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Shares turn cautious as U.S. crude gets crushed – Reuters

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NEW YORK (Reuters) – Plunging U.S. crude oil prices pulled global equity markets lower Monday, kicking off a busy week of data and earnings that will further reveal the economic damage of the coronavirus pandemic.

FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, New York, U.S., April 13, 2020. REUTERS/Andrew Kelly

Assets like the dollar and government debt rose as investors edged into safe havens.

With some global storage facilities nearly at capacity, the ‘front-month’ May benchmark U.S. crude contract CLc1 fell 40.56% to $10.86 per barrel – the lowest since 1998. Brent LCOc1 was at $26.05, down 7.23% on the day.

“For oil there is a bit of a technical story (with storage), but still, if energy consumption is down 30% and OPEC reduces supply by 10%, there is still a large gap,” said Rabobank’s head of macro strategy, Elwin de Groot.

MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 1.18%., following broad declines in Europe and Asia.

In early trading on Wall Street, the Dow Jones Industrial Average .DJI fell 458.91 points, or 1.89%, to 23,783.58, the S&P 500 .SPX lost 40.56 points, or 1.41%, to 2,834 and the Nasdaq Composite .IXIC dropped 65.40 points, or 0.76%, to 8,584.74

The S&P 500 .SPX has rallied 30% from its March low, thanks in part to the extreme easing steps taken by the Federal Reserve and a $2.3 trillion stimulus package passed by Congress.

Yet analysts are likely underestimating the impact of the global economic lockdown on earnings results, noted Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities.

The United States has by far the world’s largest number of confirmed coronavirus cases, with more than 750,000 infections and over 40,500 deaths, according to a Reuters tally.

Against a basket of its rivals =USD, the U.S. currency rose 0.2% to 99.98 and edged closer towards a three-year high of near 103 hit last month.

Bond markets also suggested investors expected tough economic times ahead. Benchmark 10-year notes US10YT=RR last rose 12/32 in price to yield 0.6179%, from 0.656% late on Friday, compared with 1.91% at the start of the year.

“We are dealing with scales of declining economic activity that nobody has seen before. The potential hit to GDP in the second quarter this year will probably far exceed what we saw at the worst point of the financial crisis,” Capital Group economist Robert Lind said in a note.

Selling pressure on Italian government bonds has returned in the past week, undoing some of the benefits of the European Central Bank’s massive bond-buying scheme, after euro zone politicians failed to agree to common debt issuance as a means of addressing the crisis.

Italian Prime Minister Guiseppe Conte used an interview with Germany’s Sueddeutsche Zeitung on Monday to repeat calls for the EU to issue common euro zone bonds to demonstrate the bloc’s solidarity.

Reporting by David Randall, Editing by Nick Zieminski

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Canada's mortgage insurer tightens rules as it forecasts home-price drop of up to 18% – Financial Post

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TORONTO — The government-backed Canada Mortgage and Housing Corp said on Thursday it would tighten rules for offering mortgage insurance from July 1, after forecasting declines of between 9 per cent and 18 per cent in home prices over the next 12 months.

The move would make it harder for riskier borrowers, who offer down payments of less than 20 per cent, to access CMHC’s default mortgage insurance.

CMHC is establishing a minimum credit score of 680 instead of the current 600, the group said in an emailed statement.

It will also limit total gross debt servicing ratios to its standard requirement of 35 per cent of annual income, compared with a threshold as high as 39 per cent currently, and total debt servicing to 42 per cent versus as much as 44 per cent now.

The measures will help curtail “excessive demand and unsustainable house price growth,” CMHC Chief Executive Evan Siddall said in the statement.

He said COVID-19 has exposed longstanding financial-market vulnerabilities, and “we must act now to protect the economic futures of Canadians.”

Some 35 per cent of Canadian banks’ mortgages are insured, their financial statements show. CMHC is the top mortgage insurer, while Genworth MI Canada and other private companies also provide similar products.

Despite evaporating activity in the housing market due to the COVID-19 pandemic, prices have continued to rise as listings have fallen off alongside demand.

Home prices across the country rose 1.3 per cent in April from March, and data from Toronto and Vancouver real estate boards showed increases of 3 per cent and 2.9 per cent in May, respectively, from a year earlier.

The CMHC has taken a more bearish view of the housing market than others. Last week, some of Canada’s biggest banks forecast maximum price declines of about 7 per cent.

Siddall last week responded to critics of its more dire outlook, saying on Twitter they were “whistling past the graveyard and offering no analysis.”

© Thomson Reuters 2020

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Canadian Dollar Price Outlook: USD/CAD Grinds Around Big Fig Support – DailyFX

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Canadian Dollar, CAD, USD/CAD Price Analysis

  • This morning brought a Bank of Canada rate decision, this Friday’s economic calendar brings Canadian jobs numbers to be released at the same time as US Non-Farm Payrolls.
  • The bank held rates, and given the change in leadership the big question is forward-looking strategy at the bank.
  • USD/CAD broke down from a descending triangle formation, and is now finding support around the 1.3500 big figure. But sellers haven’t yet been able to establish any significant trends around that support, leading to the prospect of short-term pullback.

BoC Leaves Rates Flat, USD/CAD Remains Around 1.3500

Earlier this morning we heard from the Bank of Canada as the BoC left rates flat; but the prospect of change in leadership atop the BoC does highlight potential changes in the future after outgoing Bank of Canada Governor Stephen Poloz had previously stated that rates were as low as they could go. Taking over at the bank this week is Tiff Macklem, and as noted by our own Thomas Westwater earlier today, this morning’s statement likely had little input from the newly-installed BoC Governor. This does, however, point to the possibility of change on the horizon given how aggressively the coronavirus slowdown has hit global economies.

In USD/CAD, the pair has largely clung on to support around this rate decision, temporarily testing below the big figure of 1.3500 but, so far, failing to establish any continued bearish trends below that level. And this comes on the heels of an earlier-week breakdown, as USD/CAD had built into a descending triangle formation, with a series of lower-highs from late-March into mid-May, combined with horizontal support around the 1.3850 area on the chart.

USD/CAD Four-Hour Price Chart

USDCAD Four Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

Can USD/CAD Bears Drive Through Psychological Support?

Of recent, commodity currencies have been on a tear against the US Dollar, USD/CAD included. AUD/USD has been on a similar display of recent and the same can be said for NZD/USD.

The trouble at this point for USD/CAD bears is the fact that the short-side move is already fairly well-developed; and prices are showing continued support around the 1.3500 big figure. Can USD/CAD bring sellers in at sub-1.3500 prices to continue pushing lower? Or, will the pair need a retracement first before continuing that bearish trend?

Change in Longs Shorts OI
Daily-2%-5%-3%
Weekly-9%-13%-10%

On the chart is a nearby area of interest for resistance potential. As looked at in yesterday’s webinar, the space around the 1.3600 area seems especially interesting, as there are two very recent Fibonacci levels within close proximity of each other. This is the 61.8% retracement of the 2020 major move, and the 78.6% retracement of the March major move. At this point, that zone hasn’t yet been tested for resistance and a show of sellers here could re-open the door for bearish continuation strategies in the pair.

USD/CAD Hourly Price Chart

USDCAD Hourly Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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Canadian trade plummets amid global shutdowns – BNNBloomberg.ca

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Canadian exports and imports plunged by the most ever in April amid a shutdown of global trade.

Exports plunged 30 per cent during the month, more than offsetting a 25 per cent drop in imports. The nation’s trade deficit widened to $3.3 billion ($2.4 billion), from $1.5 billion in March. The median estimate of economists surveyed by Bloomberg had called for a $3 billion shortfall.

The report illustrates the extent to which global trade has collapsed amid pandemic-related lockdowns and travel restrictions. In Canada’s case, the economy is facing a double whammy from the pandemic and tanking oil prices. Combined imports and exports at $68.6 billion were the lowest since 2010.

Energy exports dropped 44 per cent in April, as the value of crude oil shipments fell 55 per cent on lower prices and lower volumes due to weaker global demand.

In volume terms, total exports were down 20 per cent in April, with imports falling 25 per cent.

-With assistance from Erik Hertzberg.

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