Oil climbs, stocks sputter as investors await U.S. unemployment figures

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Good morning, Bull Sheeters. There’s a lot on today’s calendar, on both sides of the Atlantic.

Here’s what investors are focusing on as we head into a long weekend.

Markets update

In Asia, the markets are flat. The indices in Hong Kong and Shanghai are up slightly, while Japan’s Nikkei is trading a tick down. The coronavirus picture in the region is mixed. Singapore, held up as a model last month for its success in keeping infections at bay, is reporting a bump in cases now. China, meanwhile, reports just 63 new infections.

***

On to Europe, where the major bourses all opened in the green. But storm clouds are on the horizon. ECB chief Christine Lagarde this morning warned in an op-ed that for every month of lockdown European economies risk a 2-3% decline of GDP. Therefore, she recommends a kind of modified debt forgiveness scheme in which creditors get their money in a more gradual fashion.

The EU’s inability to reach an agreement on a coordinated funding plan, meanwhile, continues to fray nerves. Italian prime minister Giuseppe Conte told the BBC the future of the European Union is on the line. “If we do not seize the opportunity to put new life into the European project, the risk of failure is real,” he warns.

Over in Britain, Prime Minister Boris Johnson spent a third night in intensive care, but he appears to be on the mend. The U.K, along with Belgium and Germany, saw new spikes in coronavirus deaths yesterday.

***

The U.S. futures are trading sideways. This after the Dow, S&P 500 and Nasdaq all surged in afternoon trade yesterday. All eyes will be on the Thursday jobless claims numbers, which will be revealed before the opening bell today. Economists are forecasting another brutal figure. About 5 million Americans are expected to file for unemployment benefits, which would bring the trailing three-week tally to roughly 15 million.

***

Elsewhere, the dollar and gold are flat. Oil is climbing on news Russia is willing to cut output, which could put an end to a brutal month-long price war. That gesture would appear to take much of the suspense out of today’s OPEC+ meeting. Adrian Croft in Fortune details what could happen next to the oil markets should the oil powers agree to a 10 million barrel-per-day cut.

***

The S&P 500 has rallied 8.6% over the past three trading sessions after yesterday’s impressive 3.4% surge. What gives? Is it optimism about the handling of the coronavirus outbreak? That’s hard to figure; the number of global cases has risen by more than 50% in less than a week. Is it a Bernie bounce? Bernie Sanders was no fan of Wall Street, and vice versa. Now that Joe Biden is the presumptive challenger to Donald Trump in November, investors can safely remove that potential headwind from their investing calculus. Could it be a more technical explanation: bears unwinding their positions?

Fortune‘s crack finance team looked at the quarter ahead in our latest investment guide to give you a bit of clarity as we turn the page on a tumultuous Q1. If you’re concerned about your portfolio, looking for investment tips or seeking advice from the pros on how to navigate these volatile markets, we have you covered.

On that note, I want to highlight investor sentiment. It’s the subject of today’s chart.

***

Retirement savings are safe

Last week, Allianz sent me data from its latest quarterly survey of investors. As you can see from the chart above, a risk-off mood dominates in the near-term. But what caught my eye was the bottom bar—that 70% of those polled felt there was still plenty of time to recoup portfolio losses.

I write in more detail about the significance of that figure and other factors impacting markets sentiment here.

But I’ll leave you with this now: In recent weeks, there’s been much less volatility in equities trading, which would suggest we’re settling into a calmer trading range. If you were to re-poll those same people today (it should be noted the Allianz survey was conducted at a point last month when the markets were at their most turbulent) you might see a more positive outlook among those who think we’ve already hit a bottom, and those who plan to jump back in and invest.

Postscript

For nearly two weeks now, we’ve seen a steady, if gradual, improvement in coronavirus infection numbers here in Italy. It comes as the weather improves, and the big question is when—and how—can Italy phase out the lockdowns? Italians are clearly getting cabin fever. I’ve seen more of my neighbors out and about in the sunshine, taking a meandering path to throw out the trash or stock up on bread and prosciutto.

The other day, on such a roundabout errand, I spotted my old barber, Mario. His business has been shut down for the past five weeks, like all such businesses.

Mario wasn’t a great barber. (Hence, “old barber.”) He took forever to cut hair, and would get distracted in conversation with the other old-timers about the fortunes of AS Roma, the soccer club everyone pulls for around here. When he returned his attention to your head, he’d ask: where was I?

But I learned a lot from Mario. He’s been at it for more than 50 years, in the same prime spot, next to the biggest theater in this part of the city. I regard him as a credible historian about our neighborhood—from the post-war years to the recent invasion of hipster beer gardens and tap rooms. Mario is also a keen observer of the local economy. He has a take on the inflation of everything from rents to dining out to vino sfuso, the jugs of un-fussy table wine, that the old-timers prefer.

As Italy was pulling out of the last financial crisis, back in 2010 or so, we’d chat about business. Our part of Rome was going through an uneven recovery, he observed. You could see it in the hair.

The hair?

The older generations were staggering their trips to the barber shop, he told me. If they used to get a trim every three weeks, they’d now delay it by a good week or two. And nobody was coming in for a shave. Younger clients, meanwhile, had stopped coming altogether. Moms were buzzing their kids’ hair at home. He saw a lot of uneven DIY cuts as he walked around the neighborhood, bumping into his onetime reliable clients.

That observation stuck with me. I’ve been checking out the hair-lengths for years to get an idea of the ups and downs of the local economy. And I’ve never seen so many unruly mops as I do these days, I type, wearing a baseball cap. Next week it will be worse, and the week after that…worse still.

I don’t really care all that much about the grooming habits of my neighbors. But I’m worried about the local economy, and I’m worried about what Rome will look like when it finally does reopen for business.

Now, a reminder: most major stock exchanges are shut tomorrow in Asia, Europe and the U.S. We’ll be here though.

Have a nice day.

Bernhard Warner
@BernhardWarner
[email protected]

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