GLOBAL NEWS:
The U.S. dollar edged higher against the euro in a choppy session on Thursday after a video conference of European Union leaders looking to set up a joint fund to avert an economic collapse in parts of the 27-member bloc ended without any agreement on details. German Chancellor Angela Merkel signaled on Thursday she was open to offering major financial support for a coronavirus recovery package worth as much as 2 trillion euros, but wanted to see how it would be used before committing. French President Emmanuel Macron said Europe’s response to economic turmoil caused by the coronavirus crisis required financial transfers to the hardest-hit regions and not just loans. Against the dollar, the euro was 0.36% lower on the day. Earlier in the session the euro took a hit after a survey showed economic activity in the euro zone all but ground to a halt this month as the coronavirus outbreak sweeping across the world forced governments to impose lockdowns and companies to halt production and shut their businesses. U.S. business activity plumbed new record lows in April as the coronavirus severely disrupted manufacturing and services industry production, pushing the economy into uncharted waters. The U.S. Dollar Currency Index, which measures the greenback’s strength against six other major currencies, was about flat on the day at 100.44. The index hit a more than two-week high of 100.69 earlier in the session. The yen pared gains against the dollar to trade about 0.2% higher after a report in the Nikkei newspaper said the Bank of Japan will discuss scrapping its cap on government bond purchases at its next policy meeting on April 27. The dollar slipped against the currencies of oil-producing states as a bounce in crude prices gave succor to markets shaken by the massive coronavirus-induced drop in demand. The pound rose 0.1% against the dollar even after dire UK preliminary PMI readings for April, as market activity appeared immune to new data about the disastrous economic fallout from the coronavirus.
China’s central bank cut the interest rate on its targeted medium-term lending facility on Friday, following similar reductions to borrowing costs on other liquidity tools in the past few weeks to support the economy. The People’s Bank of China said it lowered the one-year interest rate on the TMLF by 20 basis points to 2.95% from 3.15% in the previous operation. In the same statement, the central bank said it injected 56.1 billion yuan into the economy on Friday, when a batch of 267.4 billion yuan of TMLF loans was due to expire. TMLF loans are aimed at struggling areas of the economy. The gap between the one-year MLF and TMLF was effectively wiped out following Friday’s rate move. The gap was kept at 10 basis points in the previous operation in January. The one-year MLF rate now also stands at 2.95%. MLF, one of the main tools of the central bank in flexibly managing longer-term liquidity in the banking system, is loosely pegged to the lending benchmark loan prime rate. China has greatly stepped up easing efforts since the outbreak of the new coronavirus which has caused massive business disruption and lead to the world’s second-largest economy posting its first quarterly contraction for the first time on record. China’s economy shrank 6.8% in January-March from the same period a year earlier, the first such decline since at least 1992 when quarterly records were first published. A recent Reuters poll suggested China’s economy will slowly recover, but analysts have said a recession is likely if conditions worsen again due to the pandemic.
Indian shares fell over 1% on Friday, tracking weak global markets, after U.S. data underscored the economic damage caused by the coronavirus pandemic and reports that an experimental drug to treat COVID 19 showed inconclusive results. The NSE Nifty 50 index fell 1.53% to 9,166.20 by 0356 GMT, while the benchmark S&P BSE Sensex was down 1.59% at 31,359.96. Asian shares and U.S. stock futures fell on Friday following reports that Gilead Sciences Inc’s antiviral drug remdesivier had failed to help severely ill COVID-19 patients in its first clinical trial. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4% and U.S. stock futures, the S&P 500 e-minis, slipped 0.72%. In Mumbai, financial stocks contributed to more than half the losses on the index, with the NSE Bank index slipping nearly 3% in early trade. Private-sector lenders ICICI Bank Ltd and Indusind Bank Ltd slid over 4% each and were among the top losers on the Nifty 50 index. The economy is likely to suffer its worst quarter since the mid-1990s due to the lockdown in the three months ending in June, according to a Reuters poll, which predicted a mild and gradual recovery. Shares of real estate firm Oberoi Realty Ltd tumbled over 4%, pushing the Nifty Realty index over 3% lower. Shares of Britannia rose over 3% after the company declared an interim dividend of 35 rupees per share on Thursday, while Infratel shares jumped over 2% after it reported a strong set of quarterly numbers.
Gold eased on Friday as investors booked profits after a 1% rise in the previous session, but weak economic data from the United States and Europe due to the novel coronavirus kept bullion on track for a weekly gain. Spot gold slipped 0.6% to $1,721.15 per ounce by 0345 GMT, but was up about 2.2% for the week so far. Prices hit a more than one-week high of $1,738.58 on Thursday, bolstered by hopes of more stimulus from the United States, especially after jobless claims soared to a record 26 million in the past five weeks. U.S. gold futures were little changed at $1,744.70 per ounce. Asian shares and U.S. stock futures fell, spurred by doubts about progress in the development of drugs to treat COVID-19 and new evidence of U.S. economic damage caused by the pandemic. The dollar held close to a more than two-week high touched on Thursday, limiting appetite for gold. Gold, considered a safe store of value during economic or political uncertainties, tends to benefit from widespread stimulus measures from central banks since it’s seen as a hedge against inflation and currency debasement. Economic activity in the euro zone all but ground to a halt this month as the coronavirus sweeping across the world forced governments to impose lockdowns and firms to down tools and shut their businesses, a survey showed. Among other precious metals, palladium rose 1.1% to $2,000.35 an ounce, but was on track to post its fourth straight weekly decline. Platinum rose 1.3% to $764.81 per ounce, while silver fell 1.0% to $15.15 per ounce.
Oil prices jumped again on Friday, gaining more ground as producers like Kuwait said they would move to cut output and as the United States approved another package to cope with the economic disruption caused by the coronavirus outbreak. Brent crude was up $1.07, or 5%, at $22.40 by 0432 GMT, after having climbed 5% on Thursday. U.S. oil gained $1.12, or nearly 7%, at $17.62 a barrel, having surged 20% in the previous session. But barring a sharp jump later in the session, prices are heading for their eighth weekly loss in the last nine, capping one of the most tumultuous weeks in the history of oil trading. Brent is headed for a 20% loss this week, with U.S. West Texas Intermediate set for a fall of more than 3%. WTI fell into negative territory to minus $37.63 a barrel on Monday, while Brent thudded to a two-decade low. Under a deal agreed between the Organization of the Petroleum Exporting Counties and associated producers including Russia, a grouping known as OPEC+, output cuts of 9.7 million barrels per day are due to kick in from May. But Kuwait’s state news agency KUNA said on Thursday the OPEC producer will begin cutting supplies to international markets without waiting for the official start of the deal. Meanwhile, U.S. legislators approved a nearly $500 billion bill for relief from the pandemic, providing support to small businesses and hospitals. The package raises U.S. spending on the crisis to nearly $3 trillion.