The Weekly Wrap – Crude Oil Prices, Economic Data, and COVID-19 Updates Drive Risk Appetite

The Stats

It was a particularly busy week on the economic calendar, in the week ending 8^th May.

A total of 57 stats were monitored, following the 60 stats from the week prior.

Of the 57 stats, 29 came in ahead forecasts, with 26 economic indicators coming up short of forecast. 2 stat was in line with forecasts in the week.

Looking at the numbers, just 18 of the stats reflected an upward trend from previous figures. Of the remaining 39, 38 stats reflected a deterioration from previous.

For the Greenback, the pendulum swung back in favor of the Greenback in the week. The U.S Dollar Spot Index rose by 0.66% to end the week at 99.734. Partially reversing a 1.30% fall from the previous week, it was a 3^rd week in the green out of 4.

Economic data, COVID-19 news, geopolitics were in focus throughout the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 4,000,975, which was up from last Friday’s 3,392,718. Week-on-week, the total number of cases was up by 608,257, on a global basis. This was higher than the previous week’s increase of 564,143 in new cases.

In the U.S, the total rose by 189,444 to 1,318,504. In the week prior, the total number of new cases had risen by 204,064.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 42,031 to bring total infections to 823,870. In the previous week, the total number of new cases had risen by 54,254.

It was worth noting that the U.S and the EU member states monitored all saw a spike in new cases on Thursday.

Out of the U.S

It was a busy week on the economic calendar.

In the 1^st half of the week, there was nothing positive for the markets to consider.

Factory orders tumbled by 10.3% in March, the trade deficit widened in March, and service sector activity tanked.

The market’s preferred ISM Non-Manufacturing PMI slid from 52.5 to 41.8.

Employment figures also tested market resilience throughout the week.

After some quite dire ADP numbers on Wednesday, initial jobless claims jumped by another 3.169m in the week ending 1^st May.

The surge preceded April’s nonfarm payroll figures on Friday, which showed a 20.5m slump. As a result of the slide, the U.S unemployment rate jumped from 4.4% to 14.7% in April.

The only consolation was that economists had forecast an unemployment rate of 16%. It was enough to support the demand for riskier assets on the day.

In the equity markets, the Dow rose by 2.56%, with the NASDAQ and S&P500 rallying by 3.50% and 6.00% respectively.

Out of the UK

It was a relatively quiet week on the economic calendar. Key stats included finalized April private sector PMI numbers and house price figures.

The stats were skewed to the negative. Finalized services and composite PMI were revised upwards from prelim figures, providing the only positive.

It was of little consolation, however, with the PMIs still at 13 levels in spite of the upward revisions

House prices fell by 0.7%, reversing a 0.2% rise in March.

Also negative was a slide in the construction PMI from 39.3 to just 8.2 in April.

While the stats were negative, the BoE gave the Pound much needed support by standing pat on monetary policy.

The support for the Pound came in spite of the BoE delivering a gloomy economic outlook.

On the geopolitical risk front, updates on Brexit pinned back the Pound mid-week, with both sides making little progress.

There was some hope of progress towards a U.S – UK trade deal, but it is going to take some time for any meaningful progress.

In the week, the Pound fell by 0.77% to $1.2410. The FTSE100 ended the week up by 3.00%, following on from a 0.19% gain from the previous week.

Out of the Eurozone

It was another busy week economic data front, with the stats heavily skewed to the negative once more.

Manufacturing and Service PMIs for April for Italy and Spain were in focus in the 1^st half of the week.

Finalized PMIs from France, Germany, and the Eurozone together with German factory orders and Eurozone retail sales also drew interest.

For Italy and Spain, while Manufacturing PMIs were on the slide and it was the Services PMIs that delivered a market shock.

The Service PMIs on Wednesday coincided with a record slide in German factory orders in March.

Eurozone retail sales were not much better, with an 11.20% fall coming before the April lockdown…

Later in the week, dire industrial production figures and trade data out of Germany had a muted impact. Perhaps the only consolation in the week was that Germany avoided a trade deficit by some margin.

For the week, the EUR rose by 1.29% to $1.0839, reversing a 1.46% gain from the previous week.

For the European major indexes, it was a bullish week. The EuroStoxx600 and DAX30 rose by 1.08% and by 0.39% respectively, while the CAC30 fell by 0.49%.

Elsewhere

It was another bullish week for the Aussie Dollar and the Kiwi Dollar, with the pair managing to avoid a Friday reversal.

In the week ending 8^th May, the Aussie Dollar rose by 1.78% to $0.6532, with the Kiwi Dollar up by 1.20% to $0.6136.

For the Aussie Dollar

It was a relatively busy week for the Aussie Dollar on the economic data front.

Key stats included March retail sales and trade figures on Wednesday and Thursday.

Retail sales surged by 8.5%, with the jump attributed to hoarding. In spite of expectations of an April slump, the Aussie found support from the numbers.

Trade data also impressed, with the trade surplus widening from A$4.361bn to A$10.602bn.

Again, the markets and the RBA are expected economic conditions to deteriorate in the 2^nd quarter, which limited the upside from the stats.

On the monetary policy front, the RBA left interest rates unchanged on Tuesday, while assuring the markets of more support should the need arise.

The RBA’s base case scenario for the economic outlook failed to sink the Aussie Dollar in the week.

From elsewhere, it was trade data from China that ultimately gave the Aussie Dollar a boost. A 3.5% increase in exports caught the markets by surprise…

For the Kiwi Dollar

It was also a busier week on the economic calendar.

Key stats included 1^st quarter employment figures and inflation expectations.

Employment increased by 0.7% in the 1^st quarter, leading the unemployment rate up to 4.2%. Economists had forecast a 0.3% decline and an unemployment rate of 4.3%.

While the employment figures were positive, inflation figures were quite the opposite.

Inflation expectations for 2-years out slumped in the 2^nd quarter from 1.93% to 1.24%. Things were not much better for 1-year, with inflation forecasted to tumble from 1.88% to 0.74%. This was of little surprise, however, when considering the slump in crude oil prices.

Ultimately, better than expected employment figures and an end to the coronavirus in NZ were the positives.

The NZ economy should now be in recovery mode, which could give the RBNZ some breathing room.

For the Loonie

It was a relatively busy week on the economic calendar, with the stats skewed to the negative.

While the stats showed further deterioration from the previous month, they were more upbeat than forecasts.

In March, the trade deficit widened from C$0.98bn to C$1.41bn, against a forecast of C$2.00bn.

In April, employment tumbled by 1.994m, following a 1.011m fall in March. Economists had forecast a 4m decline. The unemployment rate jumped from 7.8% to 13%, which was well below a forecast of 18%.

From the private sector, the Ivey PMI did disappoint, however, with the PMI falling from 26.0 to 22.8 in April. Economists had forecast a PMI of 25.0.

Ultimately, an upward trend in crude oil prices and improved risk sentiment delivered the gains for the Loonie on the week.

The Loonie rose by 1.15% to end the week at C$1.3927.

For the Japanese Yen

It was a relatively quiet week on the data front.

Key stats included March household spending and finalized April services PMI figures.

There was nothing positive to take from the numbers, with household spending sliding by 4% in March.

Service sector activity also ground to a halt, with the finalized PMI revised down from 22.8 to 21.5. In March, the PMI had stood at 33.8.

While the stats were skewed to the red, the Yen found some support though nothing to write home about…

The Japanese Yen rose by 0.24% to end the week at ¥106.65. In the week prior, the Yen had risen by 0.56% against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front.

Key stats included April service sector PMI and trade data.

The stats were skewed to the positive in the week. The pace of contraction in service sector activity eased in April, with the PMI rising from 43.0 to 44.4.

Of greater significance, however, was a 3.5% increase in exports. Economists had forecast a 15.7% slide.

Imports did tumble by 14.2%, however, with the lack of demand raising some uncertainty over what lies ahead.

The Yuan failed to end the week in the green, with Trump’s threats and an uncertain economic outlook weighing.

In the week ending 8^th May, the Yuan fell by 0.16% to CNY7.0742 against the Greenback.

The CSI300 rose by 1.30%, while the Hang Seng ending the week down by 1.68%.