Thursday, April 2, 2020

Asia Times: ADP’s private employment report shows smaller firms cutting its workforce the most since April 2009

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • ISM PMI
  • US payrolls

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Market Recap: ADP’s private employment report shows smaller firms cutting its workforce the most since April 2009

Major indices in the US fell more than 4% on Wednesday after US President Donald Trump's press conference late on Tuesday revived fears of the severity of Covid-19. Trump warned that the next two weeks will be very challenging for the US while top public officials estimates the death toll in the US could range between 100,000 and 200,000 even with the most stringent measures.

Weak economic data in the US likely also contributed to the dive in equity markets. ISM's manufacturing PMI report fell less-than-expected to 49.1 for March, but the highlight of the report was the new orders index which fell to an 11-year low of 42.0, highlighting the impact the virus outbreak already has in the US manufacturing sector.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -4.44% -973.65 20,943.51
S&P500 -4.41% -114.09 2,470.50
Nasdaq -4.41% -339.52 7,360.58
*Source: Bloomberg

But the dollar managed to strengthen against almost all major currencies except the Japanese yen. This is likely due to a rising demand for both safe havens as well as cash as investors exit positions ahead of upcoming earnings season and as the outlook for the US economy looks to be tilted to the downside for longer-than-expected.

ADP private employment fell less-than-expected in March, declining 27,000 from a 179,000 gain in February. But details of the report revealed that smaller firms cut 90,000 jobs, the most since April 2009. Initial jobless claims that is set to be released later today at 8.30pm (GMT +8) will provide a more up-to-date picture of the current US labour market.

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Safe haven assets rose across the board on Wednesday as both weak economic data and Trump's press conference encouraged risk aversion. Gold advanced while the yen strengthened against the greenback for the sixth straight trading session. US Treasuries rose across the board, with benchmark 10-year yields retreating 8.6bps to 0.58%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.91% +14.33 1,591.51
Silver -0.08% -0.01 13.82
JPY +0.34% +0.37 107.17
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -3.9 0.21%
10-Year -8.6 0.58%
30-Year -10.2 1.22%
*Source: Bloomberg

Brent suffered yet another large drop as an oversupply in oil markets will probably not end anytime soon. Brent dived more than 6% while WTI crude oil futures dipped slightly on Wednesday. But oil traders did see some hope after Russia reportedly signalled that it would not boost crude oil production amid the current oversupply as it would not be profitable for them. Both the Brent and WTI crude oil benchmarks were trading more than 4% higher on Thursday as a result.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -6.11% -1.61 24.74
WTI Crude -0.83% -0.17 20.31
*Source: Bloomberg

In Asia, equity markets in Japan, Korea and Australia inched lower in the first hour of trading on Thursday as stocks in Asia tracks losses in the US. Futures tracking major US indices were slightly higher on Thursday morning, likely as volatility started to ease a little after the sharp drop on Wednesday.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.61% -110.87 17,954.23 8:28:05 AM
KOSPI Index -0.20% -3.34 1,681.45 8:48:00 AM
ASX200 Index -2.57% -135.24 5,120.40 8:48:06 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.95% +196.00 20,928.00 8:38:06 AM
S&P500 Futures +0.97% +23.75 2,471.00 8:38:06 AM
Nasdaq Futures +0.91% +68.00 7,504.00 8:38:04 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • US Mar 27 Initial Jobless Claims (8.30pm)
  • US Feb Factory Orders (10pm)
  • US Feb Durable Goods Orders (F) (10pm)