The global financial markets surged on Thursday, cheering the approval of the massive $2 trillion stimulus bill from the US Senate, despite the huge rise in US jobless claims. The Dow Jones index posted 6% gains, concluding its biggest 3-day surge since 1931, gaining more than 20% this week.

The US Labor Department announced yesterday that the jobless benefit claims had soared to a record 3.28 million for the week ended March 21st. That number blew past the Great Recession peak of 665,000 and the all-time mark of 695,000 in October 1982. However, the number was still better than most dire estimates on Wall Street. Citi, for example, expected a spike of 4 million.

 

Coronavirus Update:

Global cases: More than 531,800

Global deaths: At least 24,000

Top 5 countries: United States (85,653), China (81,782), Italy (80,589), Spain (57,786) and Germany (43,938)

 

Market Reaction:

The Dow Jones index jumped 6.4%, to close at 22,552.17. The S&P 500 also posted a three-day winning streak, rising 6.2% to 2,630.07. The Nasdaq Composite advanced 5.6% to 7,797.54 as Facebook, Amazon, Apple, Netflix and Google’s-parent Alphabet all jumped more than 4%.

Fig 1: Dow Jones index, Daily chart

 

Crude Oil:

WTI and Brent crude oil prices failed to follow the stock market rally, posting a massive 7% loss. WTI trades near $22.80 per barrel while the Brent dropped near $26.50.

The sell-off was triggered after IEA chief Fatih Birol said that the global oil demand may fall as much as 20 million barrels per day on the travel bans and lockdowns worldwide. The oil demand loss would increase the supply glut as the ongoing “oil price war “for market share between Saudi Arabia and Russia has flooded markets with unnecessary barrels of oil. In addition, India which is the third largest oil consumer in the world, started a 21-day lockdown on Wednesday.

 

Precious Metals:

Precious metal prices jumped yesterday after the announcement of the record high jobless claims in the US. In addition, the weakness in the US dollar has also supported the US dollar-denominated precious metals, making them cheaper for holders of other currencies. Gold price climbed more than 1%, reaching intraday highs of $1.640/oz while Silver is pricing at $14.60/oz.

Furthermore, gold market participants remained concerned about a supply squeeze following a sharp divergence in London and New York prices as the coronavirus closed precious metal refineries.

Fig 2: Palladium price, Daily chart

Palladium price continued its extreme rally towards the $2.400/oz level gaining more than $800/oz since it bottomed near $1.500/oz last week. The massive rally triggered from reports of a lockdown on a major Palladium producer in South Africa, intensified supply worries.

 

Forex Market:

The US dollar has been the weakest currency across the board and on track for its biggest weekly fall in more than a decade. The sharp rise in US jobless claims combined with the FED’s stimulus plans and stock market rally have pressured the price of the US dollar index below the 99 level. The USD/JPY pair dropped to the 108.5 level, while the AUD/USD broke above the 0.61 level.

Fig 3: USD/JPY pair, 2-hour chart

The Euro and Pound Sterling currencies were the beneficiaries of the US dollar weakness. The Euro smashed the 1.10 resistance level, rallying up to 1.11, gaining more than 400 pips since it bottomed on March 20th near 1.065 level.

Fig 4: GBP/USD pair, 2-hour chart

Sterling rebounded to 1.23 as the Bank of England kept interest rates unchanged at a record low of 0.1% and its asset purchasing program steady at GBP200 billion.

 

Economic Calendar for March 26, 2020 (GMT+ 2:00):

 

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Vrasidas Neofytou

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