ASX to slip, techs rally in New York
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Australian shares are set to edge lower at the open with the RBA’s latest thoughts on monetary policy scheduled to be released near midday.

ASX futures were down 1 point to 5367 near 6am AEST, reversing earlier modest gains.

The local currency briefly surged above US65¢, and was most recently up 1.4% at US64.87¢. The move was seen in part a reflection of ’s mostly positive trade stats.

Techs continued to drive Wall Street higher. All three major benchmarks closed up though slightly off their intraday peaks.

Atlassian reset its record high again, rising to more than $US180 a share for the first time. In late trade, Paypal leapt more than 14%; Lyft surged more than 22%. Uber was set to report results after the closing bell, its shares were 11% higher.

Earlier in New York, the yield on the 2-year Treasury security fell to a record low. The January fed funds futures contract topped at 100.05 mid-morning trade in New York — a contract high — and indicative of a negative half basis point policy rate, Bloomberg reported.


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The number of Americans filing for unemployment benefits topped 3 million for a seventh straight week, signaling little relief in sight for the economy since the coronavirus began closing restaurants, factories and offices from coast to coast in mid-March.

Initial jobless claims totaled 3.17 million in the week ended May 2 following 3.85 million in the prior week, according to a Labor Department report released Thursday. That brought the seven-week total to about 33.5 million. The median estimate in a Bloomberg survey of economists called for 3 million last week.

The focus now is on tomorrow’s April nonfarm payrolls report.

“No doubt the April nonfarm payroll number will go down in the record books,” RBC Capital Markets Tom Porcelli said. “Such is the case when the economy is brought to a proverbial halt by government decree.”

Mr Porcelli said he’s expected about 20 million jobs were lost last month, with the unemployment rate expected to spike to about 17%.

“In terms of the “signal” in the upcoming report, with regards to how many jobs could come back in relatively short order, investors should focus on the job losers “on temporary layoff” series. If PPP loans are indeed used to retain and rehire, we should see the vast majority of these jobs come back very quickly.”

Today’s agenda

Local: RBA Statement on Monetary Policy at 11.30am AEST

Overseas data: China first quarter current account; Japan Nikkei services PMI April final; US April non-farm payrolls report

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Market highlights

ASX futures down 1 point to 5367 near 6am AEST

  • AUD +1.4% to 64.87 US cents (overnight peak 65.06)
  • On Wall St near 4pm: Dow +0.9% S&P 500 +1.1% Nasdaq +1.4%
  • In Europe: Stoxx 50 +1.3% FTSE +1.4% CAC +1.5% DAX +1.4%
  • Spot gold +2.1% to $US1720.87 an ounce at 2.17pm New York time
  • Brent crude +0.8% to $US29.96 a barrel
  • US oil +0.8% to $US24.19 a barrel
  • Iron ore n/a
  • Dalian iron ore +2.7% to 633.5 yuan
  • LME aluminium % to $US a tonne
  • LME copper % to $US a tonne
  • 2-year yield: US 0.13% Australia 0.21%
  • 5-year yield: US 0.30% Australia 0.39%
  • 10-year yield: US 0.63% Australia 0.91% Germany -0.55%
  • US prices as of 4.14pm New York time

From today’s Financial Review

Banks stretched as economic cost mounts: State and federal leaders will move on Friday to restart the economy as quickly and safely as possible, as new data on the economic cost shows the banks are wearing up to $160 billion in loan payment deferrals.

Chanticleer: Study shows smarter way to trade shares: When two academics set out to measure liquidity in equity markets they found a formula which can optimise share trading by institutions and retail investors.

ASIC takes aim at risky term deposit ‘alternatives’: The corporate watchdog has ramped up its surveillance of fixed income product advertising, warning the public to beware of risky investments.

The April employment report, out Friday, will highlight the unprecedented depth of job losses captured in weeks of claims figures and offer a more detailed look at the breadth of the layoffs from mid-March to mid-April. The median estimate in a Bloomberg survey of economists calls for a staggering 21.3 million drop in payrolls and for the unemployment rate to jump to 16%, the highest in monthly records dating back to the 1940s.

Neiman Marcus has filed for Chapter 11 bankruptcy protection, the first department store chain and second major retailer to be toppled by the coronavirus pandemic.

The move by the 112-year-old storied luxury department store chain was announced Thursday and follows the bankruptcy filing by J.Crew on Monday. Experts believe there will be more to come even as businesses start to reopen in parts of the country like and Florida.

Europe

UK economy to shrink by a third, says BoE: The bank sees a short, sharp collapse that would be the worst since the South Sea Bubble of 1720.

European shares rose on Thursday as a surprise rise in China’s exports overshadowed another set of grim results and a warning from Air France-KLM that demand could take “several years” to recover.

The pan-European STOXX 600 rose 0.6%, led by gains in retail, mining and real estate sectors.

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German online fashion retailer Zalando jumped 10.2% after saying it was recovering from an initial hit by coronavirus lockdowns and it expects a return to profitability as it posted a first-quarter loss.

“Market reaction has generally been driven by things not getting any worse,” said Will James, of European equities at Aberdeen Standard Investments in London.

“There’s probably a bit of danger to extrapolate a similar path of recovery within Europe and elsewhere because in China, the state is very heavily involved.”

Despite forecasts for a record 7.7% contraction for the euro zone economy this year and a 14% plunge in Britain’s economy, European shares have held near two-month highs on hopes that easing lockdowns will spark a rebound in economic activity.

and Telefonica have agreed to merge their British businesses in a $US38 billion deal that will create a powerhouse in mobile and to take on market BT.

In the biggest shake-up of the British telecoms market for five years, the deal will bring together the biggest cable TV provider in Liberty’s Virgin Media with Telefonica’s O2, the second-largest mobile operator.

Asia

Hong Kong shares ended lower on Thursday, as sentiment was weighed by a bleak outlook for global trade after China reported a double-digit fall in imports in April and renewed tensions between the Washington and Beijing.

The fall in China’s April imports signals more trouble ahead as the global economy sinks into recession, but data showed exports unexpectedly rose for the first time this year as factories raced to make up for lost sales due to the coronavirus crisis.

At the close of trade, the Hang Seng index was down 156.85 points or 0.65% at 23,980.63. The fell 0.44% to 9764.26.

The Composite index closed down 0.23% at 2871.52. The blue-chip CSI300 index was down 0.29%, with its financial sector sub-index lower by 0.69%, the consumer staples sector up 0.89%, the real estate index down 0.95% and the healthcare sub-index up 0.03%.

The smaller Shenzhen index ended down 0.11% and the start-up board ChiNext Composite index was weaker by 0.162%.

Currencies

The US dollar fell from two-week highs on Thursday, as investors booked profits on the currency’s gains this week before Friday’s US nonfarm payrolls report for April.

The greenback gave up gains against the euro and the Swiss franc and pared its rise versus the yen. Against commodity currencies such as the Australian and Canadian dollars, the US unit extended its losses. Over the week, the dollar index was up 0.9%.

“My sense is that it’s a case of profit-taking on the dollar’s outperformance this week ahead of tomorrow’s jobs report,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. “We’re just in a lull, and it’s a good time to take profits off the table ahead of what is expected to be a historically bad jobs report,”

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Commodities

The humbling of Exxon: The coronavirus has laid bare a decade’s worth of miscalculations at the oil giant after it missed the shale boom, overspent on projects, and saw its debt rise to $US50 billion.

Iron ore outlook from Hui Heng Tan, research analyst at Marex Spectron: “We remain bearish on overall supply conditions. Forward supply conditions are expected to continue to loosen and we expect that to be the case for the remaining weeks of the month. The above can be justified by the higher inflow of [iron ore] that we expect to arrive in China within the next two weeks.

“However, with some re-stocking efforts by mills of late, we observe that spot supplies continue to tighten. This would negate some of the price negative developments discussed earlier.

“While our short-term demand view has weakened, we remain marginally bullish. Mill margins improved as cheaper feedstock prices continue to keep costs low thus lifting overall profitability. Steel rates too improved lately and this is expected to lift near term IO demand.

“Notably, our estimations for April point towards about -5% YoY drop in steel rates. If realised, this would be the first time since early 2016 when we observed a back to back negative YoY growth in steel rates. This seems justifiable considering that steel inventory levels remain less than 50% higher YoY which leaves little room for mills to substantially increase run rates going forward. Both our domestic vs. imported arb weakened which means lower preference for imported ore.”

Australian sharemarket

The Australian sharemarket closed lower for a second day running on Thursday, as investors adopted a more risk averse stance in light of a number of economic red flags.

The S&P/ASX 200 fell 20.4 points, or 0.4 per cent, to 5364.2, extending its losses from the day earlier as the market struggles to make ground towards recovering what it has shed the last three months.

The sectors that have bottomed out: UBS warns the Australian sharemarket rally might be nothing more than a false start, after its heavy sell-off through February and March, but that some sectors may have bottomed out and are likely to outperform others.

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