Recent optimism that supported growth assets evaporated overnight as more hard evidence of economic damage arrived. European shares slumped as reported earnings plummeted and Royal Dutch Shell cut its dividend for the first time since the 1940s.

US shares also tumbled as PMI measures for April slumped and 3.8 million jobless claims took the Covid-19 unemployment toll to 30 million jobs. The weakness appeared to defy promises by the European Central Bank and the US Federal Reserve to expand their already enormous support packages.

The Euro weakened after ECB chief Christine Lagarde introduced a new pandemic lending package to banks while keeping interest rates on hold. Investors appeared to focus on her forecast for a 5% to 12% contraction in the European economy this year and the potential for the lending program to further compress bank margins. Finance stocks led the European share market declines.

The Fed’s decision to widen its lending program to major companies also failed to impress investors. The US dollar fell and major indices dropped despite the new support measures. The evidence of macro-economic damage overwhelmed more positive reports from Amazon and Apple, which reported a 1% increase in profits for the quarter. End of month profit taking may have added to share market pressure. 

Industrial metals fell, but surprisingly gold failed to attract bids. Crude oil markets continued to go their own way, rallying by around 10%. This may see energy stocks outperform today. Worryingly, short dated bonds rallied hardest, indicating increasing risk aversion.

Asia Pacific stock are looking at a negative if subdued session today as many major centres are closed for holidays. The Singapore dollar is in focus as it continues to climb, and CMC’s SGD index tests resistance at 982. Australia 200 futures fell 123 points in overnight trading, indicating a failure to break resistance at 5,525 and a return to lower trading ranges.