27-4-2020 10:14:3027-4-2020 10:13:0127-4-2020 10:09:2327-4-2020 10:08:3427-4-2020 10:03:42It’s been another negative session in Asia markets at the end of a volatile week for stocks, and this has bled through into a negative open for markets here in Europe as we look to retest the bottom of the recent ranges, ahead of this afternoon’s US payrolls report.
If the US Federal Reserve was hoping that its 50bp rate cut on Tuesday would help restore investor confidence then they miscalculated quite badly. This week’s emergency rate cut would appear to be the equivalent of the central bank trying to throw a treble twenty in darts, and only succeeding in getting a treble one. In aiming to send a big message to the markets, all they succeeded in doing was sowing more fear, and using up some of their monetary policy buffer.
US yields have collapsed, with the US 10-year dropping below 0.8%, down 35 basis points already this week, as markets look to price in further reductions in the Fed Funds rate in the coming weeks. US investors appear to be getting increasingly anxious as cases in the US accelerate sharply. Travel and airline stocks, after getting absolutely rinsed yesterday, have continued to fall, as the Flybe effect ripples out across the sector. Norwegian Air is once again under pressure, opening over 10% lower again, with TUI is also trading at new record lows. Hotels have also continued to feel the heat with Intercontinental Hotels and Accor adding to recent losses.
After yesterday’s big slide in the their share price and ahead of next week’s end of year results, Cineworld management have seen it necessary to update shareholders about current trading conditions, as well as a preview of their numbers up to 31 December, though it hasn’t been enough to stem the declines in the share price this morning. Revenues are expected to come in at $4.37bn with adjusted EBITDA of just over $1m. Net debt is expected to be $3.48bn. The statement also said that there has been no noticeable change in admissions compared to the same period a year ago. With respect to the effects of the coronavirus management said they were taking measures to prepare the business for all eventualities including cost reductions and capex reduction.
The banking sector in Europe is also continuing to feel the heat. Yesterday Commerzbank hit a new record low, and has continued to fall today as yields slip back close to their record lows of last year, while the rest of the sector also remained under pressure with the EStoxx Banks index heading back towards levels last seen at the height of the Eurozone debt crisis in July 2012.
Metro Bank’s share price has continued to fall to new record lows, down sharply again this morning as investors continue to react to this week’s news of the departure of the company’s chief risk officer, Grahame McGirr only two weeks into the role. The lack of transparency over the departure at a time when the bank is being investigated by regulators is not a good look for a bank where confidence in management is already quite low.
This afternoon's US non-farm payrolls report looks set to be one of the most meaningless report in the last 12 years. However good the numbers are will probably make not a lot of difference to overall sentiment. Nonetheless, expectations are for a decent number of 175,000, down from January’s 225,000, with wage growth expected to come in at 3%. The unemployment rate is expected to remain steady at 3.6%, still near 50-year lows, which can be construed as a silver lining. If, as seems likely we are about to hit a sudden stop for the global economy, at least we’re coming at from a position of low unemployment.
We also have the latest Canadian jobs report for February, and here it is also expected to see a fairly solid number of 11k, down from January’s 34k. Unemployment is expected to tick higher to 5.6%.
Not surprisingly with US yields falling sharply the US dollar is also coming under further pressure, the worst performer so far today and this week, it has fallen to its lowest levels since July last year against a basket of currencies. It has fallen the most against the Swiss franc and the euro, while the Canadian dollar has lagged behind.
Gold prices are now back close to where they were in late February, as investors price in the prospect of further US rate cuts in the weeks ahead.
The slide in oil prices has also continued, with Brent crude slipping below $49 a barrel as the prospect of sharp hits to future demand, and an inability of OPEC+ members to agree on future production cuts weights on prices.