MARKET WRAP: Nerves before US jobless claims & Bank of England

Nerves before US jobless claims & Bank of England

Trading nerve after European open

European markets have opened with a softer tone on Thursday. There are some nerves before the release of what are likely to be very high US weekly jobless claims.

The FTSE 100 is off some 200 points in early trade. Investors in the UK are waiting for an interest rate decision from the Bank of England and more stimulus measures from the Treasury.

US jobless insurance claims are expected to skyrocket this week. Many businesses will have had to make layoffs to survive the impact of travel restrictions and stay-at-home orders. The consensus estimates are for a whopping 1.5 million weekly jobless claims. If we see a number above 2 million, markets will start clamouring for the next government or central bank bailout.

Wall Street completed its first consecutive daily gain on Wednesday. It’s a small bullish milestone for the new bear market. The approval and then passing of the US stimulus bill has been the main driver for optimism. The $2 trillion (9% of US GDP) plan has gotten investors’ seal of approval.

The S&P 500 rose by 1.15%, having come off gains over 5% at the end of the session.

The Senate has now passed the $2 trillion spending bill, and it will be sent to the House of Representatives for approval on Friday.

Today’s jobless figures will give us a first taste of whether $2 trillion is even enough.

Investors’ thirst for cash has been quenched for the time being so the dollar continues to head lower. The dollar will likely resume its uptrend if global markets start to sell off again.

News that Prince Charles had contracted COVID-19 might have contributed to the volatility in Sterling on Wednesday afternoon. Under a constitutional monarchy, the health of senior Royals adds an extra complication to Britain’s fight against the coronavirus. The pound has been recovering from 3-decade lows. A united front from the Bank of England and UK Treasury will go some way to it holding onto the gains.

We’re not looking for the Bank of England to cut interest rates below the new record 0.1%. Negative interest rates now would probably just be a smack of desperation. There’s also a widespread view that the negative rates experiment in the Eurozone has failed. Some level of coordination with the UK Treasury is likely with Chancellor Rishi Sunak expected to announce plans to support the self-employed.

Having reclaimed $1600 per oz in a massive two-day rally, gold is back below that key level on Thursday. Oil continues to languish near its lows.

Opening calls

S&P 500 to open 42 points lower at 2433.

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