Oil prices have staged a near-retaliatory rally in the past two days after an epic plunge as producers accelerate production cuts in response to falling demand. Meanwhile, risk sentiment returned after the us congress passed another stimulus package worth nearly $500bn, although investors were disappointed by the failure of the rederseve clinical trial and fears of an outbreak continued to dominate. The dollar remained strong and gold fell short of the bikini 1720 mark as it awaited today’s us durable goods orders data.
The good news came one after another: oil producers will accelerate the implementation of production cuts the U.S. congress passed a new stimulus bill
Crude oil prices have had their most volatile week ever. Oil prices have rebounded strongly in the past two days after an epic collapse.
U.S. crude futures jumped $2.72, or 19.7 percent, to settle at $16.50 a barrel on Thursday. Meanwhile, brent crude futures rose 96 cents, or 4.7 percent, to settle at $21.33 a barrel.
The organization of petroleum exporting countries (OPEC) and other producers agreed this month to cut output by 9.7 million barrels a day, or about 10 percent of global supply, to support oil prices, but that failed to spark a rebound as concerns about tight demand and storage space sent crude to historically negative levels.
Under the stimulus of negative oil prices, many have said. Kuwait said on Thursday it had begun cutting oil supplies to the international market before a new production cut agreement took effect on May 1.
In addition, Russia is reviewing options to cut production and may even burn its own oil, sources said. The country’s output has changed little since march.
“We’ve seen a real reaction in the U.S. industry to the current ultra-low oil prices, which has created some green shoots in the oil market that have allowed oil to recover a little bit,” said John Kilduff, a partner at hedge fund Again Capital LLC. But it’s still hard to get excited about oil at just over $15 a barrel.”
In citigroup’s view, U.S. crude inventories remain high and could face another slump when the U.S. light crude contract expires in June.
Despite a sharp rebound in the crude oil market, the three major us stocks ended mixed Friday amid the outbreak and lackluster employment data. Among them, the dow Jones industrial average rose 0.17%; The s&p 500 fell 0.05 per cent. The nasdaq slipped 0.01%.
On the labor market front, initial claims for jobless benefits rose to 4.427 million in the week ended April 18, above market expectations of 4.2 million. Data from the past five weeks show the cumulative number of americans collecting jobless benefits has reached 26.5m, the worst decline in the us Labour market since the great depression. All the jobs created during the longest employment boom in U.S. history have been wiped out by the new pandemic that hit the economy.
Separately, data firm IHS Markit said in a separate report on Thursday that its preliminary U.S. composite output index, which tracks manufacturing and services, fell to 27.4 this month, the lowest level since it began compiling the index in late 2009, from 40.9 in March. That mirrors dire figures in Europe and Asia, where strict household rules have led to declines in production, supply chains and consumer spending.
The CBOE market volatility index.vix has fallen from the 12-year peak it hit last month, but is still well above levels of the past two years, with analysts warning that another sell-off is likely as us companies issue worrisome guidance for 2020.
U.S. stock indexes have risen this month on the back of a series of global stimulus measures, but the benchmark s&p 500 remains more than 15 percent below record highs as deteriorating economic indicators point to a deep global recession.
On April 23, the U.S. house of representatives overwhelmingly passed a $484 billion coronavirus relief bill, funding small businesses and hospitals and pushing total crisis response spending to an unprecedented nearly $3 trillion. The bill will be sent to President trump for signature.
Meanwhile, the house of representatives voted on April 23 to set up a special investigative committee to review the trump administration’s response to the new outbreak and the implementation of the economic rescue plan, including the government’s handling of issues such as testing and quarantine, and the distribution of equipment and medical supplies. US President Donald trump has previously voiced opposition to the commission, calling it a “witch hunt” by Democrats.
Spot gold continued to rally in the session, briefly breaking through the 1,730 marks and peaking at $1,738, buoyed by the prospect of more U.S. stimulus measures. Asian city on Friday, short – term gold prices under pressure to fall, touched 1720 at one point.
“Gold is supported by continued stimulus from central Banks around the world, particularly in the United States on Thursday, where they are voting on a new $500 billion stimulus bill,” said David Meger, director of metals trading at High Ridge Futures.
Gold has tended to benefit from widespread stimulus by central Banks and governments because it is often seen as a hedge against inflation and currency depreciation.
Charlie Nedoss, senior market strategist at LaSalle Futures Group in New York, said gold could rise to test the 1800 level, after being in a consolidation zone around 1680 and just pausing. Gold prices rose as the dollar weakened.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said gold will be at $1,800 an ounce in a few months, not a few weeks. “Gold has had a pretty good run and will consolidate in the $1,650 to $1,750 area in the short term, especially as equity markets stabilise. It wouldn’t be too surprising to see gold hit 1,800 by the end of the year.”
The clinical failure of the new crown drug redesivir has dampened the market
Data from the gilead sciences trial was inadvertently leaked on Thursday, and the financial times reported that a clinical trial in China showed that gilead’s reddsivir failed to improve patients’ condition or reduce the number of pathogens in their blood.
There has been a lot of interest because there is no approved treatment or vaccine for covid-19, and doctors are struggling to find anything that might change the course of the disease. Novel coronavirus attacks the lungs and in some very severe cases can cause other organs to fail.
The world health organization (WHO) accidentally published the news of the failure of Remdesivir, an anti-covid 19 drug, in a clinical trial in China on its official website on July 23. However, the WHO later clarified that the summary of the trial had not been reviewed and was not the final report. Gilead’s shares fell 4.34 percent on the news, which affected the broader market.
In a trial of 237 patients, 158 received the drug, while the remaining 79 received only a placebo, according to the data. But after a month, the death rate was 13.9 percent among those who took the drug, and 12.8 percent among those who received more than a placebo. On the face of it, the drug was largely ineffective, and the trial was aborted early because of side effects.
The market was sensitive to the news about the novel coronavirus treatment, reflecting investors’ eagerness to look for any signs that the global economy might start to return to normal.
In response to reports that clinical trials of the company’s experimental drug failed to show positive results in patients with severe covid-19, gilead said in an emailed statement:
“We regret the premature release of information about this study by the world health organization. The announcement has since been removed. The study’s investigators did not provide permission to publish their findings. Furthermore, we believe that the announcement contains an inappropriate characterization of the study. Importantly, because the study was terminated early because of low participation rates, no statistically significant conclusions could be drawn. As a result, the results are inconclusive, although trends in the data suggest that the receiver may be beneficial, especially in early patients. We are aware that data has been submitted for peer review for publication, and a report will provide more detailed information on the study in the near future.
A number of phase iii studies are currently under way to provide additional data needed to determine the potential use of redesivir as a therapeutic agent for covid-19. These studies will contribute to the identification of subjects, timing, and duration of treatment with redesivir. Some of these studies have already recruited subjects for preliminary analysis and others are expected to do so in the near future.”
Gilead and infectious disease expert Frederick Hayden, who was involved in the trial, also denied the clinical trial had failed, saying the report misinterpreted the clinical data. Gilead’s statement stressed that the trial was still too small to be statistically significant. Current cumulative data trends suggest that redesivir still has potential benefits for patients receiving early treatment. Two more complete studies are expected by the end of may.
“The scope of the study is not very large, so the clinical trial statistics are not very convincing,” mizuho analyst Salim Syed said in a research note.
David Katz, chief investment officer at Matrix asset advisors, said the hope last week was that gilead would be able to dispel concerns about a death caused by a novel coronavirus, which could lead to a faster and more definitive recovery. If the chances of dispelling fears are much less today than they were yesterday, the market sell-off is perfectly justified.
Adam Phillips, head of the portfolio strategy at EP Wealth Advisors, also said investors are pinning their hopes on a continued flattening of the epidemic curve and the eventual development of a vaccine. They are willing to ignore negative economic data for a while and focus on developments that suggest the current headwinds may prove temporary but more favorable. Today’s sudden reaction shows how volatile investors are in the current environment.