Over 30 million jobs have been lost throughout the coronavirus pandemic in the US.  The pace of job loss is improving, which begs the questions how bad the numbers would be if trillions of dollars of stimulus were not thrown at the economy.  The US weekly jobless claims came in at 3.84 million, higher than the consensus estimate of 3.5 million, but less than the prior week’s revised reading of 4.44 million. 

President Trump will closely pay attention to the highest insured unemployment rates in the week ending April 11.  Two key battleground states, Michigan and Pennsylvania saw insured unemployment rates rise 21.8% and 18.5% respectively.  With the Presidential election just over six months away, Trump will continue to try do whatever it takes to support the reopening of the economy. The one positive out of this report was that job losses are slowly working their way across the country as the states with larger metropolitan cities are showing signs that initial jobless claims have peaked.

The Fed’s preferred inflation reading Core PCE Y/Y declined a tick to 1.7% but came in slightly better than the consensus estimate of 1.6%.  The personal income and spending readings for March came in much worse than expected and pretty much guarantees a recession is coming. 

US stocks slumped as demand for Treasuries returned following bleak economic data and cautious outlooks from both the Fed and ECB.  The economic recovery will be a long drawn out one and that might mean some investors might wait and see if this rapid recovery finally delivers a modest pullback.  The stimulus trade will prevent any retest from the March 23rd low, but right now it seems investors are fine with heading to the exits ahead of Apple and Amazon’s earnings reports after the close. US equities pared some of their losses following the Fed’s widening of their Main Street Lending Program.


The ECB rate decision went as planned.  The ECB kept interest rates steady, affirmed the size of the pandemic program at 750 billion euros, and maintained the QE bond-buying operation at 20 billion euros and the extra 120 billion euros until the end of 2020. 

The ECB delivered a reduction on the lowest rate on targeted loan operations and unveiled a new program called PELTROs.  Today’s reduction with the interest rate on TLTRO III operations from June 2020 to June 2021 basically means rates will have further downward pressure over the next year. 

ECB President Lagarde’s press conference drove home the point that ECB is ready to act further.  Banks and non-banks will have an easier time refinancing and that should spur lending into the economy. 

Euro zone government bond yields declined following the ECB rate decision as Lagarde held her firepower and pretty much signaled the recovery will take much longer.  Italy’s 10-year government bond yield rose 4.6 basis points to 1.796% and is still trading on Fitch’s credit rating downgrade. Italian debt is now one notch above junk status by both Moody’s or Fitch. 

The euro wavered following the ECB rate decision but eventually rallied after the Fed expanded their scope and availability for their Main Street Lending Program. The Fed is slowly fine-tuning the emergency loan programs they announced over the past month. Wall Street seems to be supported with this approach as it shows they are trying to get these programs right and help the most Americans possible.


Oil prices rallied as investors continue to see a steady stream of headlines of crude production cuts.  Yesterday, Norway confirmed their first cut with production in 18 years.  They will be cutting production by 250,000 bpd in June and 134,000 bpd during the second half of the year. 

Oil prices were strongly supported after Royal Dutch Shell Plc, Europe’s largest oil company delivered its first dividend cut since World War II.  ConocoPhillips announced a voluntary reduction of crude production by 420,000 barrels per day in June. 

Big oil is starting to have landmark moments that signal deeper production cuts across the globe will be happening quickly.  Oil prices are looking very constructive because over the next month or two, supply will meet demand.  Oversupply worries are slowly easing and with the exception of sudden dislocations in the oil market, crude prices could continue to stabilize. 


Gold prices are little changed following a wrath of poor data and central bank action that just dangled a carrot saying more stimulus is coming.  Gold prices gave up earlier gains following the ECB rate decision failed to signal an expansion to its QE program. The economic data keeps getting uglier and uglier in the US.  Jobless claims during the coronavirus pandemic has topped 30 million and personal spending fell the most on record.

Gold has had a lackluster week so far, but the longer-term outlook remains bullish as an uncertain global economic recovery will be met with much more stimulus.  Gold is down following both the Fed and ECB, but still comfortably above last week’s low of $1,666.  The key takeaways are still bullish for gold as both the Fed and ECB rate decisions is that more action will come, pressure will grow for fiscal responses, and that economic activity will not return to normal for a very long time, possibly 2022.   


Bitcoin mania is creeping back.  After almost dying in early March, renewed interest has seen a fresh wave of retail demand.  The third halving Bitcoin event is just 12 days away and rising interest is easily making this a one-way trade.  After almost reaching $9500, prices have come back down towards $8800.  Bitcoin may have a couple more attempts at breaking back towards the psychological $10,000 level, but right now it seems the fundamentals could easily support that.  The only thing that could get in the way of this Bitcoin rally is a major wave of risk aversion.    

By Ed Moya