The S&P 500 gained 12pc last week, its largest increase in 46 years. (REUTERS / Andrew Kelly / photo file)
Unemployment claims in the United States have soared again, while the Federal Reserve has injected $ 3.6 trillion in additional stimulus to minimize the economic spinoffs from COVID-19.
The Australian dollar surged to a month high of 63.4 cents this morning as the Fed’s record stimulus weakened the greenback.
Meanwhile, Saudi Arabia, Russia and the world’s largest oil producers reached an agreement to cut production by a record amount (10 million barrels a day), but that was not enough to prevent a further fall in oil prices.
Market overview at 8:00 am (AEDT):
- ASX SPI Futures + 0.8 pc at 5442, ASX 200 (closing Thursday) + 3.5 pc at 5387
- AUD: 63.3 US cents, 50.8 British pence, 57.9 Euro cents, 68.64 Japanese yen, NZ $ 1.04
- United States: Dow Jones +1.2 pc at 23719, S&P 500 +1.5 pc at 2790, Nasdaq + 0.8 pc at 8154
- Europe: FTSE 100 + 2.9 pc at 5843, DAX + 2.2 pc at 10565, CAC + 1.4 pc at 4507, Euro Stoxx 50 + 1.5 pc at 2893
- Commodities: Brent crude -2.4pc at US $ 32.03 / barrel, spot gold + 2.3pc at US $ 1683.82 / ounce
The Australian equity market is closed for the long Easter weekend, but could benefit from solid gains when it reopens next Tuesday.
It could follow a strong lead from the Wall Street benchmark (the S&P 500), which jumped 12% this week – its biggest weekly gain since 1974.
Overnight, the S&P index added 1.5% to close at 2,790 points.
The industry biased Dow Jones index rose 286 points (or 1.2%) to 23,719, while the tech-rich Nasdaq rose 0.8% to 8,154.
European markets also jumped. The London FTSE and the German DAX increased by 2.8 and 2.2 percent respectively.
The spot price of gold also reached its highest level in a month, around US $ 1,684 per ounce.
World markets were buoyed by hopes that the number of new coronavirus cases would slow down and that the latest announcement from the US central bank on further stimulus packages would be injected into the system.
The Fed goes deeper into unexplored territory
The Fed has said it will allocate a massive US $ 2.3 trillion (US $ 3.6 trillion) to further protect the US economy from the economic damage caused by the coronavirus.
It had already lowered interest rates to almost zero and relaunched its quantitative easing program in March, pledging to buy an unlimited number of bonds.
As part of its latest stimulus package, the Fed will offer four-year loans, via banks, to struggling US companies.
New Main Street Facility Will Route Up To $ 600 Billion In Loans (At Least $ 1 Million) To Businesses With Up To 10,000 Employees Or Less Than $ 2.5 Billion In Revenue .
The companies receiving the loans “must commit to making reasonable efforts to maintain the wage bill and retain workers” and not use the funds to refinance existing debt.
The central bank will also spend up to US $ 500 billion to buy municipal bonds from local governments, which are on the front lines of the health crisis and are also facing a possible collapse in tax revenues as unemployment peaks. and companies close under a strong social distancing. rules.
Many of these programs are set to expire in September, but Fed President Jerome Powell has said the Fed will spend whatever it takes to bring the pandemic under control and get the economy back on track.
“We are deploying these lending powers to an unprecedented extent,” said Mr. Powell.
“We will continue to use these powers with strength, proactivity and aggressiveness until we are confident that we are firmly on the road to recovery.”
That was enough for investors to ignore the bad news – that 6.6 million Americans claimed unemployment insurance benefits last week, according to figures released by the United States Department of Labor.
This brings the total to 16.8 million people who have lost their jobs in the past three weeks.
The record number of applications for unemployment benefits results from the closure of businesses such as restaurants, bars and other social locations.
“In just its first month, the coronavirus crisis is about to overtake any comparison  Great recession, “said Daniel Zhao, senior economist at Glassdoor, an online recruitment company.
“The new standard for unemployment insurance claims will be the canary in the coal mine for the duration of the effects of the crisis on the millions of newly unemployed Americans.”
OPEC signs record oil deal
The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed on Thursday to cut oil production by a record 10 million barrels a day (or 10% of world supplies) for two months.
All members will reduce production by 23%, with Saudi Arabia and Russia each reducing 2.5 million barrels per day and Iraq more than 1 million barrels per day.
But the price of Brent crude fell 2.5% to $ 32 a barrel. Its value has dropped by half since the start of the year.
Investors are concerned that these supply reductions are still not enough to combat the unprecedented drop in demand for oil caused by the coronavirus pandemic.
OPEC +, which includes non-members like Russia, also expects the United States and other producers to join its efforts to cut production (by 5 million barrels per day) and support prices to help deal with the deepest oil crisis in decades.
Global demand for fuel has dropped by around 30 million bpd (or 30% of global supply) as anti-virus measures have immobilized aircraft, reduced vehicle use and curbed fuel consumption. economic activity.
If an unprecedented reduction of 15 million barrels per day were to occur, this would not be enough to prevent the world’s storage facilities from filling up quickly.
Far from signaling any willingness to offer support, US President Donald Trump has threatened OPEC member Saudi Arabia, saying he could face sanctions and tariffs if he did not reduce enough the offer to help the struggling US oil industry.
“We expect other producers outside the OPEC + club to join the measures, which could happen tomorrow during the G20,” the head of the Russian wealth fund (and the one of the best oil negotiators in Moscow), Kirill Dmitriev.
On Friday, Saudi Arabia will welcome an appeal between the energy ministers of the Group of the 20 main economies.
Published for the first time