· Risk currencies slide as recovery optimism faces reality check
The Australian dollar and other risk-sensitive currencies gave up more ground on Friday, while safe-haven currencies were supported after equities tumbled on growing doubts over a quick recovery from the coronavirus pandemic.
Still-rising infections around the world added to the Federal Reserve’s sobering economic assessment this week, which sparked a selloff in global equities and heightened risk aversion.
But many market players saw the sudden moves as position unwinding after a rapid build-up of bets on risk assets that had taken off on hopes of further economic re-openings in many countries.
The euro slipped to $1.1291, easing further from Wednesday’s three-month high of $1.14225 while the British pound similarly fell to $1.2556 from Wednesday’s high of $1.2812.
In the United States, new infections are rising slightly after five weeks of declines. Part of the increase is due to more testing, but recent economic re-openings and mass protests against police brutality and racism are seen heightening health risks.
Safe currencies are thus in demand.
The yen traded at 107.10 per dollar. It struck a one-month high of 106.58 on Thursday, having gained 3.1% from a 2-1/2-month low hit just a week ago.
· Treasury yields move slightly higher but fears of a second wave persist
U.S. government debt prices were lower Friday morning, but investors were still cautious about the economy.
At around 2:47 am ET, the yield on the benchmark 10-year Treasury note was moving higher at around 0.6854% and the yield on the 30-year Treasury bond was also trading higher at 1.4296%. Bond yields move inversely to prices.
The bond market reacted after a sell-off in equities. Investors were concerned about a potential second wave in contagion from Covid-19. In addition, the Federal Reserve said earlier this week the U.S. economy is likely to contract 6.5% this year — a more severe downturn than what many were forecasting before.
· Fears of second U.S. coronavirus wave rise on worrisome spike in cases, hospitalizations
About half a dozen states including Texas and Arizona are grappling with a rising number of coronavirus patients filling hospital beds, fanning concerns that the reopening of the U.S. economy may spark a second wave of infections.
The rally in global stocks came crashing down on Thursday over worries of a pandemic resurgence. The last time the S&P 500 and Dow fell as much in one day was in March, when U.S. coronavirus cases began surging.
· UK economy shrinks by record 20.4% in April lockdown
Britain’s economy shrank by a record 20.4% in April from March as the country spent the month in a tight coronavirus lockdown, official data showed on Friday in what is likely to be the low point of the slump before a long and slow recovery.
In the three months to April, gross domestic product contracted by 10.4% from the previous three-month-period, the Office for National Statistics also said.
· Britain's Sunak says COVID-19 lifelines will help economy to recover
The coronavirus pandemic has had a severe impact on Britain’s economy but the steps the government has taken, including supporting salaries, grants and tax cuts will help it to recover, finance minister Rishi Sunak said on Friday.
“In line with many other economies around the world, coronavirus is having a severe impact on our economy,” he said.
“The lifelines we’ve provided with our furlough scheme, grants, loans and tax cuts have protected thousands of businesses and millions of jobs – giving us the best chance of recovering quickly as the economy reopens.”
· Japan's exports to drop sharply and consumer prices to fall on virus crisis: Reuters poll
Imploding demand due to the coronavirus pandemic is likely to have resulted in Japan’s exports in May suffering their biggest decline since the 2009 global financial crisis, while consumer prices probably fell for a second straight month, a Reuters poll showed on Friday.
More weak data will reinforce expectations for a sharp contraction in the world’s third-largest economy this quarter due to the fall out from the pandemic.
Exports are expected to have fallen 26.1% in May from a year earlier, the steepest drop since September 2009 when they tumbled 30.6%, according to the median forecast from the poll of 17 economists. Exports declined 21.9% in April.
· Japan's $94 billion reserve to combat pandemic sparks ire as PM Abe's 'pocket money'
A $94 billion emergency fund that can be tapped without parliamentary oversight has been branded Japanese Prime Minister Shinzo Abe’s “pocket money” by opposition lawmakers alarmed at its unprecedented size.
Abe has said the 10 trillion yen ($94 billion) will allow the government to move swiftly to mitigate the impact of the coronavirus outbreak - a “once in a century crisis” which has devastated the economy.
“We’ll report to parliament how we spend the money as needed and at the appropriate time,” Abe told parliament on Friday.
· Japan's economy is bottoming out, eyes on recovery: finance minister
Japan’s economy appears to have hit bottom and is eyeing a recovery from the damage caused by the coronavirus pandemic, its finance minister said, underscoring cautious optimism spreading among policymakers after the relaxation of lockdown measures.
The remarks come ahead of next week’s rate review by the Bank of Japan, which is likely to hold off on expanding stimulus and stick to its view the world’s third-largest economy is headed for a gradual recovery.
· Oil falls, rally ends as U.S. sees resurgence of coronavirus infections
Oil prices fell on Friday, extending big losses from overnight as U.S. coronavirus cases surged this week and raised the prospect of a second wave of the COVID-19 outbreak hitting demand in the world’s top consumer of crude and fuel.
Brent LCOc1 was down $1.34, or 3.5%, at $37.21 a barrel by 0701 GMT, having dropped nearly 8% in the previous session. West Texas Intermediate CLc1 was down $1.37 cents, or 3.8%, at $34.97 a barrel, after slumping more than 8% on Thursday.
Reference: CNBC, Reuters
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