Morning all.
Markets showed a little bit of optimism this morning, I think centred around a move up in Oil and news from China that more of the manufacturing sector was back up and running.
Attention now seems to be shifting to US Jobless Claims data that is due in a couple of hours and there are expectations that last weeks record breaking number could be exceeded again.
The charts shows a median estimate is 3.50m claims, although Goldman Sachs has just changed their forecast from 5.25m to 6m which changes the median forecast to 3.70m claims. I could not find an updated chart this though.
Traders could be nervous about today’s numbers as following last weeks record, a true disaster of a number, stocks then went off on a strong rally for the rest of that day, against the expectations of many. Despite the bulls claiming it was all priced in, stocks reversed the very next day and are currently lower than last Thursday’s strong close.
Will we see a repeat of this pattern where even record data will produce a rally? It’s hard to know how stocks will react despite it being very easy to build a list of fundamental reasons for further selling.
One thing to remember though is that this data is for w/e 28, March a period where many states were still not in lockdown or requiring non-essential businesses to close. Below is the last chart I have from CNBC which show that state of lock downs on the 27th.
This suggests that today’s data can still get worse as since this data was released, many more states have issued stay-at-home orders and the US is finally starting to take the level of measures already in force across much of Europe.
My view is similar to last week, in that whatever happens I expect weakness into the weekend because of fear regarding how bad to the infection and mortality numbers might get. I saw this on Twitter this morning, showing a good example of why I’ve been so critical of the US over the last couple of week.
It’s easy to find tons of stories to show that the US has not been observing the guidelines that President Trump issued and that is a big problem with using ‘guidelines’, that kind of language communications that it’s optional. And we’ve seen in many other countries that attempts to do some form of soft lock-down just result in vast numbers of people carrying on as normal.
Getting back to the jobless claims today, another interesting story I came across is that banks have been unwilling to support the small business loan scheme. This was one of the Treasuries ideas to help business but also try and keep those unemployment numbers down. If businesses rehired workers they could get loans to cover the payroll which would later be forgiven when the crisis is over. It sounds good in principle but I’m sure highly stressed out small business owners are very concerned about their businesses even existing after this and are reluctant to take-on huge loan liabilities in case they don’t make it.
I’m sure it’s going to get volatile, good luck if you’re trading it today.
Stay safe, thanks for your time.
