U.S. stocks tumbled the most in a month as the torrid surge in equities came to a screeching halt amid economic jitters. Treasuries rose.
The S&P 500 careened toward a third day of losses following one of the fastest rallies on record, with 480 shares dropping. Airlines, cruise operators and travel companies that surged in recent weeks bore the brunt of the selling. Energy, financial and industrial shares led declines on Thursday.
While much of the equity selling owed to the frantic pace of the recent rally, sentiment did sour as signs mounted that a possible second wave of the pandemic could be taking hold in some states. U.S. jobless claims remained high, underscoring the longer-term challenges caused by the pandemic. The report came out a day after the Federal Reserve provided a dour outlook for the economy.
The USD/CAD pair jumped around 65-70 pips during the early North American session and refreshed session tops, around the 1.3435-40 region in the last hour. The pair showed some resilience at lower levels and quickly reversed an early dip back closer to multi-month lows, around mid-1.3400s set earlier this week. The early downtick remained cushioned amid a weaker tone surrounding crude oil prices, which tend to undermine demand for the commodity-linked currency, the loonie. Bulls, however, seemed reluctant on the back of a sustained USD selling bias, which remained unabated following the release of softer-than-expected US consumer inflation figures for May. Meanwhile, the latest leg of a sudden spike could be solely attributed to some repositioning trade ahead of the FOMC. The Fed is scheduled to announce its monetary policy decision today at 10am and is widely expected to leave interest rates unchanged at the end of a two-day meeting. Hence, the key focus will be on the accompanying policy statement and the latest set of inflation/economic growth projections, so-called 'dot-plot'. This will be followed by the Fed Chair Jerome Powell's comments at the post-meeting press conference. Investors will closely scrutinize Powell's remarks for clues about the central bank's future policy path, which will drive the near-term sentiment surrounding the USD and provide a fresh directional impetus for the USD/CAD pair.
U.S. stocks and European equities slid on concern that the blistering rally in risk assets has overshot the economic recovery. Treasuries advanced with gold and the yen.
Declines in the U.S. market ran from oil drillers to cruise lines. The dollar rose against its major peers for the first time in nine days. Financial shares led losses in the Stoxx Europe 600 Index, while a gauge of European junk-grade credit risk increased the most since April.
After a record-breaking rally that added $21 trillion to global stock markets, valuations look now stretched and technical indicators suggest a pullback is overdue. The World Bank warned the economy will contract the most since World War II this year, reducing incomes and sending millions of people into poverty in emerging and developing nations.
U.S. stocks rose as easing lockdowns bolstered economic optimism. Oil slumped. The S&P 500 extended a rally from this year's low to more than 40% and is on track to erase this year's losses. The Dow Jones Industrial Average outpaced major benchmarks. Treasuries rebounded, while the dollar headed for its longest losing run in almost a decade. Traders were cautiously optimistic as many parts of the country came out of the shutdowns that brought the world's largest economy to a standstill. Stan Druckenmiller, who last month warned about owning stocks, said on Monday that he now believes he was "far too cautious" during the current market rally. To Citigroup's strategists including Tobias Levkovich, positioning may be overly extended, and investors may not be factoring all the potential risks. The dollar fell back to the level before the coronavirus crisis sparked a rush to haven assets. Where it goes from here mostly depends on the Federal Reserve, which will probably welcome all signs of recovery in its statement at the conclusion of this week's meeting. But policy makers may be wary of an unruly increase in borrowing costs that could add to strains on businesses and households, and raise the price tag of the government's rescue efforts.
Yesterday, USDCAD was flat trading within a 1.3468 – 1.3541 range. Overnight, positive risk sentiment continued sending the USD and JPY broadly lower – both currencies trading near 3 month lows vs the other majors. The AUDUSD rate climbed towards its 2020 high. USDCAD broke below its 200 day moving average @ 1.3463 – the first time the tech level has been broken since Feb. 21st. After the initial fall from 1.3800 this week, support just above this MA had stalled the down-trend the past few days. Both Canadian and U.S. jobs data were better than expected sending equity markets broadly higher as the market becomes ever more confident with the re-opening of the economy. The initial reaction sent USDCAD from 1.3440 down to 1.3394 before moving higher to 1.3465. A subsequent decline to 1.3391 was short-lived sending USDCAD back up to 1.3446. After falling towards a 3 month low, the broad USD index has climbed back to trade near session highs.
Stocks slumped in Europe and U.S. futures fell as concern a recent rally had gone too far too fast overshadowed new stimulus measures and encouraging economic data.
Contracts on the S&P 500 and Nasdaq 100 dropped, a day after the tech-heavy index rose briefly above its record-high close. The dollar edged higher as weekly jobless claims fell to 1.88 million, reflecting a slowing -- though far from a halt -- in job losses. The Stoxx 600 stayed lower in the wake of the European Central Bank decision to add 600 billion euros to its pandemic purchase program, more than expected, and extended it to at least June 2021.
The Bank of Canada softened its worst-case scenario, saying the negative impact of Covid-19 on the economy appears to have peaked. In a decision Wednesday where it left its benchmark interest rate unchanged at 0.25%, as widely expected, policy makers said they will scale back some market operations while adjusting their forecasts for second quarter gross domestic product to a less severe contraction. The central bank now estimates the economy will drop another 10% to 20% in the second quarter, after a 2.1% decline in the first three months of this year. That suggests a peak-to-trough decline of 12% to 22%, instead of a 15% to 30% scenario the central bank had previously been estimating. The Bank of Canada also said that short-term funding conditions have improved on the back of the central bank's injections of cash into the financial system, prompting policy makers to reduce the frequency of term repurchase operations to once a week. Wednesday's interest rate decision was the last under Stephen Poloz, who has been replaced by Tiff Macklem. The Bank of Canada has taken extraordinary moves in the midst of the pandemic. The central bank cut its benchmark interest rate by 150 basis points to near zero, its effective lower bound, and it introduced its first ever large scale asset purchase program to buy billions of dollars of government and corporate debt.
The USD/CAD pair fluctuated in a relatively tight range near 1.3700 before falling sharply during the American trading hours. As of writing, the pair was trading at its lowest level since March 9th at 1.3600, losing 1.10% on a daily basis. The broad selling pressure surrounding the greenback seems to be causing the pair to extends its slide on Monday. Despite ongoing protests and riots in the US, Wall Street's main indexes are posting modest gains to make it difficult for the greenback to attract investors as a safe-haven. At the moment, the US Dollar Index (DXY), which closed the last four days with losses, is down 0.4% on the day at 97.90. On the other hand, the Markit Manufacturing PMI in Canada rose to 40.6 in May from 33 in April to help the loonie gather strength. Moreover, Canada's Prime Minister Justin Trudeau announced on Monday that they will deliver C$2.2 billion in planned infrastructure funding for municipalities in lump-sum payment in June to provide an additional boost to the currency.
Yesterday, USDCAD initially dropped from 1.3765 down to 1.3735, just shy of Wednesday's 10 week low of 1.3728 before climbing to 1.3789. The pairing then held a 1.3747 – 89 range for the balance of the session. Overnight, USDCAD climbed to 1.3794 before falling this morning to a fresh multi-week low @ 1.3715. The move was short-lived as softer equity markets, oil prices, and broad USD strength over the past 2 hours has taken USDCAD back up towards Tuesday's broken support zone @ 1.3830. The market appears to be taking profit into month-end as the CAD has rallied about 4 cents this month vs the USD. Also, Trump is holding a press conference later today and is expected to announce retaliatory measures against China. Yesterday, China passed a security bill on Hong Kong, threatening its long-standing independence.
Stock were mixed Thursday morning amid a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity.
A new report this morning showed new unemployment claims totaled a slightly greater than expected 2.123 million last week, though continuing claims for the prior week pulled back from a record high and fell for the first time during the pandemic. Meanwhile, first-quarter gross domestic product (GDP) was downwardly revised to show a 5.0% annualized decline, from the 4.8% previously reported.
The USD/CAD pair fell to its lowest level in more than two months at 1.3725 on Wednesday and staged a decisive recovery in the second half of the day. The selling pressure surrounding crude oil prices on Wednesday seems to be weighing on the commodity-sensitive loonie. Despite easing energy demand concerns, heightened US-China tensions cause crude oil to push lower. Meanwhile, Bank of Canada Governor Stephen Poloz said if the fiscal policy is not utilized, extreme conditions that warrant negative interest rates could be experienced. On the other hand, the souring market sentiment, as reflected by falling US Treasury bond yields and uninspiring performance of US stocks, help USD find demand as a safe-haven. The US Dollar Index, which slumped to its lowest level in more than three weeks at 98.72 earlier in the day, reversed its direction and was last seen gaining 0.18% on the day at 99.20. There won't be any macroeconomic data releases in the remainder of the session and investors will be keeping a close eye on the Federal Reserve's Beige Book.
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Oil rose above $34 a barrel in New York on signs that demand for physical crude continues to recover.
Nigeria, whose millions of barrels of unsold crude were the epitome of the oil market's glut in recent weeks, lifted the selling price for its supplies in June from record lows. Algeria also hiked its official prices by almost $3 a barrel. The moves by the two OPEC nations show increasing confidence that they can sell their barrels at costlier levels, providing them some respite after being hammered by the coronavirus outbreak.
Oil has surged more than 80% this month as demand has picked up and output cuts have started to chip away at a massive oversupply. That has also led to a steady flattening in the futures curve -- a signal market supplies are growing tighter. Russia, a key member of the OPEC+ alliance that has pledged record output cuts, expects the market to balance in June or July. The CAD dollar is a big winner today up 1%
Financial markets in the US will be closed in observance of Memorial Day on Monday and the pair is likely to stay quiet. Similar to other major currency pairs, USD/CAD is moving sideways in a tight channel on Monday amid thin trading conditions. Last week, rising crude oil prices helped the commodity-sensitive loonie outperform its major rivals. The barrel of West Texas Intermediate (WTI) gained more than 12% on a weekly basis to close around mid-$33s. Although the WTI edged lower during the Asian session on Monday, it recovered the majority of its losses and seems to be staying in a consolidation phase above $33.
Yesterday, USDCAD initially dropped from 1.3946 down to 1.3891 before climbing to 1.3971. The pairing held a 1.3930 – 60 range for the balance of the session. Risk aversion was elevated overnight as China reported it would pass a highly controversial national security law in Hong Kong – effectively reducing the autonomy in place since 1997. The Hang Seng index plunged nearly 6% towards a 2 month low. Oil prices also dropped over 6% taking WTI crude from a 3 month high towards a 1 week low. The USD and JPY were broadly bid approaching 1 week highs against most major currencies. USDCAD broke back above the 1.3970 resistance level which was broken on Monday when the pair dropped from 1.4117 down to 1.3930. USDCAD has traded to 1.4049 with pull-backs limited to 1.4020 thus far. Although North American equity markets have pared a large portion of overnight losses, the USD and JPY continue to hold their gains. Canada had the largest monthly drop in retail sales on record for March and April data is expected to be even worse.
U.S. stocks initially opened mostly lower but has clawed back to positive as investors shifted through weekly unemployment claims amid increased trade tension between America and China. Crude oil gained for a sixth consecutive session.
All three main U.S. equity gauges pared started in the red after a report showed another 2.44 million Americans claiming jobless benefits. Markets were already on the back foot after the Senate overwhelmingly passed a bill that could bar some Chinese companies from listing on U.S. exchanges. President Donald Trump stoked tensions by tweeting criticism of Xi Jinping's leadership, days before the biggest Chinese political gathering of the year.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was the worst performing currency in what was another volatile week. After trading to 1.3464 the previous Friday, USDCAD moved dramatically lower during Monday's session towards 1.3315. Equity markets followed Friday's late surge higher with the DJIA adding 2,000 pts on central bank stimulus hopes. Oil prices also surged 12% early in the week on hopes that Friday's OPEC meeting would result in the necessary additional output cuts to stabilize markets. Markets were "buying the rumour" and "selling the fact" as more volatility ensued. After the U.S. Fed announced an emergency interest rate cut of 50 bp (the next scheduled meeting is March 18th) markets sold off again and USDCAD dropped from 1.3380 down to 1.3320 before moving back to 1.3391. The pairing dropped back to 1.3330 ahead of the Bank of Canada interest rate decision. The BOC also cut rates by 0.50% sending USDCAD up to 1.3430. Equity markets sold off heavily with the DJIA losing nearly 2,000pts while oil prices dropped 15%. Friday's OPEC meeting failed to generate the 1.5 million barrels per day production cuts the market had been anticipating. Despite good jobs data out of the U.S. and Canada, USDCAD moved from 1.3380 up to 1.3440 before closing the week @ 1.3420.
Virus-fomented turmoil continued to rattle global financial markets, with U.S. stocks plunging and Treasuries rallying as investors await details of a policy response from the Trump administration. The S&P 500 sank 3.4%, wiping out more than half of Tuesday's surge, after President Donald Trump failed to deliver on his promise for a sweeping stimulus package to combat the economic effects of the coronavirus. The 10-year Treasury yield fell below 0.7% and crude tumbled back toward $33 a barrel. Goldman Sachs slashed its forecast for the S&P 500 and said the bull market will end soon. Financial markets whipsawed this week as investors grapple with the potential economic hit from the virus that is upending daily routines around the world. Policy makers have grown increasingly ready to take action, with the ECB indicating it may move as soon as this week, the Bank of England cutting rates and German Chancellor Angela Merkel pledging to do "whatever is necessary" to bolster the economy. In the U.S., the Trump administration continues to promise "major" stimulus, but details remain uncertain. Markets are now growing worried that whatever does come will not have the ability to stave off a major blow to the world's largest economy.