As trading days go, Thursday’s session on Wall Street was a terrible, horrible, no good, very bad one.
Stocks were annihilated, oil plunged, credit markets tightened – even gold and bitcoin weren’t spared from the carnage as anxiety over how deeply coronavirus could damage the economy continued to decimate investor confidence.
An announcement of a major funding injection by the United States Federal Reserve – aimed at flushing out financial plumbing gummed up by growing investor panic – only managed to stem the bloodbath briefly.
The Dow Jones Industrial Average closed down 2,356.60 points or just shy of 10 percent – its biggest one-day plunge since the 1987 market crash, when it lost 22 percent in a single session.
The broader S&P 500 – a proxy for US retirement and college savings plans – closed down 9.5 percent, officially landing it in bear market territory. Shortly after the opening bell, the index crossed the 7 percent loss threshold, triggering so-called circuit breakers that halted trading for 15 minutes.
The tech-heavy Nasdaq Composite Index also sank into bear market turf, closing down 9.4 percent.
Wall Street opened under a cloud of despair as fears over the economic fallout of coronavirus accelerated after US President Donald Trump on Tuesday announced a travel ban on Europe.
During a televised address to the nation, Trump labelled the coronavirus “foreign” and listed measures that had been previously floated – such as tax breaks and small business aid – to help offset the outbreak’s economic impacts. But he failed to include enough details to assuage recession fears.
“The buildup to the address, especially the comments made during the President’s televised discussion with bank CEO’s earlier in the day, left the impression that a more complete outline of the Administration’s stimulus plan would be presented during last night’s address,” Steven Ricchiuto, chief US economist at Mizuho Securities USA, wrote in a note to clients. “Markets want a credible, coordinated stimulus plan and policymakers have left investors wanting. The net result is that markets keep pricing in the worst-case scenario.”
That scenario kept gaining the upper hand on Thursday.
As businesses scrambled to get their hands on cash to weather the coronavirus storm, short-term funding markets that banks rely on to fund their day-to-day operations continued to tighten.
In an effort to calm nerves and ease the stress, the Federal Reserve announced around 1pm in New York that it is injecting $1.5 trillion in funding into short-term credit markets over Thursday and Friday.
The liquidity firepower served as tourniquet – but only briefly- and ultimately could not stem the hemorrhaging in share prices.
Airline stocks took another pummeling in the wake of the travel ban on Europe, which caught carriers by surprise and drew criticism from US Travel Association President and CEO Roger Dow.
“Temporarily shutting off travel from Europe is going to exacerbate the already-heavy impact of coronavirus on the travel industry and the 15.7 million Americans whose jobs depend on travel,” Dow said in a statement.
Energy shares also continued to get hammered as oil prices kept faltering following Monday’s crash.
Oil markets are getting hit with a demand shock from coronavirus as appetites for crude ebb with business activity, and a supply shock from Saudi Arabia, which lowered the price it charges for oil and is flooding an already oversaturated market with crude in retaliation for Russia refusing to support deep output cuts.
Global benchmark Brent crude was down more than eight percent at around $33 barrel on Thursday, while US benchmark West Texas Intermediate crude was off more than six percent at around $31 a barrel.
The scramble for cash to cover deteriorating trading positions spilled over into gold, where the spot price fell below $1,600 per ounce.
The virtual cryptocurrency bitcoin also lost its lustre, with prices crashing below $6,000.
Trump and the Federal Reserve were not the only ones unveiling measures on Thursday that failed to assuage investor fears.
The European Central Bank (ECB) announced a stimulus package to shore up the eurozone against coronavirus economic hits, including boosting its bond-buying programme and making cheap loans available to banks to keep credit flowing smoothly.
But the ECB opted to leave interest rates unchanged, disappointing investors who had expected policymakers to lower rates following emergency cuts by both the US Federal Reserve and the Bank of England.
“While these measures are pretty substantial, we do not think the ECB will be able to change investor sentiment any more than the Fed could last week,” said Andrew Kenningham, chief Europe economist at Capital Economics.
WestJet to rehire nearly 6,400 workers with help of federal wage subsidy – CBC.ca
WestJet says 6,400 workers will be brought back onto its payroll once the federal government has approved an emergency wage subsidy program.
In a statement Wednesday night, WestJet CEO Ed Sims cautioned that there might not be enough work for the rehired employees, but noted “it does help them make ends meet.
“We will be communicating with those WestJetters who are affected by this decision as soon as we can,” said Sims.
Last month, WestJet announced it was cutting roughly half of its 14,000 employees with the elimination of 6,900 positions.
Canada’s airline industry has seen a dramatic reduction in demand due to lockdowns to control the spread of the coronavirus that causes COVID-19.
The Calgary-based airline’s move to rehire its employees follows a similar move by Air Canada, which announced Wednesday that it would rehire 16,500 laid-off workers with assistance from the same federal wage subsidy program.
The federal government’s emergency wage subsidy — originally targeted only at small- and medium-sized businesses — was expanded earlier in April to cover a 75-per-cent wage subsidy for Canadian companies that had lost 30 per cent of revenue due to the pandemic.
WestJet said it can’t guarantee that all employees will be coming back to work in the short-term, but the new subsidy will help out.
After announcing layoffs in late March, WestJet executives took a 50-per-cent pay cut and vice-presidents and directors took a 25-per-cent cut.
The airline also said it would reduce the number of flights offered in Canada by about half due to a reduced demand for travel.
Oil Prices Surge with Production Cut Anticipation By – Investing.com
By Gina Lee
Investing.com – Oil prices built on the momentum from the previous session as the price war between Russia and Saudi Arabia seems to be nearing a truce.
Russia said overnight that it was willing to reduce output by around 1.6 barrels daily, or 15%. The announcement saw WTI futures surging to almost 12% as the session closed.
International rose 2.62% to $33.7 by 10:19 PM ET (3:19 AM GMT) and U.S. jumped 3.71% to $26.02.
As the oil industry continues to grapple with a supply glut, with the COVID-19 pandemic shrinking demand, Russia’s declaration comes at an opportune time. The Energy Information Administration (EIA) said overnight that the U.S. crude oil inventory increased by 15.2 million barrels for the week ending April 3, against analyst expectations of a 9.37-million-barrel build.
The American Petroleum Institute (API) also estimated a build of 11.9 million barrels yesterday.
Investors are waiting to see if Russia will hold to its word at OPEC+’s virtual meeting later in the day.
“The coming extraordinary producing-countries meeting is the only hope in the horizon for the market that could prevent a total price collapse and production shut-ins,” Rystad Energy’s head of oil markets Bjornar Tonhaugen told CNBC.
“At the moment, prices are so volatile that any news or leaks about the direction of the negotiations could move them [prices] either way. As you have seen in recent days, price swings from gains to losses and back are not unusual in such times,” he added.
But some investors took a more skeptical view.
“OPEC+ is trying mightily to cobble together a sizable production cut, and they are in full spin mode to try and rally prices,” Again Capital’s John Kilduff told CNBC.
“[OPEC’s meeting] will be a make-or-break moment for the oil market. The math on a 10 million barrel per day cutback, which is the minimum necessary to stabilize the situation, is almost impossible to compute. I expect a bad day for OPEC+ tomorrow,” he added.
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Why Canadian dairy farmers are dumping milk – Canada News – Castanet.net
Some Canadian dairy farmers started dumping milk last week to rid the system of surplus production as demand from restaurants plummeted amid the COVID-19 pandemic that forced eateries across the country to close their doors.
“We first started seeing milk being discarded last week,” said David Wiens, vice president of the Dairy Farmers of Canada, a national organization for dairy producers. Though, it’s a bit early to know exactly how much milk farmers dumped at this point.
Dairy farms in British Columbia started disposing of raw milk on April 3, according to a statement on the BC Dairy Association website. The group did not respond to a request for comment
The Dairy Farmers of Ontario, which represents about 3,400 farms, informed producers “these measures would be necessary on a select and rotating basis” last week, said Cheryl Smith, chief executive, in an emailed statement.
It’s “very, very disheartening for farmers,” Wiens said. “It goes against every grain in their body.”
Dairy production in the country is controlled under a system known as supply management. It’s a controversial system that has seen its share of opposition. U.S. President Donald Trump called on Canada to end the practice for dairy.
Canada adopted this model for dairy in the early 1970s to overcome production surpluses in the two decades prior, according to the Dairy Farmers of Canada website. Egg and poultry farmers started to operate under the system in later years.
The Canadian Dairy Commission administers supply management for dairy producers, with the Canadian Milk Supply Management Committee assessing national demand for milk products and setting targets for production annually. Dairy farmers own what’s known as quotas, which allow them to produce a set amount of milk that depends on the anticipated demand. The production amount for their quota can be moved up or down as needed.
Dairy farmers sell their product at a fixed price that accounts for production costs and other factors. Grocers set retail prices.
The supply management system attempts to ensure farmers produce the right amount of milk to feed Canadians’ desire for dairy products.
The outbreak of COVID-19, however, resulted in unforeseen fluctuations, said Wiens.
“A few weeks ago, nobody would have predicted that it would have this impact on the marketplace,” he said.
On the retail front, demand soared as people descended on grocery stores and stocked up on essentials. Some grocery stores placed limits on the amount of butter and other dairy products customers could buy as their just-in-time distribution system couldn’t handle the new milk volumes and keep shelves stocked fast enough, he said.
Farmers have a “a huge surplus of milk now, which had nowhere to go,” said Wiens.
But demand plummeted from food service clients, like restaurants. Eateries across the country shut their doors — some on provincial government orders and others in an effort to help stop the spread of the coronavirus. Nearly all dine-in services across Canada remain shuttered, with some restaurants continuing to operate serving only food to go.
Meanwhile, as demand fluctuates, cows keep producing milk daily.
“There’s no tap that you can just slow down, and, you know, turn on and off as we wish,” said Wiens, who operates a dairy farm near a small town about 70 kilometres south of Winnipeg. “It doesn’t work that way.”
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