- For the first time ever, crude oil futures went negative in trading yesterday due to a lack of storage space for barrels of oil. The cost of a barrel of WTI crude oil remains at about $21. There is clearly a strong lack of demand for crude oil globally due to the coronavirus pandemic triggering economic shutdowns. There have been reports Saudi Arabia will cut production further to try to shore up prices.
- The rate of increase globally in new confirmed infections from the coronavirus pandemic has begun to increase linearly rather than exponentially, with total confirmed cases of almost 2.5 million and a case fatality rate of 6.87%. The number of reported deaths globally has begun to decline in recent days, but it should be noted reporting is skewed towards more developed nations. The pandemic’s epicenter is still located in New York, but even there it seems likely that the peak of this wave has already been reached, as it probably has in every European nation, but not in the U.S.A. yet as a whole. A world recession or possibly even depression from the pandemic appears to be inevitable, with Goldman Sachs forecasting a 34% drop in U.S. Q2 annualized GDP and other analysts seeing a 30% unemployment rate in the near future. If correct, these will be the worst such numbers seen since the 1930s, but it should be noted many analysts continue to see a much better outlook for U.S. unemployment. The WTO has forecasted that global trade is set to fall by one third.
- Data from New York City suggests that 0.17% of the entire population of the city has recently died while infected with the coronavirus, which is one of the strongest pieces of hard evidence that the disease has a significantly higher mortality rate than any common flu. Similar data from Bergamo, Italy suggests an estimate from between 0.20% to 0.50%, suggesting that reports of much lower IFRs are unlikely to be accurate. If the case fatality rate is 0.8%, this suggests that almost one-quarter of New Yorkers have been infected with the disease so far.
- There is increasing discussion of the economic cost of the pandemic in hard hit countries and talk of reopening economies, especially in the United States where the unemployment rate is currently estimated to have hit 15%. Some nations (mostly in Europe) have begun to relax restrictions, notably Germany, Poland, Norway, the Czech Republic, Albania, Italy, and Israel. It is becoming clear that the nations which have suffered least from this first wave are New Zealand, Australia, Norway, Austria, and Israel. The situation appears to be worsening in Brazil, Turkey, Russia, India, and Japan, although the Indian lockdown has been surprisingly efficient.
- While the vast majority of confirmed cases are still in Europe and the U.S.A., with the U.S.A. account for approximately one third of all cases, infections are beginning to increase notably in Latin America, especially in Brazil which is confirming more than 2,000 new cases daily. The President of Brazil Jair Bolsonaro has been seen in public recently suffering from a dry cough, leading to speculation he is infected, as he continues to play down the disease as no worse than the flu.
- The price of Gold has found some support near $1675 an ounce, but until we see new breaks above $1725 it looks like the precious metal’s bullish run to new highs is over, at least for the time being.
- Despite the gloomy global economic outlook, stock markets (especially in the U.S.A.) continue to look relatively firm, although the S&P 500 Index closed down a little yesterday. Major U.S. stock indices have regained more than half of the value lost during their sharp falls in February and March – this is becoming technically significant. Many market analysts think the bottom of this bear market has already been reached, but other analysts see further strong falls likely in stocks over the coming weeks and months. There is a strong divergence of opinion.
- Currency markets are currently dominated by relative strength in the Japanese Yen, while the Australian Dollar looks like the weakest currency today.
- Markets have been affected recently by high relative volatility, but this has decreased to more normal levels, although stocks are still showing relatively high volatility.