GLOBAL NEWS:
The dollar fell on Friday as a news report on signs of success in a COVID-19 treatment drug trial as well as early plans to re-open the U.S. economy drove fresh optimism and risk appetite. Even the first drop in Chinese economic growth since quarterly records began in 1992 did not dent the mood as investors sought silver linings in signs of a rebound in industrial production. The Australian and New Zealand dollars led gains, with both rising about 0.8%, while the pound and euro also rose to recoup some of the past two days’ losses. Gilead said anecdotal reports do not provide the data needed to determine the safety or efficacy of remdesivir as a treatment for COVID-19 and that it expects more data will be available at the end of the month. The dollar last sat at $1.0866 per euro and $1.2504 per pound and firmed to 107.70 yen. The Aussie last bought $0.6371 and the kiwi at $0.6012. The dollar has closely tracked risk sentiment through the coronavirus crisis and remains at elevated levels as the safety of cash in the world’s reserve currency stays in demand. U.S. President Donald Trump on Thursday announced guidelines for a return to work in the world’s biggest economy - a gradual, three-stage process dependent on robust virus testing and subject to state governors’ discretion. China’s economy shrank 6.8% in the first quarter, the first reversal since at least 1992, as the coronavirus outbreak paralysed production and spending. Yet the decline was largely in line with expectations for a 6.5% contraction, and investors were encouraged by a less-than-expected 1.1% drop in industrial output.
China’s industrial output fell a less steeper-than-expected 1.1% in March from a year earlier, data from the National Bureau of Statistics showed on Friday, as the coronavirus crisis and strict containment measures severely disrupted the world’s second-largest economy. Analysts polled by Reuters had expected industrial output to fall by 7.3% in March, moderating somewhat after plunging 13.5% in the first two months of the year. Retail sales dived 15.8% in March, worse than analysts’ expectations for a 10% drop. They had tumbled 20.5% in the first two months as authorities locked down much of the country, consumers shunned crowded places and many shops and restaurants closed. Fixed asset investment dropped 16.1% in January-March, worse than a forecast 15.1% drop. The gauge had sunk 24.5% in the first two months, the first contraction on record. Private sector fixed-asset investment, which accounts for 60% of the country’s total investment, declined 18.8% in the first quarter of this year, compared with a 26.4% fall in January-February. While China has largely brought the virus outbreak under control, officials are worried about a possible second wave of infections and analysts warn it could take months before the economy recovers to normal levels.
Asian stocks gained on Friday as President Donald Trump’s plans to gradually re-open the U.S. economy offset data that showed China suffered its worst economic contraction on record due to the coronavirus outbreak. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 2.6% after reaching a five-week high. Shares in China rose 1.8% as the weak GDP data reinforced expectations that more stimulus is coming, while shares in Australia were up 2.62%. E-Mini futures for the S&P 500 index ESc1 traded 3.38% higher, also close to a five-week high. Data from China showed the world’s second-largest economy shrank for the first time since at least 1992 because of the coronavirus outbreak and tough containment measures. Gross domestic product contracted 6.8% in the quarter year-on-year, slightly more than expected, and 9.8% from the previous quarter. However, the Chinese data and other forecasts that said the world is in its worst recession in decades caused barely a ripple in Asian shares as investors focus instead on whether the pandemic is peaking and how soon governments will start to ease lockdowns which have crippled business and consumer activity. Japan's Nikkei stock index rose 2.55% on Friday, while shares in South Korea gained 3.27%. Yields on benchmark 10-year U.S. Treasuries rose slightly from a two-week low in Asia, while Treasury futures TYc1 fell in another tentative sign of investor optimism. The dollar fell against the yen, the euro, and sterling as hope for future economic growth reduced safe-haven demand for the greenback.
India’s finance minister said on Thursday the country could not support a general allocation of new Special Drawing Rights by the International Monetary Fund because it might not be effective in easing coronavirus-driven financial pressures. Finance Minister Nirmala Sitharaman said in a statement to the IMF’s steering committee that she also was concerned that such a major liquidity injection could produce potentially costly side-effects if countries used the funds for “extraneous” purposes. Sitharaman joined U.S. Treasury Secretary Steven Mnuchin in opposing a new SDR allocation, which would provide all 189 members with new foreign exchange reserves with no conditions. “In the current context of illiquidity and flights to cash, the efficacy of an SDR allocation is not certain, she said, adding that most countries rely on national reserves as a first line of defense. “Consequently, extraneous demands for these reserves, not related to domestic monetary and financial stability, would be costly, and hence cannot be supported,” she added.
Gold prices inched lower on Friday as Asian equities showed signs of a rebound, but fears of a steep global recession due to the coronavirus pandemic limited a drop in the metal’s price, putting it on course for its second straight weekly gain. Spot gold eased 0.1% to $1,716.56 per ounce by 0045 GMT. U.S. gold futures slipped 0.1% to $1,730.30. The metal was up about 1.6% for the week so far, on track to post its second consecutive weekly gain. Asian stocks look set to bounce on Friday to recover towards a one-month high as investors, following Wall Street’s lead overnight, sought silver linings in a run of data that showed the world is in its worst recession in decades. U.S. data showed 5.2 million Americans sought unemployment benefits last week, down from a slightly revised 6.6 million the week before, but lifting total filings for claims over the past month to a record 22 million. The Federal Reserve’s balance sheet increased to a record $6.42 trillion this week as the central bank used its nearly unlimited buying power to soak up assets to keep markets functioning amid an abrupt economic free fall due to the virus. Britain extended its nationwide lockdown on Thursday as stand-in leader Dominic Raab ordered Britons to stay at home for at least another three weeks to prevent the spread of the outbreak which has already claimed over 138,000 lives globally. Palladium rose 1.7% to $2,190.78 per ounce and platinum gained 0.4% to $786.30, while silver fell 0.7% to $15.51.
Oil prices rose on Friday with Brent gaining nearly 3% after President Donald Trump laid out guidelines on reviving a U.S. economy ravaged by the coronavirus pandemic that has punched a huge hole in global demand for crude and refined products. Brent was up by 75 cents, or 2.7%, at $28.57 a barrel by 0058 GMT, while U.S. crude for May delivery, which expires on April 21, was up 1 cent, or 0.1%, at $19.88 a barrel. The more active June contract was up $1.1, or 4.3%, at $26.63. “Oil prices are surging after President Trump issued guidelines that will see a portion of the country open a lot sooner than anyone expected,” said Edward Moya, senior market analyst at OANDA in New York. Optimism that there may be signs of an easing of the health crisis is sending stock and other riskier markets like oil higher. Still, both oil benchmarks are heading for a second consecutive week of losses, with U.S. oil around 18-year lows: Analysts have slashed forecasts for prices and demand due to the spread of the coronavirus and oversupply concerns. The Organization of the Petroleum Exporting Countries lowered its forecast for 2020 global oil demand and warned it may not be the last revision downward. OPEC now sees a contraction of global demand of 6.9 million barrels per day, compared with a small increase predicted last month, due to the coronavirus outbreak. OPEC and other producers including Russia, in a grouping known as OPEC+, over the weekend agreed on production cuts of nearly 10 million bpd, after an earlier cooperation agreement collapsed.