Risks Too Numerous to Bear as Traders Tip-Toe Back From Easter
Make-or-break International Monetary Fund and Group of 20 meetings, deadlocked oil talks, likely confirmation of China’s economic slump and the prospect of a collapse in company earnings.
The risks to global markets were almost too numerous to bear as traders prepared to return to work Monday after the long Easter weekend. And that’s even before they try to unpick the latest numbers on the ebb and flow of the Covid-19 pandemic. “I am sticking with the doom-and-gloom prophecies,” Stephen Innes, Bangkok-based chief market strategist at Axicorp, said in a report. U.S. stocks on Thursday capped their biggest weekly gain since 1974, the dollar retreated and Treasury yields jumped as investors took heart from the Federal Reserve’s decision to provide as much as $2.3 trillion in additional aid. But many investors said it was too early to see an end to the selloff. Data from China on Friday are forecast to show the world’s second-largest economy shrank 6% year-on-year in the first three months of this year as the virus ravaged the country.
“It should provide an advantageous reference point for benchmarking the probable effects of Covid-19 on economic activity in other economies,” Innes said.
Before that, the IMF is poised to slash its outlook for the world economy as it holds its spring meetings via video conference. Investors are hoping the Washington-based lender and G-20 members announce measures to bolster emerging markets in the face of the fastest capital outflows on record. Meantime, analysts are bracing for the first corporate results from Europe, where lockdowns have brought many economies to a virtual standstill.
All eyes will be on oil on Monday as negotiators struggled to confirm a deal over the weekend to cut crude output and stem the collapse in prices. The OPEC+ alliance on Thursday tentatively agreed to curb output by 10 million barrels a day, ending the price war between Saudi Arabia and Russia. Mexico, however, has yet to endorse the deal and the Kremlin warned of “unmanageable chaos” unless it’s clinched.
“If they do manage to finally announce a new deal as confirmed, selling oil won’t be going away as a trend,” Jameel Ahmad, a markets analyst at FXTM in London, said by email. “If anything, the deal will become more about trying to prevent oil prices falling to horrifying single-digit numbers.”
Saudi Arabian stocks declined 2% on Sunday as the talks dragged on.
West Texas crude dropped 9.3% to $22.76 a barrel Thursday, bringing its decline this year to almost 63%.