Wednesday, April 15, 2020

Asia Times: US airlines surge in after hours trading as they reportedly have an initial agreement with the US Treasury for financial support

Tags
  • Dollar
  • Gold
  • Yen
  • Euro
  • Stocks
  • Oil
  • US earnings' season

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Market Recap: US airlines surge in after hours trading as they reportedly have an initial agreement with the US Treasury for financial support

Stocks in the US surged on Tuesday amid optimism that lockdowns in the US would be easing soon, ignoring potentially worrying signals from earnings reports of both JP Morgan and Well Fargo. After US President Donald Trump's statement that he would like the US economy to reopen from its lockdown soon, White House advisor Larry Kudlow said on Tuesday that Trump will be having an official announcement on more details of the reopening of the US in the next couple of days., adding to overall investor sentiment.

In company news, both JP Morgan and Wells Fargo posted their largest loan-loss provision in the last 10 years, reaching levels last seen during the 2008 Financial Crisis. The high levels of provision signal that loan-makers are preparing for high rates of defaults amid the coronavirus outbreak. Investors will likely be able to get a clearer picture of the extent of this as more companies start to report their Q1 earnings for 2020 over the next few weeks. JPMorgan CEO Jamie Dimon did reassure the market, saying that the bank is preparing for the worse and is well prepared to handle large losses. Both banks missed estimates, with JPMorgan's EPS reaching US$0.78/share (E: US$2.141/share) and Wells Fargo's EPS at US$0.07/share (E: US$0.538/share). JPMorgan's shares ended 2.74% lower while Wells Fargo's shares dived 3.98% on Tuesday as a result.

US airlines surged in after-hours trading, after industry players and the US Treasury department reportedly have a preliminary agreement for airlines in the US to receive financial aid amid the coronavirus outbreak. American Airlines was reported to be receiving US$5.8bn in grants and loans while Southwest will get US$3.2bn. Other airlines, i.e. United, Delta and more will also reportedly be participating in the program.

Among S&P500 sectors, the consumer staples, consumer discretionary and technology sectors were the best performing, each advancing more than 4% on Tuesday. Cruise liners were among the top performers in the S&P500, with Royal Caribbean Cruise shares spiking 13.40%, with Carnival Corp and Norwegian Cruise Liners close behind, gaining more than 8% each. Apple shares advanced 5.05% after data indicated that iPhone shipments to China recovered slightly in March.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +2.39% +558.99 23,949.76
S&P500 +3.06% +84.43 2,846.06
Nasdaq +3.95% +323.32 8,515.74
*Source: Bloomberg

In forex, the dollar dived against most major currencies, pushing the Dollar Index down to close below 99.00 amid optimism for both the US and the EU to reopen. Spain, Germany and Italy all reported falling new infections of the coronavirus, allowing EU leaders to consider easing their lockdown policies incrementally. The Australian dollar strengthened the most against the greenback, while the Canadian dollar continued to weaken as the outlook for oil continues to skew negative.

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Safe haven assets also rose on Tuesday, likely as more investors re-enter the market as volatility eases and as positions were hedged against a potential pullback in equities as a result of weak corporate earnings. Gold gained while the yen strengthened 0.51% against the greenback, although the strength in the Japanese currency was more likely due to a fall in demand for the dollar. US Treasuries rose across the board, pushing yields lower on Tuesday. Benchmark 10-year yields fell 1.9bps to 0.75%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.68% +11.63 1,726.97
Silver +2.19% +0.34 15.33
JPY +0.51% +0.55 107.22
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -2.6 0.22%
10-Year -1.9 0.75%
30-Year -0.5 1.40%
*Source: Bloomberg

Oil tumbled yet again, with Brent retreating 6.74% while WTI crude oil futures dived more than 10% as the oil market continues to be flooded until the May 1st deadline for the production limit to take effect.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -6.74% -2.14 29.60
WTI Crude -10.26% -2.30 20.11
*Source: Bloomberg

Meanwhile in Asia, equities showed some weakness as investors weighed the risks of the outlook for the world economy. With major US banks prepare for large losses and the IMF predicting a 3% contraction for the world economy in 2020 thanks to the global lockdown, investor sentiment will probably dampen. Both the Nikkei and the ASX200 started Wednesday's trading session lower. Futures tracking major indices in the US were trading lower on Wednesday morning as well.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.47% -92.73 19,544.19 8:51:45 AM
ASX200 Index -0.64% -35.11 5,453.00 9:11:35 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.23% -54.00 23,825.00 8:14:25 AM
S&P500 Futures -0.39% -11.00 2,832.00 8:14:24 AM
Nasdaq Futures -0.17% -14.50 8,677.50 8:14:24 AM
*Source: Bloomberg

Earnings releases for the day ahead includes (all timings in GMT +8):

  • Bank of America (6.45pm)
  • Citigroup (Bef US Market Open)
  • Goldman Sachs (7.30pm)

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

  • US Mar Retail Sales (8.30pm)
  • US Mar Industrial Production (9.15pm)
  • Bank of Canada (BoC) Monetary Policy Decision (10pm)
  • BoC Governor Poloz's Press Conference on the Monetary Policy Decision (11.15pm)