Thursday, April 9, 2020

Asia Times: Oil prices & energy equities surge as energy traders wait on OPEC+ meeting later today

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04092020a

Market Recap: Oil prices & energy equities surge as energy traders wait on OPEC+ meeting later today

US equities surged on Wednesday after muted trading on Tuesday, pushing the DJIA and S&P500 more than 3% higher as hopes for an additional fiscal stimulus package from the US rose. US President Donald Trump said that his administration will be looking for an extra US$250bn stimulus package aimed to replenish funds for the small business loan program. Trump's optimism that the coronavirus outbreak is reaching its peak in the US also likely contributed to the gain in the equities market on Wednesday.

The energy sector led gains in the S&P500 once again, spiking 6.74% on Wednesday with utilities close behind, rising 5.41%. UnitedHealth, Goldman and Apple were the main movers of the DJIA, while Walt Disney, Walmart and Walgreens were the laggards.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +3.44% +779.71 23,433.57
S&P500 +3.41% +90.57 2,749.98
Nasdaq +2.58% +203.64 8,090.90
*Source: Bloomberg

The Australian dollar gained the most against the greenback on Wednesday after Bloomberg reported that Algeria's energy minister signalled that the OPEC+ meeting later today will be held to discuss a massive reduction to production output, which may reach 10 million barrels a day. The Australian dollar managed to erase losses earlier that day that resulted from Australia's sovereign debt rating outlook being downgraded by S&P Global Ratings from stable to negative.

The Fed's monetary policy meeting minutes for its emergency meeting on March 15th revealed that officials agreed that rates should stay close to zero until the coronavirus crisis has passed and the US economy starts to return back to normal. The meeting minutes also showed that while officials were unanimous on the need for stimulus, some officials felt a 50bp rate cut was sufficient instead of the final 100bp cut. There was also concern on the Fed's asset purchase program, where some officials saw the need for the program to be seen not as quantitative easing but as a tool to ensure liquidity in money markets. The greenback fell on the release of the minutes, but recovered later after EU officials were unable to agree on an economic stimulus package for the bloc.

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The safe haven assets market was relatively muted on Wednesday. Gold and yen both inched slightly lower. US two-year Treasuries gained, while longer-term Treasuries fell. Benchmark 10-year yields were 6bps lower at 0.77%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -0.10% -1.58 1,646.14
Silver -0.40% -0.06 14.87
JPY -0.06% -0.07 108.83
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -0.8 0.25%
10-Year +6.0 0.77%
30-Year +8.2 1.38%
*Source: Bloomberg

Oil rose on Wednesday thanks to positive signals from Algeria, whose energy minister signalled that the bloc is discussing a large reduction to output to combat the low oil prices. Russia's energy minister also reportedly said that Moscow is ready to cut its output by about 15% (1.6mn barrels a day), although signalling that a cut of that magnitude will only be part of a deal that includes other non-OPEC+ oil producing countries as well. Both Brent and WTI crude oil futures were trading higher on Thursday morning as well, advancing 2.53% and 4.58% respectively as of 9.03am (GMT +8).

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +3.04% +0.97 32.84
WTI Crude +6.18% +1.46 25.09
*Source: Bloomberg

Stocks were mixed in Asia on Thursday morning, likely as traders wait for news on the OPEC+ meeting later today. The Nikkei was slightly lower, while the KOSPI and ASX200 were more than 1% higher in the first hour of Thursday's trading session. US equity futures were trading slightly higher as well as optimism continues to dominate the equities market.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.06% -12.10 19,341.14 8:42:45 AM
KOSPI Index +1.50% +27.09 1,834.23 9:02:40 AM
ASX200 Index +1.18% +61.66 5,268.60 9:02:35 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.58% +134.00 23,380.00 8:52:49 AM
S&P500 Futures +0.46% +12.50 2,747.50 8:52:50 AM
Nasdaq Futures +0.40% +32.50 8,222.25 8:52:50 AM
*Source: Bloomberg

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

  • UK Feb Industrial/Manufacturing Production (2pm)
  • ECB Monetary Policy Meeting Minutes (7.30pm)
  • US Apr 3 Initial Jobless Claims (8.30pm)
  • Canada Mar Unemployment Rate (8.30pm)
  • Start of OPEC+ Virtual Conference (10pm)
  • US Apr Consumer Sentiment Index (U. of Mich) (P) (10pm)