GLOBAL NEWS:
The dollar and yen held broad gains on Wednesday, as a bounce in oil prices failed to calm market nerves, with the week’s rout and frail fuel demand underlining a grim outlook for the global economy. The greenback sat just below a two-week peak against a basket of peers, and barely budged against commodity currencies whacked by the oil collapse, even as U.S. crude CLc1 jumped 20%. The safe-haven Japanese yen held at 107.83 per dollar and both the U.S. currency and yen were steady against the oil-sensitive Canadian dollar and Norwegian krone. The Australian dollar battled to pull ahead, but hit resistance around $0.6300. The recovery in U.S. crude lifts it out of negative territory, but at just shy of $14 a barrel, it is still some 80% under January’s peak as cratering energy consumption due to coronavirus lockdowns creates a supply glut. The greenback has gained half a percent this week on a basket of currencies and stands near multi-week highs against currencies of oil exporters such as Russia, Norway and Canada. It advanced against most Asian currencies on Wednesday and gained most on the New Zealand dollar, rising about 0.3% to $0.5959 after the Reserve Bank of New Zealand's governor on Tuesday again raised the prospect of negative rates. The euro remained rangebound, holding at $1.0856, while the British pound held near a two-week trough after a gloomy assessment of recovery prospects from the Bank of England's chief economist. Australia’s central bank governor, Philip Lowe, said on Tuesday that the country is likely to experience its biggest contraction in output since the 1930s, and that a quick return to business as usual should not be expected. “The fall in commodity and equity prices is a signal market participants expect the world economy to remain weak for some time, even once the lockdowns are eased,” said Commonwealth Bank of Australia FX analyst Joe Capurso.
Asian share markets slipped to two-week lows on Wednesday as the floor fell out from under crude prices, exposing the deep economic damage wrought by the global coronavirus health crisis. Skittish investors sought the safety of government debt as Brent oil futures plunged for a second day to a low last seen almost two decades ago, fueled by a swelling world crude glut. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8% while Japan’s Nikkei slumped 1.3%. Earlier this week, the May U.S. WTI futures contract crashed into negative territory for the first time in history. In addition to massive oversupply concerns, analysts say the plunge also highlights the technical constraints the market faces in responding to shocks. International benchmark Brent futures dropped below $20 per barrel on Tuesday and last traded at $18.62, down 3.7%. So far this week, it has lost 33.7%. U.S. June crude futures traded at $12.78 per barrel. On Wall Street, the S&P 500 lost 3.07% and the Nasdaq Composite, which has outperformed due to increased demand for various internet services amid lockdowns, dropped 3.48%. Amazon fell 2.7% on Tuesday. As the difficulties of restarting the U.S. economy sank in, U.S. Treasury yields tumbled, with the five-year note hitting a new record low on rising prices for bonds: one of the safest assets. The dollar rose to a two-week high against a basket of currencies, as investors fled riskier assets for the world’s most liquid currency while putting pressure on oil-linked currencies such as the Norwegian crown and the Canadian dollar. The safe-haven yen held firm at 107.79 to the dollar while the Swiss franc stood near five-year high against the euro at 1.05255 franc. The British pound nursed losses at $1.2287 after a 1% fall in the previous day also due to the lack of clarity on Brexit.
Indian stocks edged higher on Wednesday, lifted by an 8% jump in Reliance Industries Ltd after Facebook invested in its digital business, even as broader sentiment remained weak following another meltdown in oil. The NSE Nifty 50 index inched up 0.5% to 9,028.2 by 0349 GMT, while the benchmark S&P BSE Sensex rose 0.5% to 30,813.29. Shares of heavyweight Reliance Industries climbed to a near seven-week high after Facebook bought a 10% stake in the company’s digital business for $5.7 billion, a deal that will help the conglomerate cut its huge debt pile. Gains in Reliance helped eclipse losses in nearly a third of the Nifty 50 components, driven by weak risk appetite as crude prices remained under pressure. Asian share markets slipped to two-week lows as the plunge in oil prices exposed the deep economic damage wrought by the global coronavirus health crisis. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8% while Japan’s Nikkei slumped 1.3%, following a 3.07% drop on the S&P 500 and a 3.48% slide on the Nasdaq Composite. In Mumbai, energy giant Oil and Natural Gas Corporation Ltd slid for a third straight day, falling as much as 6.9% to a three-week low.
Oil prices found some respite on Wednesday as U.S. oil futures rose more than 20% and Brent prices steadied after a two-day price plunge, as markets struggle with a massive crude glut amid the coronavirus outbreak. After falling into negative territory for the first time in history amid record trading volumes, U.S. crude futures rose 20% as contracts for May delivery expired and the June contract became the front month. West Texas Intermediate was up $2.05, or 18%, at $13.62 a barrel by 0034 GMT. Brent crude, which settled down 24% in the previous session, was up 4 cents at $19.37 a barrel after rising more than $1 earlier. Oil prices have slumped over 70% this year as the coronavirus has slashed demand for everything from jet fuel to gasoline, while storage tanks around the globe are filling rapidly. The volatity in the oil market has prompted CME Group, the world’s biggest commodities exchange, to raise margins on crude oil futures.
Gold prices held steady on Wednesday as fragile equities, hammered by falling crude prices, offset a stronger U.S. dollar. Spot gold was steady at $1,685.46 per ounce by 0041 GMT. U.S. gold futures were up 0.9% at $1,703.60. The metal fell as much as 2% in the previous session as investors scurried for cash to cover losses in other asset classes mainly driven by a plunge in oil prices. Against key rivals, the dollar was hovering close to a two-week high scaled in the previous session, making gold costlier for investors holding other currencies. Asian share markets were set to tumble on Wednesday as the floor fell out from under U.S. crude prices, exposing the deep damage the coronavirus pandemic has had on global economic demand. The crash in U.S. crude prices has turned a reliable commodity less than worthless and given fresh urgency to bearish voices, who say it sounds alarm bells for global growth and are bracing for a catastrophic collapse in asset prices. The U.S. Senate on Tuesday unanimously approved $484 billion in fresh relief for the U.S. economy and hospitals hammered by the coronavirus pandemic, sending the measure to the House of Representatives for final passage later this week. The heads of the International Monetary Fund, European Stability Mechanism and other regional financing arrangements on Tuesday agreed to work together to mitigate the economic and financial impacts of the pandemic. SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.37% to 1,033.39 tonnes on Tuesday.