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North American stock markets regain ground on hopes for economic stimulus

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TORONTO —
Canada’s main stock index staged nearly a 10 per cent rebound on Friday as hopes rose for government stimulus to ease the economic impact of the coronavirus outbreak and a crash in oil prices.

But despite regaining some of the ground it gave up in its biggest one-day drop on record on Thursday, the market still wound up more than 15 per cent lower on the week as economists warned of a recession to come.

“Not just today, but I think this rally is not necessarily signalling an end. There could be weakness that continues,” said Kevin Headland, senior investment strategist at Manulife Investment Management.

He warned that economic data gathered during the markets’ recent weak period prompted by low oil prices and the spread of the COVID-19 outbreak to Europe and North America will likely continue to ripple through markets.

“I expect fundamental economic data to come out weaker over the next few months. As well, you would expect Q1 earnings also to come out weaker and the market may react negatively to any of those announcements,” he said.

In choppy trading, the S&P/TSX composite index closed up 1,207.88 points or 9.6 per cent at 13,716.33, a day after giving up more than 1,700 points.

It ended the week down 2,458.69 points from its close of 16,175.02 on Friday, March 6.

Stocks surged in the United States, recouping much of their historic plunge, after President Donald Trump announced new measures on Friday to fight affects of the coronavirus.

The Dow Jones industrial average jumped 1,985 points, or 9.4 per cent, its best gain since October 2008. Stocks doubled their gains in the last half-hour as Trump made his remarks.

The S&P 500 index was up 230.38 points at 2,711.02, while the Nasdaq composite was up 673.07 points at 7,874.88.

Both the Royal Bank of Canada and CIBC warned that Canada is likely on the brink of a recession later this year as the economy is derailed by the impact of COVID-19 and a plunge in oil prices.

Both banks said economic output will likely contract in the second and third quarters.

The Canadian dollar sold off on Friday after the Bank of Canada cut its key interest rate by half a percentage point to 0.75 per cent in addition to its half a percentage point cut last week.

“We expect the Federal Reserve to cut materially next week and wouldn’t be surprised to see them cut the rest of the 125 basis points and go to zero,” said Headland.

“I would expect the Bank of Canada to follow suit.”

He said the loonie could drift to a level lower than 70 cents US.

The Canadian dollar traded for 71.94 cents US on Friday compared with an average of 72.36 cents US on Thursday.

The S&P/TSX Capped Energy Index rose by 10.59 per cent as the April crude contract jumped 23 cents to US$31.73 per barrel and the April natural gas contract gained 2.8 cents at US$1.869 per mmBTU.

Financials, telecommunications and consumer staples sectors also posted double-digit percentage increases.

The April gold contract was down US$73.60 at US$1,516.70 an ounce and the May copper contract was down 0.85 cents at US$2.464 a pound.

This report by The Canadian Press was first published March 13, 2020.

With a file from The Associated Press.

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Oil prices pull back after OPEC and Russia delay discussions on cutting output – CBC.ca

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Oil prices fell on Monday after Saudi Arabia and Russia delayed a meeting to discuss output cuts that could help to reduce global oversupply as the coronavirus pandemic pummels demand.

Brent crude fell more than $3 US when Asian markets opened but recovered some ground, with traders hopeful a deal between the top producers was still within reach.

Brent was down 81 cents, or 2.4 per cent, at $33.30 US a barrel. U.S. crude was 65 cents, or 2.3 per cent lower, at $27.69 a barrel, after having earlier been as low as $25.28.

The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, are expected to meet on Thursday, instead of Monday, to discuss cutting production.

“Perhaps it is best that the meeting was delayed for producers to cement a minimum of common ground before the actual discussions take place on Thursday,” BNP Paribas analyst Harry Tchilinguirian said. He noted initial disappointment at the delay had driven down prices in Asian business.

Kremlin spokesperson Dmitry Peskov said Moscow was ready to co-ordinate with other oil exporting countries to help stabilize the market and that the OPEC+ meeting was delayed for technical reasons.

OPEC+ is working on a deal to cut production by about 10 per cent of world supply, or 10 million barrels per day (bpd), in what member states expect to be an unprecedented global effort.

But Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said even if the group agrees to cut up to 15 million bpd, “it will only be enough to scratch the surface of the more than 23 million bpd supply overhang predicted for April 2020.”

Sentiment was lifted by Saudi Arabia’s decision to delay releasing its official crude selling prices to Friday, pending the outcome of the OPEC+ meeting.

U.S. President Donald Trump has said he would impose tariffs on crude imports if needed to protect U.S. energy workers from the oil price crash.

Investor morale in the eurozone fell to an all-time low in April and the bloc’s economy is in deep recession because of the novel coronavirus, a survey showed on Monday.

“Wherever you look, the narrative is the same: the global economy is in a painful recession,” Stephen Brennock of oil broker PVM said. “As OPEC+ ponders fresh supply curbs, you can’t help but think that the oil market will continue to be at the mercy of the virus pandemic.”

Second wave of COVID-19 infections in China

Markets were also spooked when the National Health Commission of China said on Monday that 78 new asymptomatic cases had been identified as of the end of the day on Sunday, compared with 47 the day before.

Asymptomatic patients, who show no symptoms but can still pass the virus to others, have become China’s chief concern after strict containment measures succeeded in cutting the overall infection rate.

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Premarket: Stocks jump on virus slowdown hopes, but oil slips on oversupply – The Globe and Mail

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World stock markets jumped on Monday, encouraged by a slowdown in coronavirus-related deaths and new cases, though a delay in talks between Saudi Arabia and Russia to cut supply sent oil tumbling again.

Equity investors were encouraged as the death toll from the virus slowed across major European nations including France and Italy.

London’s FTSE raced up 2%, indexes in Paris and Milan rose 3% and Germany’s DAX gained more than 4% after Japan’s Nikkei finished with similar gains overnight.

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There was plenty of news to demonstrate just how brutal the virus has been: eye-popping plunges in car sales and air travel in Europe, Britain’s prime minister being hospitalised , and Japan preparing to declare a state of emergency. But the markets appeared hopeful.

Wall Street S&P 500 emini futures were up almost 4%, close to their upper limit too, buoyed by comments from U.S. President Donald Trump that his country was also seeing a “levelling off” of the crisis.

“What is driving the market is the evidence that the number of new cases has started to turn the corner,” said Rabobank’s Head of Macro Strategy Elwin de Groot.

As well as a slowdown in deaths in Italy, he said, improvements were starting to become visible in Spain and even in the United States there had been a little bit of a let-up.

“When you see that happening you can start gauging when lockdowns can start to be gradually lifted. That gives a little bit more visibility and that is vital,” he added, although he stressed there were still huge uncertainties and risks.

As has been the pattern for most of the year, commodity markets saw the day’s other big moves.

Brent crude fell as much as $4 after Saudi Arabia and Russia, who have been at loggerheads this year over production, pushed back the planned start of a meeting of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, until Thursday.

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OPEC+ is working on a deal to cut oil production by about 10% of world supply, or 10 million barrels per day (bpd), in what member states expect to be an unprecedented global effort.

The countries are “very, very close” to a deal on cuts, one of Russia’s top oil negotiators, Kirill Dmitriev, who heads the nation’s wealth fund, told CNBC.

But Rystad Energy’s head of oil markets Bjornar Tonhaugen said even if the group agreed to cut up to 15 million bpd, “it will only be enough to scratch the surface of the more than 23 million bpd supply overhang predicted for April 2020.”

EMERGENCY CALLS

In currency markets, the yen fell 0.6% to 109.14 against the dollar and weakened against other major currencies as Japan’s Prime Minister Shinzo Abe said the government would declare a state of emergency as early as Tuesday to curb a spike in coronavirus infections.

The dollar barely budged against the euro but the pound recovered having dipped 0.4% after British Prime Minister Boris Johnson was admitted to hospital for tests as he was still suffering symptoms of the coronavirus.

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Yields on safe-haven German government bonds crept higher in fixed income markets too, reflecting the slightly brighter tone in world markets despite some painful data.

Investor morale in the euro zone fell to an all-time low in April and the currency bloc’s economy is now in deep recession due to the coronavirus, which is “holding the world economy in a stranglehold”, a Sentix survey showed.

Orders for German-made goods had already dropped 1.4% in February, German data showed. British car sales slumped 40% last month and Norweigen Air’s traffic plummeted 60%.

“Never before has the assessment of the current situation collapsed so sharply in all regions of the world within one month,” Sentix managing director Patrick Hussy said.

“The situation is … much worse than in 2009,” Hussy said. “Economic forecasts to date underestimate the shrinking process. The recession will go much deeper and longer.”

CRUCIAL TEST

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In Asia, stocks had also proven bullish. Australia’s benchmark index rose 4.33%, Japan’s Nikkei added 4.24% after a slow start, while South Korea’s KOSPI index climbed 3.85%. Hong Kong’s Hang Seng index was 2.18% higher.

That sent MSCI’s broadest index of Asian shares outside of Japan up 2%, on track for its best performance in more than a week.

Markets in mainland China were closed for a public holiday.

Worryingly, the number of new coronavirus cases jumped in China on Sunday, while the number of asymptomatic cases surged too as Beijing continued to struggle to extinguish the outbreak despite drastic containment efforts.

“Focus in markets will now turn to the path out of lockdown and to what extent containment measures can be lifted without risking a second wave of infections,” National Australia Bank analyst Tapas Strickland wrote in a note.

“Key to a strong rebound in China will be the ongoing lifting of containment measures, with Wuhan – the epicentre of the outbreak – set to lift containment measures on April 8.”

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Reuters

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Application process for emergency benefits for workers begins this morning – CTV News

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OTTAWA —
Applications open today for the new federal emergency aid benefit for Canadians who lost their income because of COVID-19.

The Canada Revenue Agency will open its application portals this morning to those born in the first three months of the year, with those born in other months able to apply later in the week.

The agency is trying to keep demand from overwhelming its online and telephone systems.

More than two million Canadians lost their jobs in the last half of March as businesses across the country were forced to close or reduce their operations to slow the spread of the novel coronavirus.

Others are unable to work because they are required to self-isolate at home, or need to look after children whose schools and daycares are closed.

Finance Minister Bill Morneau anticipates the wage benefit will cost the government $24 billion.

People born in April, May and June can apply Tuesday, those born in July, August or September can apply Wednesday and applications are accepted Thursday from people born in October, November and December. Friday, Saturday and Sunday will be open to anyone.

Prime Minister Justin Trudeau said Sunday Canadians who sign up for direct deposit could get their first payment before the end of the week. It’s anticipated direct deposit applicants will get money within three to five days, while those who opt for printed cheques will get money in 10 days.

“While we still have a lot of work to do, we’re making good progress on getting you the support you need as quickly as possible,” Trudeau said.

However, opposition parties say there are some glaring holes in the aid that is leaving some people in need out of the program completely.

Conservative finance critic Pierre Poilievre said there are “serious design and delivery flaws” that should be fixed.

Poilievre said some small business owners who paid themselves with dividends don’t qualify because they won’t have $5,000 of employment income in 2019 as the benefit requires. Further, he said a worker who has lost most of their income but still has one contract or a handful of clients won’t qualify for any money because you can’t have any current income in order to be eligible.

“They are effectively banned from doing any amount of work that might help keep their business open,” he said.

Poilievre said there are some easy fixes, including adjusting the wage benefit down slightly if a worker earns some income, much like happens when someone is collecting employment insurance but manages to find work temporarily.

He also wants small business owners to be viewed as employees for the purposes of the emergency response benefit.

NDP MPs Peter Julian and Gord Johns wrote to Morneau Sunday also asking for changes, including to address the fact the benefit provides an incentive not to work at all.

They said workers who have lost most but not all of their shifts, or lost one part-time job but not the other, “are living on significantly reduced incomes” but won’t qualify for the benefit.

“The consequences are that they are now asking to be laid off or furloughed so that they can access the CERB,” they wrote. “This is causing significant disruptions to normal business, to essential services, and to community contributions on local economies.”

Opposition parties also want more clarity on the government’s biggest aid program, the $71 billion, emergency wage subsidy, that will cover up to 75 per cent of wages for businesses that choose to keep employees on the payroll rather than laying them off.

Poilievre said it is going to take too long for businesses to see any of that money, and some of them won’t survive that long.

The Conservatives and NDP both want the government to reconsider the requirement for businesses to show a 30 per cent drop in revenue in order to qualify.

To be eligible for the emergency benefit, workers must have earned at least $5,000 in 2019, or in the 12 months before applying. The benefit is the same for everyone regardless of previous income, and is a less complicated application process than for employment insurance.

This report by The Canadian Press was first published April 6, 2020.

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