20 March 2020

Oil Burning Again with Highest Single-Day Spike

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What’s happening: Oil prices skyrocketed on Thursday, with the WTI crude spiking 24% to post its biggest single-day percentage gain in history.

What happened: After declining more than 24% on Wednesday, crude oil bounced back from its lowest levels in 20 years during yesterday’s session. Oil got a boost from news of various central banks of the world announcing measures to support their economies to cope with the coronavirus pandemic. Reports of the Trump administration planning to intervene in the oil war between Saudi Arabia and Russia also sparked hopes of a resolution.

Why it matters: The US Federal Reserve announced on Wednesday that additional measures were underway in their effort to stabilize the financial markets. The Fed plans to extend loans to money market mutual funds facing a cash crunch. The ECB (European Central Bank) also announced a new €750 billion stimulus to support the economy. Meanwhile, Australia’s central bank announced an interest rate cut for the second time this month.

The Trump administration is reportedly planning to persuade Saudi Arabia to curtail its oil production and pressurise Russia by imposing sanctions. This had investors confused, with US President Donald Trump saying on the same day that he would get involved “at the appropriate time” and believes the low gas prices will be good for US consumers although this was hurting industries.

The US Department of Energy announced plans to buy crude oil for its emergency stockpile. The DoE intends to purchase up to 30 million barrels of oil for the SPR (Strategic Petroleum Reserve) by the end of June.

WTI (West Texas Intermediate) crude contract for April climbed 23.8% to settle at $25.22 per barrel on Thursday, while Brent crude for May jumped 14.4% to end at $28.47 per barrel. WTI oil had gained 6.9% at reach $26.96 per barrel during the Asian trading session this morning.

Natural gas prices settled 3% higher on Thursday, rebounding from a 7% decline in the previous trading session. Prices were propelled by reports from the US EIA (Energy Information Administration) of a decline of 9 billion cubic feet in domestic supplies of natural gas for the week ended March 13.

What to watch: Markets are awaiting official announcements from the Trump administration, hoping for an intervention in the unprecedented oil war. Investors will also keep look out for the US Baker Hughes crude oil rig-count report.

The Markets Today

     

Investors will be watching US stocks today, with markets closing higher on Thursday after another volatile trading session.

Context: US stocks closed higher on Thursday, as governments around the world pledged their support for their respective economies during the coronavirus outbreak. Governments are gearing up to extend as much financial support as possible, as the pandemic threatens to bring businesses and economies to their knees amid global lockdowns and restrictions on movement of people and supplies.

Details: After shedding more than 1,300 points on Wednesday, the Dow made some recovery yesterday. The index gained 1% after the Federal Reserve announced a Money Market Mutual Fund Liquidity Facility and the ECB declared an asset-purchase program. Reports of the US Congress discussing a $1 trillion fiscal stimulus package also grabbed investor attention.

The Dow climbed 188.27 points to close at 20,081.19 on Thursday. The S&P 500 gained 0.5% to reach 2,409.39, while the Nasdaq 100 jumped 2.3% to end the day at 7,150.58.

Shares of Tesla jumped around 18% after Morgan Stanley upgraded the stock, while rental-car stocks recovered, with Hertz Global and Avis Budget Group climbing more than 22% each.

Why it matters: Markets are responding to every bit of positive or negative news, while governments grapple with responding to the coronavirus threat. Meanwhile, key US economic reports have started reflecting the coronavirus impact on the economy. US initial jobless claims surged by 70,000 to 281,000 in the week ended March 14, while the Philadelphia Federal Reserve manufacturing index dipped to -12.7.

Investors will need to focus on the fundamental strength of the assets they choose to hold. And, traders will have to exercise more discipline

What to watch: US stocks are expected to continue their upward momentum today. US stock futures trading so far points towards a higher open on Wall Street. Markets will continue to keep an eye on support from the Federal Reserve to get the economy back on track as well as on the number of confirmed coronavirus cases and deaths.

The US economic calendar is light today, with the only important report showing existing home sales data. US existing home sales, which fell 1.3% to an annual rate of 5.46 million units in January, are expected to rise 0.7% in February.

Other Markets: European indices were trading higher at 10:10am GMT, with the FTSE 100, German 30 and French 40 up by 3.64%, 5.84% and 6.16%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

Russia’s unemployment rate, retail sales and gross domestic product, Turkey’s total motor vehicles production, India’s foreign exchange reserves, Mexico’s consumer spending, Canada’s retail sales and Brazil’s federal tax revenues and net payrolls.

 

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