Boris heading to hospital has seen some risk aversion towards the Pound as we get into the week and there have been a few other moves of note too.
Stocks have rallied in Asia and on European futures markets, apparently in response to reports that Europe might be lifting some of its lockdown measures. We’re yet to see or hear any of these reports, but they’ve (or the rumour at least) has made it onto trading floors and they’ve run with it. Meanwhile, Japan is apparently preparing to declare a state of emergency to try and control the spread of the virus there – this hasn‘t stopped their stock market trading more than 4% higher in the session.
Oil’s the asset that’s got the market on its toes this morning though: Price fell by more than 10% at the start of business on the news that the OPEC+ talks had been delayed until Thursday. It’s stabilised a little since, but after the massive move caused by Trump late last week, we wouldn‘t expect it to be anything less than volatile and to continue to be until OPEC get some kind of agreement in place. You can tell the price is dire as even Norway are offering to cut their daily supplies; the country makes up around 2% of global supply, but is willing to reduce that in line with others in a bid to help the price find a foothold.
The FT are reporting that the US and Canada are threatening tariffs on Russian and Saudi oil imports into the countries if they don’t get their acts together and control supply. Despite being the US being the world’s largest oil producer, they import nearly half of the oil that they use – some 10 million barrels per day – and tariffs on that would almost certainly shift the needle on their overall mix of domestic and foreign consumption, so there’s some leverage to be had here.
There’s an interesting piece in the Wall street Journal that talks about Texas and how that’s getting a double whammy at the moment, with oil prices that are uneconomical to produce at and cities that are being hit by lockdowns which is hurting the service sector – and all the while consuming less oil and therefore adding to stockpiles which means even when they get back to work this won’t correct itself. They also talk about the knock on effects, where tax revenues from the oil industry dry up and in turn hurt things like education which rely on the steady flow of income.
Still, whilst all this is going on, at least Trump’s at the helm making sure things go smoothly… The Washington Post are reporting that many Americans might not receive their $1,200 relief cheques until August or September and that a lot of businesses are being denied the loans that they should qualify for. The piece talks about a lot of the issues stemming from the fact that Steve Mnuchin the Treasury Secretary hasn‘t filled senior positions and is therefore creating a bottleneck because he is the one that is micro managing a macro situation. Another issue that banks are facing in dishing out the loans is that they could well be held criminally liable if they don’t undertake enough compliance checks on the companies – checks that would normally take them weeks, but staffing levels are lower than they would normally be – an difficult predicament that can only really be clarified from the very top of the administration down.
In the UK; Andrew Bailey has taken the time to write a piece for the FT assuring everyone that what the Bank of England are doing isn‘t printing money to prop up the government. The article talks about how the monetary policy committee have got this all under control and that their independence from government is not being muddied, despite their unusually large support package. Their theory is that they can full unwind this stimulus in the future and that we can go back to normal. Theoretically.
Going into the week, the FTSE is following suit and trading higher with this positive risk sentiment. If we can get a few straight days of Spain and Italy’s Covid numbers improving then we’d expect this to continue. Italy is now showing its lowest numbers since March 19th.
In-line with everyone else trying to ‘think outside the box’, we’ll be doing a webinar later in the week, but something a little different to a thinly veiled sales pitch! We’re joining with our friends at AON and will talk about the lessons the world should take from this and the things we can do now to try and get ahead of the curve. We’ll send the details for this in due course, but we’ll go for Thursday and try to time it with your afternoon coffee.
As if that wasn‘t enough change for one week, we’re also going to be rolling out this daily briefing from a new email provider in the coming days and this could well mean you receiving it twice for a day or two. Apologies if this is the case. If you stop receiving it, then please do get in touch – I’ll write every day this week, so be sure to make a mental note to expect it.