· Dollar gains as virus concerns dents risk appetite
The U.S. dollar rose on Thursday on safety buying as fears grew over a rapid rise in coronavirus infections in some U.S. states and as trade tensions between the United States and the European Union increased.
The governors of New York, New Jersey and Connecticut on Wednesday ordered travelers from eight other U.S. states to be quarantined for two weeks on arrival, as COVID-19 infections surged in regions spared the brunt of the initial outbreak.
New orders for U.S.-made capital goods rebounded more than expected in May, but recouped only a portion of the prior two months’ declines.
Forex markets have been closely following moves in equities as risk sentiment changes. Stocks opened lower on Thursday following their worst day in two weeks.
The U.S. dollar index was last up 0.3% on the day at 97.42.
A dispute between the United States and the European Union, in which Washington is flagging possible changes in tariffs on EU goods, also hurt risk sentiment.
The euro was weighed down as riskier assets in the region, including Italian bonds, weakened, and as the European Central Bank fought back against a German court challenge to its money-printing plans.
The ECB also said it will offer euro loans against collateral to central banks outside the euro area to backstop funding markets amid the coronavirus pandemic.
The euro was last down 0.31% at $1.1215.
The dollar gained 0.17% against the Japanese yen to 107.2 yen.
· US jobless claims top 47.2 million, 1.48 million new
Another 1.48 million Americans filed new claims for unemployment benefits last week, the Labor Department said Thursday, a worse-than-expected figure that showed the continuing potency of the coronavirus pandemic.
The new claims were a decrease of only 60,000 from the week prior and brought the total since the business shutdowns began in mid-March to more than 47.2 million.
· U.S. GDP fell at a 5% rate in the first quarter, and the worse is likely on the way
The U.S. economy shrank at a 5.0% rate in the first quarter with a much worse decline expected in the current three-month economic period because of the coronavirus pandemic.
The Commerce Department reported Thursday that the decline in the gross domestic product, the total output of goods and services, in the January-March quarter was unchanged from the estimate made a month ago.
That was the sharpest quarterly decline since an 8.4% fall in the fourth quarter of 2008 during the depths of the financial crisis.
The first quarter decline reflected just two weeks of the shutdowns that began in many parts of the country in mid-March.
Economists are forecasting a much bigger GDP drop of around 30% for the current April-June period.
· Record spikes in U.S. coronavirus cases push up hospitalization rates in 16 states
The U.S. reported more than 34,400 coronavirus cases on Wednesday, according to a CNBC analysis of Johns Hopkins University data, after health officials in California, Florida and Texas all reported record-high single-day spikes.
As of Wednesday, the nation’s seven-day average of daily new Covid-19 cases was 31,172. This number has increased more than 34% compared with a week ago, according to the analysis of Johns Hopkins data. Cases are growing by 5% or more in 31 states across the U.S., including Arizona, Florida, Texas and California.
Twelve states hit record highs in daily new cases on Wednesday based on their seven-day average, the analysis found. They include Arizona, Arkansas, California and Florida. Arizona also hit a record high in average daily new deaths with a seven-day average of nearly 31 new lives lost.
Coronavirus hospitalizations, like new cases and deaths, are an important measure of the outbreak as it helps health officials gauge how severe it may be.
In an interview with TV station KBTX in San Antonio on Tuesday, Gov. Greg Abbott urged residents to wear a mask and practice social distancing to prevent infection.
“The hospitalization rate is at an all-time high. Coronavirus is spreading in Brazos County and across the entire state of Texas, which is exactly why action is being taken,” he said. “The safest place for you is at your home.”
Then, on Thursday, Abbott paused the state’s reopening plans and ordered hospital officials in four hard-hit counties to halt elective surgeries.
· Federal Reserve caps bank dividend payments after pandemic analysis
The U.S. Federal Reserve announced on Thursday it will cap big bank dividend payments and bar share repurchases until at least the fourth quarter after finding lenders faced significant capital losses when tested against an economic slump caused by the coronavirus pandemic.
In its analysis, the Fed found that the country’s largest lenders have struggled to model the unprecedented downturn and ensuing rescue programs, adding to already unprecedented uncertainty about how banks and the economy overall would perform in the coming months.
The Fed did not say how each bank fared under the pandemic analysis, but found the 34 tested firms could suffer as much as $700 billion in aggregate loan losses under the most severe, “W-shaped” economic recovery.
· Fed balance sheet down again as currency swaps fall further
The Federal Reserve’s stash of assets shrank for a second straight week as foreign central banks once again sharply cut their use of currency swaps and U.S. banks further dialed back their use of Fed repurchase agreements.
The size of the Fed’s balance sheet - composed of assets ranging from U.S. Treasury bonds and mortgage-backed securities to loans to banks and state governments - fell to $7.13 trillion on June 24 from $7.14 trillion a week earlier, data released by the Fed showed on Thursday.
Thursday’s data also showed the Fed has yet to extend any credit under its Main Street Lending Program, designed to give small and mid-sized businesses a funding backstop during the coronavirus crisis. While the facility’s balance rose to $37.5 billion from $31.9 billion a week before, the change entirely reflected additional seed capital from the U.S. Treasury.
As was the case a week earlier, when the Fed’s balance sheet shrank for the first time since February, the main culprit in the overall drop was another big reduction in foreign exchange swaps with other central banks as the dollar-funding crunch that had triggered their heavy use starting in March continued to ease.
· Fed's Powell to testify on CARES Act before House committee next week
U.S. Federal Reserve chair Jerome Powell will testify before the U.S. House of Representatives Financial Services Committee on Tuesday at 12:30 p.m. EDT (1630 GMT), the Fed announced on Thursday.
The Fed chair will provide testimony on the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, under which the Fed set up several new lending facilities to bolster the economy during the coronavirus pandemic. The law requires periodic congresional hearings to review the programs.
· Senate backs bill to punish China over Hong Kong
The U.S. Senate passed legislation on Thursday that would impose mandatory sanctions on people or companies that back efforts by China to restrict Hong Kong’s autonomy, pushing back against Beijing’s new security law for the city.
The measure also includes secondary sanctions on banks that do business with anyone found to be backing any crackdown on the territory’s autonomy, potentially cutting them off from American counterparts and limiting access to U.S. dollar transactions.
· Wall Street executives brace for a potential Biden win as Trump fades in polls
Ø Finance executives are now bracing for Joe Biden to potentially win the presidency as Donald Trump slides in national and swing-state polls.
Ø Various current and former Wall Street financiers, analysts, lobbyists, lawyers and political advisors with banking clients spoke to CNBC about how the industry is bracing for a possible Biden win.
Ø The changes in tone and expectation – and, in some cases, preparation for a Biden presidency – represent an about-face for many executives who privately cheered on Trump’s tax cuts.
· Oil climbs nearly 2% as U.S. economic data lends support
Oil prices rose about 2% in a volatile session on Thursday, buoyed by signs of a marginal improvement in the U.S. economy and a tepid rise in fuel demand, but price gains were limited by rising cases of COVID-19 in some U.S. states.
Brent crude rose 74 cents, or 1.8%, to $41.05, after trading as low as $39.47. The global benchmark dropped 5.4% on Wednesday. West Texas Intermediate crude settled 71 cents, or 1.87%, higher at $38.72 per barrel.
Reference: CNBC, Reuters, Daily Star
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