GLOBAL NEWS:
The dollar rose to a three-week high on Thursday as traders overlooked another week of roughly 3 million new jobless claims, evidence of a second wave of coronavirus-related lay-offs. The Japanese yen and Swiss franc were both weaker against the dollar and flat versus the euro, and U.S. stocks ended the day up, suggesting the dollar's bid was not part of a broader risk-off move. The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy, supports the contention that it would take a while for activity to rebound even as businesses in many states reopen after shuttering in mid-March as authorities tried to slow the spread of COVID-19, the respiratory illness caused by the virus. Against a basket of its rivals, the dollar was up 0.20% at 100.37, hitting a three-week high of 100.56 early in the session. The euro was down 0.23% against the dollar at $1.079. Earlier in the session the pound tumbled below the $1.22 line for the first time in more than five weeks after Wednesday's data showed Britain's economy shrank by a record 5.8% in March as the coronavirus crisis escalated. It later recovered, last trading down only 0.06% at $1.222.
China’s top energy producers will grow their natural gas output this year by twice as much as in the previous oil rout even as they slash spending due to collapsing oil prices, company officials and analysts said. The world’s top energy consumer is forecast to expand its natural gas production by 5% or more in 2020 despite plans for deep spending cuts which will likely curb local oil production, they said. That would be half the growth in 2019 but double the 2.2% growth seen in 2016 following a lengthy oil slump. China’s state-owned energy companies are joining others worldwide in slashing expenditure after this year’s 56% drop in oil prices as a global pandemic ravaged economic activity. As the country’s oil and gas trio plan double digit spending cuts, they are prioritising gas development at home particularly as the market is relatively insulated from sharp oil moves due to government subsidies. PetroChina, Sinopec Corp and CNOOC Ltd said in April they would reduce spending by roughly 20% to 30%, similar to the cuts they made in the last oil rout in 2015/2016. China has boosted gas investment in recent years under a massive anti-pollution drive to replace coal with the lower-carbon gas. It has also sought to unlock the kind of unconventional resources that have transformed the United States into the world’s top gas producer and a leading exporter in the recent decade.
Japan will recover only modestly in the second half of this year from a steep contraction in the current quarter, a Reuters poll showed on Friday, underscoring just how badly the world’s third largest economy has been hit by a global coronavirus pandemic. As the Bank of Japan opens its money spigot to battle the fallout, its balance sheet was also expected to swell to a record level by the end of 2020, economists said. The global health crisis has forced many countries to impose strict lockdowns crippling economic activity worldwide. Against this backdrop, Japan’s economy is in the cusp of deep recession as a government state of emergency adopted in April requested citizens to stay home and businesses to close. While the government lifted the state of emergency in large parts of the country on Thursday, big cities like Tokyo will keep restrictions in place in a sign of persistent economic weakness lasting many more months. The May 7-14 poll of over 30 economists also found the economy would rebound 7.7% in the third quarter and 6.1% in the fourth - still not enough to make up for the steep falls in the first half. In the worst-case scenario projected in the poll, the economy will drop over 29% this quarter and only manage to flatline in July-September. GDP will shrink 5.8% this fiscal year to March 2021 before rebounding 3.2% next year, according to the poll. The government is due to release first-quarter gross domestic product data on May 18 and for the second quarter in August.
Singapore Airlines Ltd said on Friday it would slash capital spending by 12% to S$5.3 billion from a previously planned S$6 billion in the financial year ending March 31 as it grapples with the coronavirus crisis. The airline’s update from its last estimate in November was provided in slides released ahead of an analyst and media briefing to discuss its full-year results. Singapore Airlines on Thursday evening reported its first-ever annual loss, citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic, saying the timing of any recovery was uncertain. The latest capital spending budget reduces the amount spent on new aircraft by S$600 million and on other items by S$100 million. The airline said it was negotiating with aircraft manufacturers to adjust the delivery stream for orders placed in the past because of the current market conditions. The company said its cargo capacity was had suffered less, dropping 60% because it was maximising the use of its dedicated freighter fleet, using empty passenger jets to carry cargo and doing ad-hoc charter flights. Air freight rates have risen sharply as airlines have cut back on passenger capacity; in normal times, around 50% of air cargo is carried in the belly of passenger planes.
An already-dismal near-term U.S. economic outlook has darkened further in the latest Reuters poll of economists, and while a recovery is still forecast for the second half, the economy won’t come close to regaining the ground it lost this year. Laying bare both the human and economic tragedy brought by the coronavirus pandemic, almost 4.4 million people have been infected globally and the U.S. unemployment rate surged to 14.7% last month, far higher than its post-World War Two record of 10.8% in November 1982. U.S. gross domestic product was forecast to shrink an unprecedented 35.0% this quarter after contracting 4.8% last quarter, on a seasonally-adjusted annualized basis, according to the May 11-14 poll. The economy is forecast to grow 16.0% in the third quarter and 9.0% in the fourth quarter, compared with 12.0% and 9.0% in the previous poll. Under a worst-case scenario, however, it will contract 2.5% and 1.0% respectively. The median 2020 GDP forecast showed a further downgrade to -5.7% from -4.1% predicted a month ago but was a touch better than the International Monetary Fund’s -5.9% prediction. A staggering 20.5 million jobs were lost in April - the steepest plunge in payrolls since the Great Depression. The unemployment rate for this quarter was forecast at 16.8%, up 3.1 percentage points from the previous poll and nearly five times the reported 3.5% in February, the lowest in nearly 50 years.
Oil prices were mixed on Friday after big gains a day earlier when the International Energy Agency (IEA) predicted crude stockpiles would start to shrink in second-half 2020 after surging while the coronavirus pandemic slashed fuel demand. Brent crude was up 1 cent at $31.13 a barrel by 0115 GMT, after rising nearly 7% on Thursday. The global benchmark is roughly flat on the week after rising for the previous two weeks. Giving up earlier gains, West Texas Intermediate (WTI) oil was down 13 cents, or 0.5%, at $27.43 a barrel, having jumped 9% in the previous session. WTI is still heading for a third weekly gain, up more than 10%. Prices have been lifted by more signs that oil output is falling among OPEC and other major producers, a grouping known as OPEC+. But the market mood remains cautious, with the coronavirus pandemic far from over and new clusters emerging in countries where lockdowns have been eased. Still, as demand increases with the easing of lockdowns to get economies going again, the IEA said it expects crude inventories to fall by about 5.5 million bpd in the second half of this year. U.S. crude inventories fell for the first time in 15 weeks, the Energy Information Administration said on Wednesday, dropping by 745,000 barrels to 531.5 million barrels in the week to May 8. Analysts had expected another increase. OPEC+ had already agreed to cut production by nearly 10 million bpd, a record amount, and Saudi Arabia extended its planned reductions for June, pledging earlier this week to slashing production by nearly 5 million barrels per day. Saudi Aramco, the world’s largest oil exporter, reduced the volume of crude it will supply to at least three buyers in Asia by as much as 30% for June, three sources with knowledge of the matter told Reuters on Thursday.