U.S. Stock Futures Falter as Oil Trades at 18-Year Low
March 30 2020 - 5:45AM
Dow Jones News
By Joe Wallace and Joanne Chiu
U.S. stock futures wobbled and oil dropped sharply Monday as
investors grappled with the mounting economic toll after U.S.
government officials signaled that measures to contain the
coronavirus pandemic may remain in place for an extended time.
Futures tied to the S&P 500 index wavered between gains and
losses, suggesting that U.S. shares could be headed for another
volatile trading session at the start of the week. U.S. crude-oil
futures dropped to their lowest level in over 18 years, weighing on
the shares of oil-and-gas producers and pushing European and Asian
stocks lower.
The White House on Sunday extended its social-distancing
guidelines through the end of April. The move marks a shift in
stance for President Trump, who had said that he hoped to ease
restrictions in coming days to limit the economic damage. The end
of the first quarter, on Tuesday, will also test many businesses'
ability to pay bills. Traders meanwhile are bracing for fresh
constraints on liquidity in some financial markets as investors
take stock of portfolios and banks assess their balance sheets at
the end of March.
Markets have entered a new phase in their response to the
pandemic, said James McCormick, a strategist at NatWest Markets.
After governments and central banks took extraordinary steps to
backstop livelihoods and the financial system in March, investors
are now attempting to assess the economic impact of the worsening
pandemic and the effectiveness with which these stimulus packages
are deployed.
"In April, we're settling into understanding a bit more about
the growth impact and looking hopefully for some signs of
flattening of the infection and mortality curves," Mr. McCormick
said.
U.S. crude-oil prices came under renewed pressure as the
restrictions on business activity in most economies- -- combined
with the threat of elevated production levels from Saudi Arabia and
Russia -- raised the prospect of a longer downturn in fuel
markets.
West Texas Intermediate, the main U.S. crude gauge, fell 5.3% to
$20.35 a barrel. Brent crude, the global oil benchmark, slumped
6.1%, extending its plunge this year to more than 60%.
In another sign of investor caution, the yield on the 10-year
U.S. Treasury note, a security that is seen as a haven, fell to
0.634%, according to Tradeweb, from 0.744% Friday.
Investors are awaiting a series of data releases this week that
will start to reveal the economic strain exerted by the pandemic
and measures to contain the spread of the virus. In the U.S.,
surveys of purchasing managers are expected to show a steep decline
in manufacturing activity, while jobless claims are likely to rise
again after last week's record surge.
"There's still a lot of bad news to come on the macro front,"
said Nicholas Brooks, head of research at International Capital
Group, referring both to economic data and the coronavirus death
toll. "It's hard to see a sustained rally in markets in this kind
of environment."
In Europe, the pan-continental Stoxx Europe 600 index lost
0.8%.
The South African rand fell to a record against the dollar after
Moody's Investors Service cut its credit rating to junk. The
decision, which will remove South African debt from the FTSE World
Government Bond Index, is likely to be followed by further
downgrades to credit ratings in emerging markets, analysts
said.
In Asia, Japan's Nikkei 225 index, which logged its best week in
its history last week, pulled back more than 1.5%. Hong Kong's Hang
Seng Index and the Shanghai Composite in mainland China also
retreated.
Monetary authorities in the region also took further steps to
shore up markets and economies. China's central bank cut an
interbank interest rate, while its counterpart in New Zealand said
it would start buying corporate bonds to help companies stay
afloat. Singapore, which uses foreign-exchange rates rather than
borrowing costs as its main policy tool, also eased policy.
One outlier in global markets was Australia, whose benchmark
S&P/ASX 200 soared 7% by the close of trading Monday after the
government unveiled a A$130 billion ($80.1 billion) wage-subsidy
program.
The renewed volatility follows a week in which the Dow Jones
Industrial Average logged its biggest advance since 1938.
"We've had the rally, and now we might have a bit more of the
reality," said Sean Taylor, chief investment officer for the
Asia-Pacific region at asset manager DWS.
The U.S. move to extend social distancing reflects how the focus
of the pandemic had shifted from China to the U.S. and Europe, with
public-health measures bringing economic activity to a near
standstill and reducing global demand, Mr. Taylor said.
Write to Joe Wallace at Joe.Wallace@wsj.com and Joanne Chiu at
joanne.chiu@wsj.com
(END) Dow Jones Newswires
March 30, 2020 05:30 ET (09:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.