Sad figures and facts, jobless claims and OPEC+

9 avr. 2020

The stock markets continue to make a good face in a bad game. It is possible that today they will finally return to reality, where the number of new infections in the US doubled from 200K to 400K during a week, a reality where during only the first two weeks of quarantine the number of jobless claims in the US have increased by 10 million, a reality , where the largest economy in the world risks to contract by 30+%.

Today’s jobless claims data may serve as a reason for return to reality. An indicator that was previously perceived by markets at the annoying fly is now almost the main indicator of problems with the US economy. There is a logic to this, because unlike other macroeconomic indicators jobless claims are published weekly, that is, it is the most operational, in addition, the labor market responds first to what is happening in the economy.
According to analysts from St. Louis Federal Reserve Bank, more than 66 million jobs (46% of working Americans) in the retail and production sectors are at high risk of layoffs. That is, the size of jobless claims today in 10 million will not surprise us at all (current forecasts are 5.25 million). But for the markets it will be a very painful blow, which should lead to sales in the US stock market.

And you should not expect that the US economy will recover as fast as it is now (the so-called V-shaped crisis). Former Fed chief Ben Bernanke said in a direct text recently that this option is unlikely. In this regard, very revealing information came from Lufthansa, who have already begun to actively reduce and restructure their businesses, as they understand that at best they will restore only 25% of pre-crisis operational activity not before October. Airlines, of course, is extreme case, but at the same time it is very indicative.

In general, we continue to be pessimists and sell in the stock market and also buy gold. Today we will keep on selling dollar as well.
Thursday promises to be extremely volatile day in the oil market. The OPEC + meeting is extremely uncertain in terms of results, and it can generally break or be postponed at any time. Too much is tied to the behavior and position of the United States, and it is still unclear. Nevertheless last night, the OPEC President expressed optimism and assured that the deal will be, and markets will see a reduction of 10 million b / d.

However, we are rather skeptical about this cut size and are generally looking forward to recovering our $ 20 purchase. Recall that we sincerely believe in self-regulation of the market and the $ 20 price is the best motivator for reducing supply and balancing the market. Actually, the latest data from the US Energy Ministry fully confirm this. US oil production will decline significantly in the next couple of years: by 1.2 million bpd and by 1.6 million bpd in 2020 and 2021, respectively.