GLOBAL NEWS:
The U.S. government notified lenders on Sunday that it will cap how much each bank can lend under the emergency loan program designed to keep workers on payrolls amid the coronavirus pandemic, hours ahead of the reopening of the lending program. The Small Business Administration will impose a maximum dollar amount for individual lenders at 10% of Paycheck Protection Program funding, or $60 billion per lender, and pace the applications filed, according to SBA guidance on Sunday to lenders that have received a significant number of applications. The steps are “prudent and reasonable” due to the unprecedented demand for the loans. U.S. banks were girding over the weekend for another frantic race to grab $310 billion in fresh small-business aid due to be released by the government. The SBA was due to reopen PPP funding at 10:30 a.m. ET on Monday, allowing lenders to resume processing piles of backlogged applications from businesses hurt by the coronavirus shutdown. The PPP came under criticism after a number of publicly traded companies with thousands of employees and hundreds of millions of dollars in annual sales got loans, while smaller businesses did not. Despite technical and paperwork challenges, the program’s first round of funds was exhausted in less than two weeks and lenders expect the second tranche of cash to be snapped up even faster by tens of thousands of applications queued up. More than 25% of the total pot went to fewer than 2% of the firms that got relief, a Reuters analysis of the data showed.
Profits at China’s industrial firms fell in March although at a slower pace than in the first two months, with many sectors seeing significant declines, suggesting the economy is still struggling to resume production after the coronavirus outbreak. The world’s No.2 economy is limping back after weeks of near paralysis caused by the health crisis and tough containment measures, but recovery has been patchy with worries about a second wave of infections and a global recession adding to the challenges for policymakers. China’s industrial firms earned 370.66 billion yuan in March, down 34.9% from a year earlier, data from the National Bureau of Statistics showed. This follows a 38.3% slump in January-February, the steepest drop since at least 2010. For the quarter ended March, industrial firms’ profits fell 36.7% on an annual basis to 781.45 billion yuan. Electronics and drinks manufacturers saw some recoveries in profits from the first two months, the data showed. Eight out of 41 sectors surveyed marked profit increases in March, better than only four in January-February. Market demand has not recovered completely, and production costs remain relatively high, Zhang said in a statement published alongside the data. Beijing’s policies are less aggressive than the quantitative easing of other major central banks and it balances the need for stimulus against high household and corporate debt. Earnings at China’s state-owned industrial firms were down 45.5% on an annual basis for January-March, versus a 32.9% fall in the first two months, the statistics bureau data showed.
Asian shares inched higher on Monday ahead of a busy week for earnings and central bank meetings, with much chatter the Bank of Japan will announce more stimulus steps. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.1% in early trade, having shed 2.6% last week. Japan's Nikkei .N225 gained 1.1%, while E-Mini futures for the S&P 500 ESc1 dipped 0.4%. There is considerable speculation the BOJ will pledge to buy unlimited amounts of government bonds, removing the current target of 80 trillion yen per year, even though it has not been near reaching it. It is also expected to raise purchases of corporate and commercial debt, and perhaps launch a new loan programme to help companies struggling with cash flow. The Federal Reserve and the European Central Bank meet later in the week, with the latter likely to do more. Earnings season will be in full swing with around 173 companies in the S&P 500 reporting this week, including Apple, Amazon, Facebook, Microsoft, Caterpillar, Ford, GE and Chevron. The dollar has been generally bid thanks to its safe haven status as the world’s most liquid currency at times of stress, though moves have been relatively mild in recent weeks. The dollar index touched a three-week high at 100.860 on Friday before easing back to 100.250 on Monday. The euro was steady at $1.0816, having hit a one-month low of $1.0725 on Friday, while the dollar was flat on the yen at 107.44. Gold held at $1,723 per ounce, after gaining 2.5% last week.
Indian shares rose more than 2% on Monday, powered by gains in banking and asset management company stocks after the central bank launched a special liquidity facility for mutual funds to ease the pressure due to the coronovirus pandemic. The Nifty advanced 2.21% to 9,356.65 by 0504 GMT, while the benchmark Sensex gained 2.26% to 32,034.22. The Reserve Bank of India said it would open a special liquidity facility for mutual funds of 500 billion rupees ($6.56 billion) to ease liquidity strain, reassuring investors after a prominent fund house last week said it would wind down six credit funds due to a lack of liquidity. The Nifty Banking Index extended gains to rise as much as 2.9% after the announcement, while the Nifty Private Bank Index jumped 3.1%. Private-sector lender Kotak Mahindra Bank Ltd was the biggest mover, rising as much as 6.9% to a near four-week high. Asset manager Nippon Life India Asset Management Ltd soared 12.7%, while HDFC Asset Management Company Ltd jumped 7.9%. Domestic markets have also been buoyed by expectations of more stimulus from the Indian government after an initial round worth about $22 billion, which included provision of free cooking gas cylinders, grains and some cash to the country’s poor. The Bank of Japan on Monday expanded monetary stimulus for the second straight month to ease corporate funding strains and finance huge government spending, while the Federal Reserve and the European Central Bank are due to meet later in the week. In Mumbai trading, private-sector lender IndusInd Bank Ltd rose as much as 6.3% ahead of its quarterly results due later in the day, while state-owned Bank of Baroda Ltd rose as much as 3.1% after approving a fund raise of up to 135 billion rupees. IT firm Mindtree Ltd surged nearly 10% after reporting a better-than-expected profit for the March quarter.
Gold prices edged lower on Monday as equities firmed, while expectations for more economic stimulus measures limited losses. Spot gold eased 0.3% to $1,722.49 per ounce by 0135 GMT. U.S. gold futures rose 0.4% to $1,742.60. Asian shares inched higher ahead of a busy week for earnings and central bank meetings, with speculation that the Bank of Japan will announce more stimulus steps. Gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement. Investors are pinning their hopes for the reopening of the U.S. economy on the potential for wider availability of testing for COVID-19 cases and on drug trials for treatments of the disease but said, until there is concrete progress in these areas, further stock market gains may be limited. Shares of gold miners and funds dealing in the precious metal have rallied in recent weeks as the virus crisis rocked global markets and investors raced to buy safe-haven assets. Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.6% to 1,048.31 tonnes on Friday from 1,042.46 tonnes on Thursday. Palladium rose 0.4% to $2,032.80 per ounce, while platinum gained 0.8% to $766.04 and silver was flat at $15.24.
Oil prices fell on Monday on signs that worldwide oil storage is filling rapidly, raising concerns that production cuts will not be fast enough to fully offset the collapse in demand from the coronavirus pandemic. U.S. oil futures led losses on fears that storage at Cushing, Oklahoma, could reach full capacity soon. U.S. crude inventories rose to 518.6 million barrels in the week to April 17, near an all-time record of 535 million barrels set in 2017. U.S. West Texas Intermediate CLc1 June futures fell $1.49, or 8.8%, to $15.45 a barrel by 0452 GMT, while Brent crude LCOc1 was down 44 cents, or 2.1%, at $21.00 a barrel. Oil futures marked their third straight week of losses last week - and have fallen for eight of the past nine - with Brent ending down 24% and WTI off around 7%. The June WTI contract’s price fall may have been triggered by investors moving to later months to avoid a similar fate, said Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo. Producers may not be slashing output quickly or deeply enough to buoy prices, especially when global economic output is expected to contract by 2% this year, worse than the financial crisis, while demand has collapsed 30% due to the pandemic. Amid the rush to cut output, rig counts in the United States are down to the lowest since July 2016, while the total number of oil and gas rigs in Canada has fallen to the lowest since at least 2000, according to Baker Hughes data. The Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, pledged earlier this month to cut output by an unprecedented 9.7 million barrels per day in May and June.