Indian bonds gain after early fall; fiscal package details awaited

Indian bonds gain after early fall; fiscal package details awaited

By Ritu,

Capital Sands

Indian bonds recovered from early falls on Wednesday as investors chose to wait for details of the government’s 20 trillion rupee ($266 billion) fiscal package aimed at supporting an economy ravaged by a weeks-long coronavirus lockdown.

Prime Minister Narendra Modi said on Tuesday night that the package was equivalent to nearly 10% of India’s gross domestic product, and was aimed at the multitudes out of work and the businesses reeling under the prolonged shutdown.

Expectations are high that the Reserve Bank of India (RBI) could help support the market by way of a pre-set open market operation calendar, operation twist to manage the maturity curve, or presence in primary auctions or private placements if required, DBS Bank economist Radhika Rao said.

Most analysts said the government would now be looking at a fresh stimulus of roughly 10-12 trillion rupees, after deducting the first stimulus package of 1.7 trillion rupees and the measures taken by the RBI so far.

Traders said market positioning was light, and shorting bonds was not working amid a lack of details on the economic package, helping the pull-back in yields.

Yields are expected to hold in a tight range ahead of the finance minister’s press conference scheduled for 1030 GMT, which could throw more light on specifics of the stimulus package.

Market participants however said they did not expect the government to further increase market borrowings beyond the 4.2 trillion rupees hike announced earlier this month.

The government is scheduled to borrow a record 12 trillion rupees from the market in the current fiscal year to March 2021, and analysts project the fiscal deficit could rise to at least 5.5% of the gross domestic product, sharply above the budgeted deficit of 3.5%.

Europe Trades in Tight Ranges; Vodafone Outperforms

Europe Trades in Tight Ranges; Vodafone Outperforms

By Ritu,

Capital Sands

European stock markets traded in tight ranges Tuesday, as investors weighed up the benefits of reopening economies with the possibility of a second wave of Covid-19 victims.

At 3:55 AM ET (0755 GMT), the DAX in Germany traded 0.1% higher, France’s CAC 40 fell 0.08%, while the U.K.’s FTSE index was up 0.3%.

France’s economic downturn is easing as the country emerges from a lockdown imposed in mid March, although activity remains mired at levels far below normal, the central bank said on Tuesday.

The euro zone’s second-biggest economy was operating 27% below normal levels in April, a little better than the 32% gap seen in the second half of March, the Bank of France said, summarizing responses from its monthly business climate survey.

This comes as countries around the world gradually ease restrictions in an effort to restart their economies.

However, the Robert Koch Institute in Germany, the country widely seen as having handled the crisis the best in Europe, reported that the “reproduction rate” – the number of people each person infected with the coronavirus goes on to infect – had risen to 1.1 in the wake of the relaxation of national guidelines.

Any rate above 1 means the virus is spreading exponentially, and this will be seen as a worrying outcome.

This follows the discovery of five new cases in Wuhan in China, where the pandemic originated, as well as a new outbreak in South Korea, whose aggressive testing and contact tracing had kept infection rates low during the virus’ first wave.

In corporate news, Vodafone stock climbed 5.8% after the world’s second-largest mobile operator met expectations with a 2.6% rise in full-year core earnings. However, it did not give a current year outlook due to the uncertainty caused by the coronavirus.

On the flip side, TV and stereo maker Bang & Olufsen dropped nearly 10% after saying it will ask shareholders to approve a 400 million crown ($57.99 million) rights issue to help it through the coronavirus crisis.

AIB Group  fell 2.7% after saying its performance for the first quarter of the year worsened, and warning  it would have to take large credit provisions.

German insurance giant Allianz  slid 2.8% after reporting a big virus-related hit to its property and casualty arm and also suffering outflows of nearly $50 billion from its asset management arm PIMCO. Industrial giant Thyssenkrupp  slid 10% after detailing another big loss in its fiscal second quarter and the promise of an even bigger one in the current quarter.

Oil futures edged higher Tuesday, continuing to be helped by Saudi Arabia’s move Monday to voluntarily deepen its production cuts.

At 3:55 AM ET, U.S. crude June futures traded 2.2% higher at $24.66 a barrel. The international benchmark Brent contract rose 0.9% to $29.89.

Elsewhere, gold futures rose 0.5% to $1,705.80/oz, while EUR/USD traded at 1.0816, up 0.1%.

Europe Higher; Reopening Economies Prompt Optimism

Europe Higher; Reopening Economies Prompt Optimism

By Ritu,

Capital Sands

European stock markets posted gains Monday, amid growing optimism as more countries start to reopen their economies.

At 3:45 AM ET (0735 GMT), the DAX in Germany traded 0.5% higher, and France’s CAC 40 rose 0.2%. The U.K.’s FTSE index gained 0.8%, making up for lost time as Friday was a holiday.

France, the second largest economy in the euro zone, is set to emerge cautiously from one of Europe’s strictest lockdowns on Monday, while  the U.K., now the hardest hit country in Europe in terms of deaths, has announced tentative plans to lessen social distancing measures.

This follows a number of European countries — including Denmark, Norway, Spain, Italy, Austria and Germany — which have also started to lift lockdown measures.

The European economy has been hard hit by the measures taken by the various national governments to shut down their respective economies to curb the spread of the Covid-19 virus.

European Central Bank President Christine Lagarde said, a couple of weeks ago, that the euro-area economy could shrink by as much as 15% as a result of the pandemic.

In corporate news, Ericsson  stock climbed 0.9% after lifting its forecast for 5G subscriptions globally to around 2.8 billion by 2025 from 2.6 billion seen previously, as a consequence of the coronavirus outbreak. German consumer products maker Henkel was flat after reporting hat the pandemic fueled robust sales of cleaning products in the first quarter, while payments company Wirecard stock rose 8.8% after the company appointed a new chief compliance officer. It’s still fallen 30% since a report by KPMG into suspect accounting practices failed to clear management’s name, however.

On the flip side, easyJet  stock slumped over 7% after the U.K. government announced over the weekend plans to introduce a 14-night quarantine on incoming travellers.

Oil futures slipped back Monday, consolidating after recent gains had pushed the sector from the all-time lows seen recently.

At 3:45 AM ET, U.S. crude June futures traded 2.2% lower at $24.20 a barrel. The international benchmark Brent contract fell 2.1% to $30.32.

Elsewhere, gold futures fell 0.3% to $1,708.80/oz, while EUR/USD traded at 1.0833, down 0.1%.

Europe Pushes Higher as Trade War Threat Recedes

Europe Pushes Higher as Trade War Threat Recedes

By Ritu,

Capital Sands

European stock markets pushed higher Friday, helped by a lessening of tensions between China and the U.S. ahead of key employment data.

At 4 AM ET (0800 GMT), the DAX in Germany traded 0.8% higher, and France’s CAC 40 rose 0.6%. The U.K.’s FTSE index was closed due to a holiday.

China’s Vice Premier Liu He talked with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin by phone on Friday Beijing time, according to China’s Xinhua News Agency. The two sides pledged to cooperate on the economy and public health, the report said.

The two sides have traded barbed comments about the origin and spread of the Covid-19 pandemic over recent days, with the Trump administration at one point threatening trade sanctions as a punishment for China’s perceived part in the outbreak.

In corporate news, ING  stock climbed over 5% despite the Dutch bank posting a drop in first quarter profit of 35% on the back of higher provisions taken for the potential fallout from the coronavirus outbreak. The numbers were still better than expected.

However, activity is likely to be limited Friday ahead of the key U.S. employment report for April, which will capture an entire month of lockdown measures that brought large parts of the economy to a standstill.

Economists expect that nonfarm payrolls plunged by 22 million last month, when the data are released at 8:30 AM ET (12:30 GMT).

“That bad report tomorrow is actually going to understate how bad the damage has been,” Minneapolis Federal Reserve Bank President Neel Kashkari explained, adding that the reported unemployment rate could be as high as 17%, but he says the true number may be as high as 24%. “It’s devastating.”

Oil futures pushed higher Friday, with investors cautiously optimistic as lockdown measures continue to be loosened in the U.S. leading to slow but steady increases in demand.

At 4 AM ET, U.S. crude June futures traded 4.8% higher at $24.69 a barrel. The international benchmark Brent contract rose 2.8% to $30.28.

Elsewhere, gold futures rose 0.2% to $1,729.80/oz, while EUR/USD traded at 1.0828, largely flat.

Europe Edges Lower; FTSE 100 Outperforms

Europe Edges Lower; FTSE 100 Outperforms

By Ritu,

Capital Sands

European stock markets traded slightly lower Wednesday amid weak economic data, while better than expected earnings helped the U.K. to outperform.

At 4:35 AM ET (0835 GMT), the DAX in Germany traded 0.1% lower, France’s CAC 40 fell 0.2%, while the U.K.’s FTSE 100 index traded up 0.7%.

German factory orders slumped 15.6% in March to their lowest level since records began in 1991, while IHS Markit’s final Composite Purchasing Managers’ Index for the euro zone, seen as a good indicator of economic health, plummeted to 13.6 in April from March’s already dire 29.7, easily its lowest reading since the survey began in 1998.

On a busy day for corporate news, BMW  stock fell 3% despite reporting a 133% rise in first-quarter profit. That was mainly due to a one-off provision in the year-earlier period. The German automaker offered up downbeat guidance, saying the impact of the coronavirus could erode demand and profit over the whole year.

Norwegian Air Shuttle  slumped 11% after saying it would sell new shares at a 79% discount to the latest traded price as it seeks to boost its equity in order to qualify for Norway’s government aid package.

Italian bank UniCredit eked out a 1.0% gain despite posting a 2.7 billion-euro loss on soaring provisions.

By contrast, shares in ITV , Britain’s biggest free-to-air commercial broadcaster, rose over 4% despite saying ad revenue last month fell by 42%, while withdrawing its 2019 final dividend. Investors had worried that the figures could have been worse.

Ocado  stock rose 2% after the British online supermarket said retail revenue soared 40% year-on-year in its second quarter to date as shoppers in coronavirus lockdown sought deliveries to avoid venturing out. And pharma company AstraZeneca rose 1.4% to another all-time high after the U.S. Food and Drug Administration approved its Farxiga drug for treating heart conditions.

The countdown to Friday’s historic employment report begins Wednesday with a measure of April’s private sector job situation.

ADP  issues its payrolls report at 8:15 AM ET (1215 GMT), the first full measure of a month the country spent on lockdown restrictions. Economists expect that private-sector payrolls plunged by 20.05 million, according to forecasts compiled by

Oil futures edged higher Wednesday, helped by the American Petroleum Institute saying late Tuesday that its measure of inventories for the week ended May 1 rose by 8.4 million barrels, compared with a rise of 10 million barrels the week before.

The Energy Information Administration will post its figures for crude stockpiles for the week ended May 1 at 10:30 AM ET (14:30 GMT).

At 4:35 AM ET, U.S. crude June futures traded 3.3% higher at $25.36 a barrel. The international benchmark Brent contract rose 2.5% to $31.74.

Elsewhere, gold futures fell 0.2% to $1,708.05/oz, while EUR/USD traded at 1.0801, down 0.4%.

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