Last night the International Monetary Fund released its estimate of a 3% fall in global production this year. The main US crude oil contract fell 10% in overnight trading, despite the agreement between major producers to cut global production by 9%-10% from the end of this month. Gold rose again to touch a new 7 year high just below US $1750. However share markets appeared to focus on declining viral infection rates to post gains as the US corporate reporting season commenced.
Both West Texas and Brent crude are testing major support levels. WTI has bounced off US $20 a barrel in early Asia Pacific trading after last night’s plunge, but Brent has slipped below $30. The pressure could reflect concerns that plunging demand will dwarf the announced production cuts.
The flood of money unleashed by central banks buoyed haven assets. Bonds of major nations rose along with gold. The US Federal Reserve’s central role in the monetary support saw the US dollar continue it’s slide. The combination of safe haven demand and a lower US dollar pushed CMC’s JPY index above 21,600. Commodity currencies like the Australian, New Zealand and Canadian dollars also rose, in apparent disregard of the IMF’s grim outlook.
European stock markets made modest gains. The UK 100 defied the optimism after the Foreign Secretary told reporters the lockdown will likely be extended this week. This didn’t inhibit US enthusiasm. The SPX 500 jumped 3%, but was outshone by a 4% gain for the Nasdaq index. JP Morgan and Wells Fargo both reported quarterly earnings below consensus as they increased provisioning for bad debts, although Johnson and Johnson shares rose after the company beat estimates and lifted its dividend.
Asia Pacific futures traders treated the mixed market action cautiously. Hong Kong and Australian stocks look set for minor opening gains, but Nikkei futures finished the overnight session in the red.