Stocks start the second quarter on the back foot, after their worst three months in over a decade, as the White House warns of up to 240,000 U.S. deaths from the coronavirus. Europe's factory activity slumped to a seven-year low in March, and there's probably worse to come next month, while oil prices tested $20 a barrel again after a sharp rise in U.S. inventories. ADP (NASDAQ:ADP)'s set to release its monthly survey of private hiring. And cruise line operator Carnival is trying to stay afloat with a $6 billion offering of stock and debt. Here's what you need to know in financial markets on Wednesday, April 1.
Trump warns of a tough April; tariff suspensions mooted
President Donald Trump warned of a painful month ahead after the White House projected up to 240,000 Americans could die of the Covid-19 coronavirus.
“This is going to be three weeks like we’ve never seen before,” Trump told reporters, completing a pivot away from weeks of downplaying the outbreak.
Johns Hopkins data estimates over 189,000 cases in the U.S., a rise of 15% on the day. The U.S. death toll has now topped 4,000, with around one quarter of those coming in New York City.
Various reports suggest the White House is poised to announce the suspension of more U.S. import tariffs in the coming days to ease conditions for importers already struggling with a drop in demand from consumers.
Europe's factory output slumps, while China's rebounds
Europe’s factory activity fell to its lowest level in seven years in March, according to the latest purchasing manager indices released by consultancy IHS Markit. The Caixin PMI for China, meanwhile, rebounded back above the growth line.
The figures had been largely anticipated, but prompted another lurch downward in European stock markets in early trading, with the benchmark Stoxx 600 index losing 2.7% and the U.K. FTSE 100 losing 3.1%.
The FTSE in particular was hit by the latest round of capital conservation measures, as HSBC (LON:HSBA), Barclays (LON:BARC), Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) all suspended their dividends under pressure from regulators. The banks account for some 12% of U.K. companies’ dividend payments, many of which would normally be reinvested in normal times.
Stocks set to open lower; ADP's payrolls report eyed
U.S. stock markets are set to open the second quarter markedly lower, asset managers preferring to make more conservative bets for the next three months after the stock market’s worst quarter since the 2008 financial crisis.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 636 points or 2.9% at 21,115 points. The S&P 500 Futures contract was down 2.9% and the NASDAQ 100 futures contract was down 2.5%.
The market is bracing for the release of the ADP private payrolls report for March, which will shed more light on how far and how fast the labor market is deteriorating.
Restaurant chain owner CraftWorks is expected to fire 18,000 staff after its plans to restructure in bankruptcy proceedings collapsed, The Wall Street Journal reported.
Also in focus will be Xerox (NYSE:XRX) and HP (NYSE:HPQ), after the former ended its interest in merging with the printer-maker late on Tuesday.
Carnival tries to stay afloat
Cruise line operator Carnival (NYSE:CCL) will try to complete an ambitious $6 billion capital raising in an effort to get through an unprecedented collapse in demand due to the outbreak.
Panama-listed and unlikely to receive support from any government package, Carnival’s plans are a test of private markets’ willingness to back business through a sudden stop, and trust in a future that has near-zero visibility.
The company is trying to place $1.25 billion in new stock (the price of which has fallen over 70% so far this year) as well as $1.75 billion in convertible notes and $3 billion in senior notes which will be supported by liens on the group’s ships.
Even with such backing, the company is reportedly marketing the senior notes with a coupon of 12.5%.
Crude tests $20 again as BP's capex cuts hint at more ahead
U.S. crude oil prices bounced off the $20 a barrel support level but remain under pressure, after a call between President Donald Trump and his Russian counterpart Vladimir Putin failed to generate any concrete measures on addressing the glut on world markets.
The American Petroleum Institute’s weekly report on U.S. oil supplies on Tuesday showed crude inventories rising by over 10 million barrels last week, illustrating the difficulties caused by the collapse in demand for fuel. The U.S. government’s inventory data are due at 10:30 AM ET (1430 GMT).
Elsewhere, BP (LON:BP) said it would cut capital spending by 25%, slightly more than the 20% cuts announced by most other majors. The move hints that the first round of budget cuts may not be enough for the industry in general.