Statistics from the USA, earnings season, jobless claims

16 avr. 2020

Yesterday, we finally saw the first statistics from the United States besides jobless claims, which can shed light on the state of things in the US economy. Retail sales decreased by 8.7% (the forecast was -8%), which was the strongest drop in the entire history of observations (since 1992). Industrial production fell by 5.4% (forecast - a decrease of 4%), which was a record drop since 1946. Overall, data are very weak and worse than forecasts, but they are still far from a complete failure. The reason for this on the surface - half of March was not at the lockdown. So the real scale of what happened will show data for April.

More indicative in this regard, in our opinion, is the New York Empire Manufacturing Manufacturing Activity Index, whose values for April were 2 times worse than forecast: -78.2 points with a forecast of -35.0.

The first US companies send additional signals about the problems in the economy as part of the earnings season for the first quarter. According to the data from JP Morgan, the worst fears are confirmed: profits collapsed by 69% (!). And this despite the fact that the reporting period included data for January and February, when no one could even think about a lockdown in the USA. That is, in reality, everything is much worse. The results for other banks are not much better: Wells Fargo's net profit for the quarter literally collapsed by 89%, while CitiGroup's profit fell by 46%.
In this light, we cannot but recall our recommendations to sell in the US stock market.

And, of course, today we will monitor data on jobless claims. Another 5-6 million unemployed may sow panic among the optimists and supporters of the soon happy end.

Bank of Canada expectedly left the rate unchanged. But the Canadian dollar was under heavy pressure.

Germany extended the lockdown for another two weeks. But India is going to partially unlock the country: not because everything suddenly became good there, but rather, because the Government is simply not able to somehow compensate for the economic blow from the lockdown for the poorest part of the population. In this light, we draw attention to the feasibility of selling the Indian rupee in the foreign exchange market.

The International Energy Agency (IEA) gave another reason for the downward pressure in the oil market. According to IEA the free capacity in oil storage facilities is running out, which can increase the imbalance in the oil market, as well as a logistical collapse. At the same time, the Agency noted that according to the results of 2020, demand in the oil market may decline by a record 9%. Recall that we consider WTI $ 20 prices as an opportunity for medium-term purchases. The current gap in supply and demand is compensated by the United States and China, which are actively buying oil in their strategic reserves. In addition, China, India, South Korea and the United States are proposing to use the free capacities of their strategic reserves for the temporary storage of excess oil .