Thursday, April 16, 2020

Asia Times: Stocks slump as economic and corporate data highlights extend of economic damage from the coronavirus crisis

  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • US Retail Sales
  • Bank of Canada


Market Recap: Stocks slump as economic and corporate data highlights extend of economic damage from the coronavirus crisis

US equities retreated on Wednesday as more data pointed to a worse-than-expected downturn in the US. Goldman Sachs (+0.16%), Bank of America (-6.49%) and Citigroup (-5.64%) joined JPMorgan and Wells Fargo in sharply increasing loan-loss provision, resulting in widely missed targets. Goldman performed the best among the three, likely due to revenue from its loan department only taking up only a small chunk of its business (corporate lending only contributed to 2.2% of revenue for the bank in FY2019).

All sectors in the S&P500 fell, erasing most of the gains from earlier this week. The healthcare sector dropped the least, inching slightly lower by 0.52% followed by the communications sector that retreated 1.05%. The fall in stocks reflect the fading optimism that investors had before more data revealed that the timeline for recovery in the US may be longer-than-expected.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -1.86% -445.41 23,504.35
S&P500 -2.20% -62.70 2,783.36
Nasdaq -1.44% -122.56 8,393.18
*Source: Bloomberg

The forex market was essentially the reverse of yesterday's performance. All major currencies weakened against the greenback, as risk aversion returned to financial markets. The Canadian dollar fell 1.67% against the dollar on Wednesday despite slightly strengthening after the Bank of Canada (BoC) expanded its asset purchase program to include corporate and provincial bonds. The new Provincial Bond Purchase Program will acquire up to C$50bn while the Corporate Bond Purchase Program will buy up as much as C$10bn of investment grade bonds. The central bank also hinted in its statement that the current C$5bn weekly government bond purchase program can be increased as required, while leaving its target rate unchanged at 0.25%. The continued drop in oil prices likely also pushed the Canadian dollar further down.

In the US, headline retail sales dropped the most on record, declining 8.7% (E: -8.0%) for the month of March. Core retail sales (i.e. excluding auto and gas sales) fell less than economists' forecast of -5.2%, dropping only 3.1% from February. Manufacturing data was much worse, with the New York state Empire Manufacturing Index diving 78.2, much more than the consensus estimate for a 35.0 decline. Industrial production in March fell as well, dropping 5.4% from February to March. The weaker-than-expected economic data underpins the economic impact that the coronavirus outbreak and the subsequent lockdown across the world has on the US economy may be more than what financial markets expect, causing a drop in equities and a rally for the greenback as investors shift their position back to cash.


Gold and yen tracked losses in the equities market on Wednesday, while US Treasuries gained. Both gold and yen only inched slightly lower, as correlation to equities starts to move back into positive territory. Benchmark 10-year yields sank 12bps to 0.63%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -0.58% -9.94 1,717.03
Silver -1.83% -0.29 15.29
JPY -0.22% -0.24 107.46
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -2.2 0.20%
10-Year -12.0 0.63%
30-Year -13.6 1.27%
*Source: Bloomberg

Oil markets continued to slump as inventory buildup and reduced demand for energy continued to dominate the crude oil market. EIA reported soaring crude inventories, rising by almost 20mn barrels for the week. Gas consumption in the US retreated to the lowest ever as well, resulting in WTI crude oil futures dipping back below US$20 per barrel.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -6.45% -1.91 27.69
WTI Crude -1.19% -0.24 19.87
*Source: Bloomberg

Asia is most likely set to track losses in the US on Thursday, after data and stock market performances affirmed Asian investors that the initial recovery in stock prices was likely only temporary. Futures tracking US major indices were also down on Thursday morning.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -1.22% -238.74 19,282.07 8:12:45 AM
KOSPI Index -1.42% -26.33 1,830.07 8:32:40 AM
ASX200 Index -2.07% -113.27 5,353.90 8:32:35 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.66% -154.00 23,226.00 8:22:46 AM
S&P500 Futures -0.64% -17.75 2,756.25 8:22:47 AM
Nasdaq Futures -0.72% -61.50 8,529.25 8:22:49 AM
*Source: Bloomberg

Earnings season continues with the following companies releasing reports later today (all timings in GMT +8 where available):

  • United Airlines Holdings
  • BlackRock Inc (Aft US Market Close)
  • Morgan Stanley (7.15pm)

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

  • Germany Mar Inflation Rate (CPI) (2pm)
  • US Apr 10 Initial Jobless Claims (8.30pm)