U.S. Stock Futures Wobble After Bout of Volatility
08 Abril 2020 - 7:05AM
Dow Jones News
By Anna Isaac and Chong Koh Ping
U.S. stock futures wavered on Wednesday, following a
roller-coaster session on Wall Street that saw a strong rally in
the major benchmark indexes ending abruptly with a precipitous
drop.
Futures tied to the Dow Jones Industrial Average drifted between
gains and losses a day after the blue-chips index gave up a 4.1%
gain to close 0.1% lower.
European equities ticked down, with the pan-continental Stoxx
Europe 600 dropping 1.5%. Fresh survey data on Wednesday showed
that the German economy is expected to contract 9.8% in the second
quarter due to the coronavirus pandemic and the containment
measures put in place by authorities. That would be the sharpest
decline ever recorded in Germany since quarterly national accounts
began in 1970, and probably be more than twice as steep as the
decline during the first quarter of 2009.
The data came on top of European Union finance ministers
suspending talks on an economic crisis response on Wednesday
morning, underscoring the deep differences within the bloc over how
to share the mounting costs of the health crisis. Ministers had
hoped to agree to a package of measures that could have provided
half a trillion euros worth of support for the economy.
"There's disappointment," said Florian Hense, European economist
at Berenberg Bank. "The longer it takes for finance ministers and
leaders to come up with a solution, the weaker their ability to
sell it to their home audience. We're not talking about economics
any longer, but politics."
Any agreement reached would be a welcome signal for markets, Mr.
Hense said. Investors continued to pull out of Italian and Greek
bonds, which are considered riskier assets, sending their yields
higher. The yield on 10-year Italian bonds rose to 1.698%, while
Greek bond yields ticked up to 1.903%. The euro fell 0.4% against
the U.S. dollar. Meanwhile, the yield on the benchmark 10-year
German bund, considered a haven asset, dropped to negative 0.336%,
from negative 0.319% on Tuesday. Yields drop as bond prices
climb.
In a sign of investors' waning risk appetite, funds flowed into
U.S. government bonds, pushing the yield on the 10-year U.S.
Treasury down to 0.729%, from 0.735% Tuesday.
The U.S. death toll from the new coronavirus rose sharply, with
nearly 50% more people killed Tuesday than any previous day in the
epidemic, according to a Wall Street Journal analysis of data from
Johns Hopkins University. European countries with falling infection
rates began easing their restrictions, while some Asian leaders
called for extended lockdowns to fight the pandemic.
In Asia, Japan's Nikkei 225 closed 2.1% higher. Late Tuesday,
the government said it plans to pay households and businesses
directly as part of a nearly $1 trillion economic package. It could
subsequently use stimulus money to encourage consumer spending and
travel.
Investors are watching closely for when U.S. infections peak and
start to decline, and when shutdowns are lifted, according to
Kelvin Tay, regional chief investment officer at UBS Global Wealth
Management in Singapore. In time, he said, investor focus would
shift to 2021 corporate earnings, and how quickly economic activity
can recover.
Since the Federal Reserve last month made use of a range of
tools -- adopting "the entire playbook" it developed during the
2008 global financial crisis -- in quick succession, market
functioning has improved, Mr. Tay said. "The markets have exited
the panic-selling mode."
As well as slashing interest rates, the central bank announced
other aggressive measures in March, pledging to buy government
bonds, corporate-bond funds and municipal debt. It has boosted the
short-term cash markets and even arranged to lend directly to
companies.
In commodities, U.S. crude futures climbed 3.1% to $24.40 a
barrel. American Petroleum Institute data released late Tuesday
reportedly showed U.S. crude inventories rose by more than
expected. The prices are too low for U.S. producers, leading to a
significant slowdown in drilling activity, ING strategists said.
The Energy Information Administration's short-term energy outlook
forecasts that U.S. oil output in 2020 will decline by 470 million
barrels a day from the previous year, taking it down from a
previous forecast of 770 million barrels a day growth.
Later in the day, the Fed will disclose what was discussed at
its meetings in the first half of March, offering fresh insights
into policy makers' willingness to take additional steps as the
outlook deteriorates. Costco Wholesale will also report March sales
after the closing bell in New York, giving investors a view on how
the pandemic has affected the retailer's operations.
Write to Anna Isaac at anna.isaac@wsj.com and Chong Koh Ping at
chong.kohping@wsj.com
(END) Dow Jones Newswires
April 08, 2020 05:50 ET (09:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.