Risk Assets Recover Despite Jobless Claims Continuing to Surge

 

Crude prices rebound, boost risk assets. US crude futures tied to the June contract rose 19% to close at $13.78/barrel on Wednesday. Prices jumped after President Trump tweeted he “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” The Trump administration is also considering additional federal funding to aid producers after Texas regulators failed to issue an order halting oil production in the region. US stocks rallied alongside oil prices – the DJIA and S&P 500 adding 2% and 2.3%, respectively. Treasury yields rose from near-record lows, with the yield on the 10-year UST closing near 0.60%.

 

 

Unemployment claims continue at historic pace. Released this morning, the US Department of Labor reported that 4.4 million Americans filed jobless claims for the week ending April 18th, with California processing the highest number estimated at 533,568. Jobless claims total more than 26M since widespread lockdowns began in mid-March. Economists are mixed with some predicting unemployment claims already peaked in March when the number spiked close to 7M and expect the rate to continue to slow in the coming weeks versus others forecasting a surge as Americans may have been unable to previously file due to overwhelmed state systems. New York Governor Andrew Cuomo added that his state has 1,000 people “just to take the incoming unemployment calls. That’s how high the volume is. And they still can’t keep up.” The next phase of relief from the White House is poised to provide an additional $320 billion in aid to the Paycheck Protection Program conditional on a House vote. Treasury Secretary Steven Mnuchin estimates that the PPP has saved over 30M jobs and will continue to do so with the additional funds.

 

 

Day ahead. The Purchasing Manager’s Index composite level for April came in at 27.4 this morning, with manufacturing dropping to 36.9 from 49.2 a month earlier. New home sales for March fell past economist expectations, dropping more than 100k to 627k. The Kansas City Fed April manufacturing index is forecasted to drop to a record low for April after falling to -17 last month. The House is expected to pass the new economic rescue bill today.