Market rally loses steam amid worry about US jobless numbers

Singapore — A two-day equities rally lost momentum on Thursday, and investors sold riskier currencies, as stimulus negotiations dragged on in Washington and investors fretted over a likely spike in US jobless claims.

MSCI’s broadest index of Asia-Pacific shares outside Japan wobbled either side of flat. Japan’s Nikkei slumped 4% and US stock futures fell 1%.

The dollar climbed about 1% against the Australian and New Zealand dollars and the yen rose 0.4% against the dollar as investors sought shelter.

“We are not out of the woods just yet,” said Stephen Daghlian, at brokerage CommSec in Sydney. “There are plenty of risks in the next couple of weeks.”

First among them are initial jobless claims in the US due at 12.30pm GMT, with forecasts in a Reuters poll ranging from 250,000 claims all the way up to 4-million.

US Federal Reserve chair Jerome Powell is also due to appear on NBC television about 11am GMT.

The Fed’s promise of unlimited bond buying has eased some of the virus-driven financial stress this week. But Powell is also likely to be asked about the real economy, and the apparent divide between health officials and President Donald Trump as to how quickly the country can return to work.

Meanwhile, as Senate leaders in US hoped to vote on the stimulus package late in the Washington night, markets’ patience and optimism are beginning to waver.

“There has been so much stimulus thrown at this,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney.

“But the positivity related to it is really just sentiment,” she said. “A lot of companies have withdrawn earnings guidance … these are still ahead of us. We don’t know how bad it could be.”

Hong Kong’s Hang Seng was down 0.5% by midmorning while regional trade was mixed. Indices in China posted meagre gains and Australia, Indonesia and Thailand advanced.

Jobless claims to test bounce

The money at stake in the stimulus bill amounts to nearly half of the $4.7-trillion the US government spends a year.

But it also comes against a backdrop of bad news as the coronavirus spreads and more signs of economic damage.

Singapore’s economy suffered its biggest contraction in a decade in the first quarter, data showed on Thursday, as the coronavirus pandemic prompted the city-state to cut its full-year GDP forecast and plan for a deep recession.

Spain’s coronavirus death toll has overtaken China’s and a total of 21,221 people have died globally.

California governor Gavin Newsom told reporters on Wednesday that a million Californians had already applied for jobless benefits in March — a number that knocked stocks from session highs and has analysts bracing for even worse to come.

RBC Capital Markets economists had expected a national figure of more than 1-million in Thursday’s data, but say “it is now poised to be many multiples of that”, as reduced hours across the country drive deep layoffs.

“Something in the 5-million to 10-million range for initial jobless claims is quite likely,” they wrote in a note. That compares to a 695,000 peak in 1982.

Citi Private Bank said the peak could reach 15%-18% of the total US workforce, about 25-million people.

In currencies, the mood was to duck and cover. The Australian dollar fell 1.3% to $0.5879 and the pound fell 0.5% to $1.1833.

The safe haven yen rose to ¥110.70 to the dollar.

Oil steadied with stimulus hopes offsetting the fear of plunging demand. US crude futures slipped 35c to $24.14 a barrel and Brent crude futures fell 0.9% to $27.15.

Gold fell 1% to $1,597.91/oz.