Wall street climbs, supported by Trump and oil

Wall street climbs, supported by Trump and oil

Jean-Noël Legalland,

published on 10/03/2020 at 2:00 p.m.

Photo credit © Reuters

(Boursier.com) – Wall Street is recovering quite clearly after the plunge of the previous day, since the main stock market indices gain around 3% before market. Last night, the DJIA had collapsed by 7.79% and the Nasdaq by 7.29% with the fall of a quarter of the prices of black gold. This was the largest correction in the US rating since December 2008. The trend is much more positive today, the markets counting on strong support from monetary authorities and governments.

Trump said Monday evening that he would meet with the Republicans in the House of Representatives and the Leader of the Republican Majority in the Senate on Tuesday to discuss a possible payroll tax reduction and “substantial” assistance that could receive “those who are paid by the hour” so that they are not penalized by the health situation. Trump also talked about small business loans and said he works closely with the airline and hotel industries, as well as with cruise lines hit hard by the coronavirus.

Major business leaders will also be invited to the White House to discuss the avenues for recovery from the depressive effects of the coronavirus epidemic. Trump thus plans to take several “far-reaching” measures, which will be detailed on Tuesday … The American leader mentioned among the lines of work “a possible cut in wage taxes” which must be discussed with Congress officials. “We are also going to talk about helping people who are paid by the hour” (…) “I will be Tuesday afternoon to inform you about the economic measures we are taking, which will be major and far-reaching” , said the American president who estimated that the world had been taken aback by the coronavirus.

For US Treasury Secretary Steven Mnuchin, “the United States has the most robust economy in the world”. For her part, the Democratic President of the House of Representatives, Nancy Pelosi, said that it was “obvious that new parliamentary measures would soon become necessary”. The latter reiterated its call to “prioritize the health and safety of American workers over the interests of companies”.

By the end of last week, Donald Trump had released $ 8.3 billion in emergency aid for the treatment and prevention of coronavirus.

Oil prices, which had literally collapsed yesterday – after having already lost 10% on Friday – following the failure of the OPEC + meeting in Vienna, are now rising quite significantly today on Tuesday, pending the presentation of stimulus measures, in the USA in particular. The price of a barrel of American light crude (WTI), which had abandoned yesterday nearly 25%, regains more than 10% now at $ 34.5 on the Nymex, while North Sea Brent advances 11% after plunged 24% yesterday.

The two main varieties of oil have dropped more than 40% since the start of the year. Monday’s loss is the worst day for black gold since the first Gulf War in 1991 …

Prices even lost more than 30% at the start of the day Monday, following the bitter failure of the OPEC + meeting on Friday. In the process, Saudi Arabia lowered the official selling price for the month of April for all of its crude qualities to all destinations. The failure of negotiations between OPEC and Russia at the end of last week on a production framework is therefore fraught with consequences, and weighs down the sector on the stock market this morning. Friday, Russia had opposed a new drop in production wanted by OPEC, which wanted a reduction of 1.5 million barrels per day until the end of 2020 to cope with the fall in prices following the spread of the coronavirus epidemic.

Saudi oil giant Saudi Aramco has set its selling price per barrel of light crude destined for Asia for April at 3.10 dollars less than the Oman / Dubai average, notes Reuters. This is a drop of $ 6 per barrel compared to the month of March. The group also lowered the selling price of a barrel of light crude to the United States for April to 3.75 dollars less compared to the ASCI, down $ 7 compared to March. The price for Northern and Western Europe was set at $ 10.25 less than the benchmark for Ice Brent, down $ 8 per barrel. Saudi Arabia remains the world’s leading oil exporter, which explains the weight of these decisions.

It is therefore an unprecedented decision by Aramco, which launched the price war in the sector, promoting market share. The Saudi producer confirmed this morning its intention to raise its production in April to 12.3 million barrels / day, a record level (+ 25% increase). Bloomberg indicates that this level exceeds the maximum capacity of Arabia, which suggests that the kingdom should even draw from its strategic reserve.

The IEA anticipates a drop in global demand for oil this year, which would be a great first since 2009.

Russia made some more positive comments, not ruling out the possibility of resuming talks with Saudi Arabia. Dmitry Peskov, spokesman for the Kremlin, said that no one was ruling out the possibility of resuming talks on cooperation between Russia and Arabia in oil production. The local finance ministry has estimated that oil reserves will allow Russia to cope with prices of $ 25-30 per barrel for six to ten years … Russia believes it can boost its oil production by 500,000 barrels per day, which would bring production to a record level of 11.8 million barrels per day.

On the economic front in Europe on Tuesday, French industrial production for the month of January 2020 recovered by 1.2% compared to the previous month according to INSEE, while the consensus was + 1.8%. The revised reading for the previous month (December 2019) is -2.5%. Italian industrial production meanwhile, also announced this morning, climbed 3.7% compared to the previous month, against + 1.6% consensus and -2.6% a month earlier.

At the euro area level, the revised seasonally adjusted GDP growth for the fourth quarter came out at + 0.1% according to Eurostat, in line with the previous estimate as well as with the consensus. The evolution of employment came out positive by + 0.3%, in accordance with the consensus. In France, it came out at + 0.5% on private employment compared to the previous quarter, against + 0.2% consensus. The increase in salaried employment in France accelerated to + 1.1% in 2019. In the fourth quarter of 2019, net creations of salaried employment reached +90,800 in France according to INSEE, or + 0.4%, after + 0.2% in the previous quarter.

No major statistics are expected on Tuesday on Wall Street.

Operators remain attentive to the development of the coronavirus epidemic. China has confirmed the best recent impression, with President Xi Jinping even saying the epidemic is almost under control. Xi went to Wuhan, the initial epicenter of the epidemic. The city will begin to lift the restrictions imposed in recent weeks. Beijing reported a third day with no new cases of infection outside of Hubei province.

In Italy, on the other hand, the measures are draconian, with the extension to the whole of the country of movement restrictions and public events. It must be said that the local assessment is very heavy, with more than 9,000 confirmed cases and nearly 500 deaths now. The choice to isolate the country is therefore logical and almost inevitable. The measures initially taken in the north of the country are extensive. The schools are closed until April 3, accompanied by a ban on rallies and sporting events. Giuseppe Conte, president of the Italian council, asks the Italians to leave their home only for work or for urgent reasons. The public transport network remains operational. The Ministry of Industry indicates that Rome will approve measures of around 10 billion euros to counter the impact of the coronavirus.

In South Korea, the trend is improving, the country having quickly opted for radical measures. In other regions, in Europe in particular or in the USA, the number of cases is increasing with the increase in tests. Brussels intends to be more flexible in order to help the governments of the European Union to face up. In Japan, a new package of $ 4.1 billion is planned to deal with the consequences of the virus. The Bank of Japan also intends to intervene. Australia is also expected to announce a stimulus package that could reach up to A $ 10 billion.

In China, the current crisis had consequences in terms of inflation in February. The producer price index fell 0.4% year-on-year, compared with -0.3% of expected decline. The consumer price index, on the other hand, climbed 5.2%, as expected, after a jump of 5.4% in January, with very strong increases in certain food prices.

Values

The stocks most abused yesterday should resume at the start of the session on Tuesday. Apple earns 4% before market, Amazon 3%, Alphabet 3% and Microsoft 4%. ExxonMobil is up 8%, Chevron 6% and ConocoPhillips 8%. Halliburton ahead by 16% and Schlumberger by 11%! In the banking sector, Citigroup takes 5%, Bank of America 6%, JP Morgan 5% and Wells Fargo 5%, while Goldman Sachs advances by 4% …

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