Wall St lower on virus, earnings positioning

Shares on Wall Street began the week mixed as the number of COVID-19 virus cases and deaths continued to rise in the US and as investors positioned for a bleak first-quarter reporting season.

ASX futures were 43 points or 0.8% to 5442 when they last traded on April 9.

“While the market has been rising over the past two weeks, it is still very indecisive and showing signs of weakness,” Wealth Within’s Dale Gillham said in a note.

“The reason I say this is because in 6 of the past 12 days the market has closed higher than it opened, meaning 50 per cent of the time it has closed lower. When markets or stocks unfold like this, it is a sign of indecision and uncertainty.”

The local currency leapt above the US64¢ mark overnight, as it continued to rebound from a drop below US57.50¢ on March 19. It was 0.7% higher at US63.91¢ at 5.40am AEST.

While the currency has rebounded more than 11% from its March low, it’s still down more than 9% year-to-date.

New York state deaths top 10,000: Britain should expect the number of daily deaths from coronavirus to continue to rise this week, the government’s chief scientific adviser saids. Follow coronavirus updates here.

Shares closed mixed on Wall Street to start the week with earnings season poised to begin. The Dow shed 1.4%, and the S&P 500 slid 1%. The Nasdaq ended 0.5% higher.

“First quarter earnings season is all about guidance,” said LPL Financial equity strategist Jeffrey Buchbinder said in a note.

“Forecasting has been somewhat of a guessing game with many companies pulling outlooks given the uncertainty, so investors will be looking for help developing credible scenarios depending on how long the stay-at-home orders remain in place.”

Fundstrat Global said it expects the post-March end rally to stall this week. “After an impressive oversold rebound short-term momentum indicators, tracking 2-4 weeks shifts, are starting to move into overbought territory.”

“First key support is near the 200-week at 2647 (1000-dma=2627) and late March highs near 2635 followed by the 15-dma at 2554 followed by 50-62% retracements of the recent rebound between 2496-2420.

“Our expectation is that the pullbacks, should it develop, will hold between the rising 15-dma and 200-week sma.”

The S&P 500 ended at 2762 in New York on Monday local time.

Today’s agenda

Local: NAB business survey – conditions, confidence – March; NZ net migration February

Overseas data: China trade balance March; US import price index March

Market highlights

ASX futures up 43 points or 0.8% to 5442 as of April 9

  • AUD +0.7% to 63.91 US cents (overnight peak 64.09)
  • On Wall St: Dow -1.4% S&P 500 -1% Nasdaq +0.5%
  • In New York, BHP +0.3% Rio +0.4% Atlassian -1.9%
  • Tesla +13.6% Amazon +6.2% Netflix +7%
  • European markets were closed
  • Spot gold +1.4% to $US1719.56 an ounce at 2.03pm New York time
  • Brent crude +1.1% to $US31.83 a barrel
  • US oil +0.3% to $US22.82 a barrel
  • Iron ore +1% to $US85.60 a tonne
  • Dalian iron ore -0.1% to 596 yuan
  • Shanghai copper +1.6% to 41,850 yuan a tonne
  • 2-year yield: US 0.25%
  • 5-year yield: US 0.45%
  • 10-year yield: US 0.77%
  • US yield prices as of 4.59pm New York time

From today’s Financial Review

Jobless rate to hit 10pc: Treasury: With unemployment forecast to hit double digits for the first time since April 1994, the Prime Minster and state leaders are set to start planning what they are calling the “road out”.

Can property markets withstand the virus?: The RBA warns of risks lurking in the residential property market as rising unemployment triggers a rise in people falling behind on their home loan repayments.

Chanticleer: Why Virgin needs to be saved: As the federal government contemplates some form of rescue package for Virgin Australia, it is apparent the sharemarket has not got its mind around the fact the equity is worthless.

Fidelity’s Taylor: ‘You have to step off the cliff and invest’: The fund manager says previous crises can provide some helpful rules of thumb: in a cyclical downturn, you need a balance sheet that gets you to the other side.

United States

US deaths seen reaching 68,000 by early August: The first wave of the COVID-19 virus epidemic is expected to kill more than 68,000 Americans, according to the latest IHME projection.

LPL Financial on earnings: “First quarter earnings season will kick off this week with 40 S&P 500 Index companies slated to report results, including several of the biggest banks on Tuesday and Wednesday.

“Analysts are calling for a roughly 10% year-over-year decline in earnings for the index, down from the 4% year-over-year increase expected as of January 1.

“Even the lowered forecast may prove optimistic given some analysts have not adjusted numbers since mid-March in response to the lockdowns in many major cities throughout the country.”

A steep economic downturn and massive coronavirus rescue spending will nearly quadruple the fiscal 2020 US budget deficit to a record $US3.8 trillion, a staggering 18.7% of US economic output, a Washington budget watchdog group said.

Releasing new budget estimates based on spending mandated by law, the Committee for a Responsible Federal Budget (CRFB) also projected that the fiscal 2021 deficit would reach $US2.1 trillion in 2021, and average $US1.3 trillion through 2025 as the economy recovers from damage caused by coronavirus shutdowns.

Europe

Markets were closed across Europe for the Easter Monday holiday.

Asia

Repelling the virus is China’s trusted leadership moment: Co-operating with others in the virus fight is Beijing’s chance to resolve the strategic dilemmas it faces as a rising power.

Lessons from China for restarting the economy: The most important advantage for recovering economies is the ability to modify the Chinese model of simultaneously trying to contain the virus and restore the economy at a much faster pace.

Currencies

The US dollar index inched lower in thin afternoon trade.

The dollar index, which measures the greenback against a basket of six rival currencies, was down 0.09%. Against the euro, the dollar was 0.19% stronger at $US1.091.

“The dollar rallied some overnight in holiday thinned trade, though pulled back in light NY trade on Monday. There was zero data on tap, and focus largely remained on virus developments,” wrote analysts at Action Economics.

The greenback has been pressured in the last few weeks by Federal Reserve measures that have flooded the financial system with dollars to address a liquidity crunch caused in part by demand for the US currency.

“As we leave the acute phase of the crisis, the market will have to deal with the underlying data and the uncertainty of the CV-19 exit strategies. The latter will be piecemeal and bumpy. It’s a dance of fits and starts rather than a binary event of economy on/off. In turn, we expect another bump in the USD,” said Mark McCormick, global head of foreign exchange strategy at TD Securities.

Commodities

The European Commission has imposed provisional anti-dumping duties on some stainless steel products from China, Indonesia and Taiwan, according to the official EU journal, nearly eight months after launching a probe into low-price imports.

The duties on hot-rolled stainless steel sheets and coils include a rate of 17% on shipments from two Indonesian subsidiaries of Chinese stainless steel maker Tsingshan Holding Group, whose rapid expansion and low production costs in the southeast Asian country have left EU producers fretting over market share.

Tsingshan’s Chinese rival Shanxi Taigang Stainless Steel and three affiliates were hit with the highest rate of 18.9%, while other mainland China firms saw rates of 14.5% and 17.4%. The Taiwan duties were lower, ranging from 6% to 7.5%.

Steel output in Japan is on course to collapse 26% this quarter as the coronavirus pandemic pummels the global economy, according to an official forecast, adding to evidence of the severe pain being felt across the worldwide industry with mills being forced to scale back operations.

The nation’s crude-steel production is projected to slump to 19.36 million tons in the period, the lowest since the same quarter of 2009, the Ministry of the Economy, Trade and Industry said in a statement on Thursday. Japan is the third-largest supplier of the alloy after China and India.

Australian sharemarket

ASX hits 4-week high as shares close 3.5pc higher

The ASX ended on Thursday with strong gains as investors welcomed comments from top healthcare company CSL.

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