points, or 1.69%, to 21,052.53, the S&P 500 lost 38.25 points, or 1.51%, to 2,488.65 and the Nasdaq dropped 114.23 points, or 1.53%, to 7,373.08.
U.S. President Donald Trump said on Saturday he would impose tariffs on crude imports if he has to "protect" U.S.energy workers from the oil price crash that has been exacerbated by a war between Russia and Saudi Arabia over market share. "If I have to do tariffs on oil coming from outside or if I have to do something to protect our ... tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," Trump told reporters in a briefing about the coronavirus outbreak.
The JPY, CHF, GBP as well as AUD & NZD all lost ground as the USD strengthened across the board.
The USD firmed against major currencies for a third straight day, DXY index was up 0.4% at 100.67. The index posted a 2.3% gain last week.
CNY strengthened - the midpoint rate was set at 7.1104 and traded down towards 7.0908.
EUR also fell lower from 1.0850 to a 1.0775 low.
GBP fell from 1.2380 to 1.2205 lows.
AUD headed for a weekly loss with AUD price action falling from 0.6070 highs down past 0.6000 towards 0.5982 lows.
NZD tumbled from 0.5915 to a 0.5842 low.
AUDEUR remained firm, trading in and around 0.5550 for the most part.
AUDNZD stabilised above 1.0200, hitting a 1.0258 high but fell gradually towards 1.0230.
U.S. Treasury yields held steady on Friday despite a grim federal jobs report, in a replay of a similar dynamic from the day before.
The yield on the benchmark U.S. 10-year note was down 2.3 basis points at 0.604%. Yields did rise in the afternoon, with the 10-year note hitting a session high of 0.623%, before falling back.
The two-year Treasury yield was up 1.1 basis points at 0.2308% in afternoon trading.
The gap between yields on two- and 10-year Treasury notes was at 37 basis points, nearly the same as Thursday's close.
Borrowing costs in the euro area were mostly steady to a touch lower, as bleak news in terms of both the coronavirus outbreak and the economic outlook weighed on investor sentiment and supported higher-rated debt markets. Italy's 10-year bond yield was 4 basis points higher on the day at 1.53%, while the gap over German Bund yields stood at 194 bps versus 184 bps late on Thursday.
Gold prices edged higher after gloomy U.S. non-farm payrolls data magnified the economic toll from the coronavirus, although a stronger USD capped Gold's advance. Spot gold was up 0.4% to $1,619.40 per ounce.
Iron ore futures in China jumped as much as 3.5% after the Brazilian government ordered to halt operations at 47 mining dams as they failed to certify stability. Prices for spot iron ore with 62% content fell by $2 to $81.5 a tonne.
Copper prices slipped and aluminium carved out a four-year low on worries about an extended erosion in global demand for metals due to the coronavirus pandemic after dire U.S. employment data. Three-month LME copper was down 1% to $4,847 a tonne, holding well above a four-year low of $4,371 touched about two weeks ago. LME aluminium lost 0.4% to $1,484.50 a tonne after hitting $1,479.50.
Crude futures surged for a second day, with both U.S. and Brent contracts posting their largest weekly percentage gains on record due to hopes that a global deal to cut crude supply worldwide will emerge early next week. The rally continued Friday, with Brent crude futures jumping 13.9%, or $4.17 a barrel to settle at $34.11. The contract ended the week 36.8% higher, the largest weekly % gain in the contract's history. U.S. West Texas Intermediate crude rose $3.02, or 11.93% to settle at $28.34 a barrel. The contract posted a 31.8% gain on the week, also its largest on record.
ECONOMIC CALENDAR TODAY
Australian Economic data today: March MI inflation gauge (last 1.6%). A secondary consideration, but below target.
Australia - March ANZ job ads (last 0.7%). Hiring freezes should see a sharp pullback.
New Zealand - March ANZ commodity prices (last -2.1%). Sharp declines across all major commodity exports.
Europe - April Sentix investor confidence (-17.1). Confidence evaporated in Mar. Another soft print expected.
AUD remained heavy into the Friday night payrolls data, a stronger USD causing AUD to drop below 0.6000 towards a 0.5982 low. Global equities & commodities dropped as the 'risk-off’ mentality continued. Australian health officials said on Sunday they were cautiously optimistic about the slowing spread of the coronavirus in the country but warned social distancing restrictions are to stay in place for months. Confirmed cases rose by 139 during the 24-hour period to Sunday afternoon, bringing the national total to 5,687, Chief Medical Officer Brendan Murphy said. The death toll from COVID-19, the respiratory disease caused by the virus, rose to 34. This suggests the daily rate of infections was below 5%, about a fifth of what Australia saw in mid-March. Health Minister Greg Hunt warned over the weekend, however, that despite the good signs, Australians will still have to keep their distance from others for a "difficult" six-month period. Victoria Premier Daniel Andrews said on Sunday while there has been some "wonderful success" in slowing coronavirus spread, Australians "have a long way to go".
Global benchmark oil prices are expected to open lower today as a dispute between top crude exporters Russia and Saudi Arabia raises concerns of another collapse in talks to curb production at a meeting this week. The move lower may be muted as the market reacts to U.S. President Donald Trump's statement on Saturday that he will put tariffs on Saudi and Russian production, potentially accelerating a meeting. OPEC and its allies postponed an emergency meeting scheduled for Monday, led by Saudi Arabia, where the oil cuts could be agreed upon. A senior Saudi source told Reuters on Sunday that the kingdom would now host the meeting via videoconference on Thursday and the delay was to allow more time to bring other producers on board.
Australian data this weeks concentrates on the Feb trade surplus, April RBA rate decision and Feb housing finance approvals. The trade surplus held at a sizeable $5.2bn in January - the calm before the storm. There is extreme uncertainty around this release as the balance of two numbers - exports and imports - could both move in a very large range. With the RBA continuing to rule out negative rates, the cash rate is set to remain at its current level for a very long time. As such, the focus of RBA meetings will be on how the Board assesses its QE measures and whether they may require adjusting. Australia's housing market had started the year with good momentum ahead of the coronavirus shock, with prices posting solid gains in the first few months and turnover holding on to the strong gains in late last year, Q1 sales up 28% on the same time last year. In terms of housing finance approvals, Jan showed a robust broad-based gain, the total value of approvals surging 4.6%mth with gains in both volumes and average loan size, and across all segments, albeit with investor activity continuing to lag. The February number will show a similar pattern with a more moderate pace, the total value of approvals rising a further 1.5%. This is ahead of what will be a steep drop through March and April as the sector moves into a virus-related shutdown. The outright ban on physical auctions and open homes that came into effect in late March coupled with wider social distancing requirements and health concerns and a deep shock to economic activity mean property market activity will be reduced to a trickle of online and private sales
For the AUD, a touch firmer on open this morning (.6015) but back under 0.6000 as I write.
The upside remains limited as technicals continue to lean bearish, AUD trading under the 10-DMA & RSIs implying further downside momentum.
Support 0.5980-85, 0.5945, resistance 0.6030-35, 0.6070-75.