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Tyson Foods Inc. will be reducing prices on certain products for the remainder of the week, according to The Wall Street Journal. This comes after surging meat prices and shortages at some retail shops in the first half of May. 

The Arkansas company, which processes about 25% of the nation’s beef, will discount prices of ground beef, roasts, and other beef products by as much as 30% through Saturday. Price reductions will be given to restaurants, grocery stores, and other customers for a limited time. 

Noel White, Tyson’s chief executive, said the reduction in price on specific products is a move to keep beef affordable. This comes at a time when prices have soared due to production woes seen at processing plants across the country. He said discounting prices will help “preserve consumer demand” as processing plants come back online after some were shuttered for virus containment purposes. 

“We’re doing this because we want to help keep beef on family tables,” White said.

Don Close, a senior meat analyst for Rabobank, said consumers have been struck hard by the economic turmoil and have downgraded from rib-eye steaks to hamburgers. 

“Clearly, with the price run-up we’ve seen in recent weeks, we’re seeing demand erosion,” he said.

Wholesale beef prices have nearly doubled over the last several months as tens of millions of Americans have lost their jobs, and economic depression unfolds. 

The reason for soaring beef prices, as we’ve explained several times: an unprecedented collapse of the nation’s food supply chain as over a dozen meat processing plants have been shuttered due to the coronavirus pandemic.

Last month, Tyson Chairman John Tyson warned in a full-page ad in several newspapers:

“As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain,” wrote Tyson. “The food supply chain is breaking.”

The announcement by Tyson comes after government data shows American grocery store prices are quickly rising as unemployment reaches levels not seen since the Great Depression. Grocery prices rose 2.3%, including seasonal adjustments, in April, which was the sharpest increase since 1974. 

A quick fix that could temporary reduce prices is to flood US markets with Mexican steaks and other beef cuts. And according to new reports, that is about to begin. Enjoy that Mexican beef. 

Authored by Martin Armstrong via ArmstrongEconomics.com,

Just when you thought it could not get any more corrupt, the Democrats have demonstrated to the world that they are beyond all morality, ethics, and are outright corrupt.

Tucked inside House Democrats’ new coronavirus bill is language that would create a loophole in states’ voter ID requirements, allowing people to cast ballots without having to prove who they are.

After accusing Russia of influencing the 2016 election, they are trying to sneak in open-season for total corruption.  It has long been a joke in Chicago where all the dead manage to vote Democratic in elections and the number of votes always exceeds the population.

Now they want votes to be counted with no proof of who you are, alive, dead, an illegal alien not paying taxes or a tourist from Europe, or perhaps even from Mars with green or grey skin.

I warned that the 2020 election will be the MOST CORRUPT in history. The Democrats have proven this is beyond question. The problem they are unleashing is if they have so corrupted the election to overthrow Trump, they will ignore the political bonfire of all time. We will be looking at massive civil unrest and there will be blood in the streets. If the Democrats think that they can get away with that, all civility will come to an end. That would encourage civil war.

I have warned that I had good DIRECT information that those associated with Bill Gates sold out in January because of a coming “virus” that had not even made a blip on the news. This is not about vaccines to save the world, perhaps ID2020 to control the world, but nobody gives a shit if we live or die. I have VERY GOOD sources and this has been about removing Trump BECAUSE they see him as the person stopping their dream of reconstructing the world economy to their New Green World Order. They will do absolutely everything they possibly can.

Fauci just told the senate people will die needlessly if we open up too soon. He is preaching the Gates Agenda to destroy the economy to rebuild this in their dream. Of course, all the left press is in on this coup. The New York Times, Washington Post, CNN, MSNBC, are all conspiring to try to keep the country locked down to destroy as much as possible in hopes the people will overthrow Trump and then we will all openly accept mandatory vaccines from Bill Gates. I wonder how much it cost him to buy the whole bunch? Did he get a discount as a package deal? They have certainly turned against the people for a price.

We are in for the battle of our lives. They win and there will be little left that we will perhaps remember only in films if they do not burn them to hide history.

They will NOT be successful in conquering the world. There is resistance rising globally. We will use Socrates to identify the safe havens.

This year, 2020, was our timing target. It was exactly 86 years to this decline and fall of the Roman Empire. 2020 is exactly 86 years from 1934 and the New Deal when they also confiscated gold. Welcome to the New Green Deal. They are back! This time they want a digital currency to control everything.

The string of unprecedentedly huge spikes in jobless claims continues. In the last week 2.98 million Americans filed for unemployment benefits for the first time (notably worse than the 2.50 million expected).

Source: Bloomberg

The small difference WoW suggests a second wave of unemployment is hitting…

That brings the eight-week total to 36.47 million, which is massively worse than the prior worst eight-week period in the last 50-plus years.

And of course, last week’s “initial” claims and this week’s “continuing” claims… the highest level of continuing claims ever

Source: Bloomberg

Connecticut saw a massive surge in initial jobless claims last week (we suspect this is more systems catch up than a sudden resurgence)…

And as we noted previously, what is most disturbing is that in the last eight weeks, far more Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession… (22.13 million gained in a decade, 36.47 million lost in 8 weeks)

Worse still, the final numbers will likely be hurt even more due to the bailout itself: as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, could contribute to new records being reached in coming weeks as it increases eligibility for jobless claims to self-employed and gig workers, extends the maximum number of weeks that one can receive benefits, and provides an additional $600 per week until July 31. A recent WSJ article noted that this has created incentives for some businesses to temporarily furlough their employees, knowing that they will be covered financially as the economy is shutdown. Meanwhile, those making below $50k will generally be made whole and possibly be better off on unemployment benefits.

As Mises’ Robert Aro noted earlier in the week, the stimulus packages being handed out across this world provide us with an opportunity to document the anticapitalist process as it unfolds in real time, keeping in mind that when these inflation schemes fail, it will likely be blamed on capitalism.

The combination of increasing the money supply in order to pay people not to produce goods or services has consequences that not a lot of people are talking about.

It flies in the face of the free market and is as nonsensical as a negative interest rate. A loan that is forgivable is unconventional to say the least, because a loan is normally defined as an amount borrowed that is expected to be paid back with interest. When a loan is given on a first-come-first-served basis for the purpose of paying people not to work and is forgivable because it’s guaranteed by the United States government, we shouldn’t call it a loan.

It may be called socialism, maybe interventionism, and some may still prefer the term statism; but one thing is certain when it comes to the Paycheck Protection Program: it’s not capitalism!

Welfare cliffs are of course not the only reason so many capable Americans languish in partial dependency on government assistance. Dreadful government schools in poor areas and systematic obstacles to getting a job, such as minimum wage laws and occupational licensing laws, are also to blame. But the perverse incentives of America’s welfare system really hurt, and the CARES Act may have been a serious tipping point.

But, hey, there’s good news… well optimistic headlines as Treasury Secretary Steven Mnuchin said he anticipates most of the economy will restart by the end of August.

Finally, it is notable, we have lost 314 jobs for every confirmed US death from COVID-19 (784,136).

Was it worth it? Well of course it was – US equity markets are roaring higher (though the last 3 days reality may be starting to set in again)…

Authored by Matt Taibbi via RollingStone.com,

In late April Marko Kolanovic, a financial analyst for JPMorgan Chase, wrote to clients with good news. Pandemic aside, investors should expect stock prices in S&P 500 companies to return to record numbers some time early next year!

“The S&P 500 should attain previous all-time highs,” Kolanovic wrote, “if the monetary measures are sustained.”

The key part of this phrase was the last bit, “if the monetary measures are sustained.” In countries that did not have a Federal Reserve Bank shooting a bazooka of cash daily at Wall Street, Kolanovic suggested the coronavirus would result in a 30 percent decline in the present value of earnings.

In other words, without intervention by the Federal Reserve, the United States in the coronavirus era would be looking at a Depression-level contraction.

Assuming the Fed bazooka keeps firing, however, a large portion of the investor class is already on a road leading back to champagne and confetti. And that, as Robert Frost would say, has made all the difference.

On the road more traveled, on the real side of the coronavirus economy, the pain has been historic. As of this writing, 30 million people have filed jobless claims during the COVID-19 crisis, and millions have lost their employer-based insurance.

At least one in three can’t make their rent, millions more can’t afford groceries, and workers in supermarkets, medical clinics, warehouses, and other professions are now in a macabre race to see if they’ll turn blue and die before corporate employers decide to slash their salaries or retirement benefits — which has already happened to front-line caregivers in some cities.

There are no projections of record earnings in the futures of such people. The best case is survival, and the grim reality of diminished economic horizons. Yet for the tiny sliver of people whose fortunes depend not on salaries, tips, and commissions, but upon the prices of financial products like stocks and bonds, the coronavirus response heralds a brave new world.

The $2.3 trillion CARES Act, the Donald Trump-led rescue package signed into law on March 27th, is a radical rethink of American capitalism. It retains all the cruelties of the free market for those who live and work in the real world, but turns the paper economy into a state protectorate, surrounded by a kind of Trumpian Money Wall that is designed to keep the investor class safe from fear of loss.

This financial economy is a fantasy casino, where the winnings are real but free chips cover the losses. For a rarefied segment of society, failure is being written out of the capitalist bargain.

This is a fresh take on a long-developing dynamic. Dating to the late Eighties, when then-Fed-chief Alan Greenspan slashed interest rates after the 1987 stock-market crash, there’s been an understanding that the government would be there to help Wall Street back on its feet in hard times.

That belief was so strong it had a name: the “Greenspan put.” Bloomberg’s Tim Duy defines the term as “the implied promise that central bankers led by Fed Chairman Alan Greenspan would bail out market participants who indulged in risky behavior.”

The Fed stepped in to flood Wall Street with cash (these are called “liquidity injections”) after a series of messes in the Clinton and Bush years, from the Asian-currency debacle to the collapse of the Long-Term Capital Management hedge fund in the late Nineties to a deflation panic in 2002.

A prolonged period of liquidity injection in the early 2000s prompted a now-familiar pattern of pushing investors out of traditional safe-haven investments (the low interest rates punished savers) and into ever-riskier gambles in commodities, stocks, and the housing markets.

All three arenas saw bubbles, but the one in the U.S. housing market burst after an orgy of Ponzi-style scheming sent mortgage prices shooting through the roof. In the space of a few months in 2008, the pension funds and municipalities that had been urged by greed-sick bankers to invest in a “real estate boom” (actually a fraud-driven speculative bubble) lost fortunes.

Taxpayers and homeowners bore nearly 100 percent of the pain. Nearly 3 million people filed for foreclosure in 2010 alone. Back then, the notion of using state funds to rescue these folks was rejected as laughable, a dangerous “moral hazard.” As billionaire Charlie Munger put it in 2010, homeowners needed to “suck it in and cope,” and not wait for a handout.

Wall Street, though, got the mother of all rescues. The response wasn’t limited to a traditional liquidity injection. Banks were given trillions in bailouts and emergency loans, allowed to dump years of bad investment decisions into special garbage facilities set up by the Federal Reserve, and urged to “drink themselves sober” through years of free money from a zero-interest-rate policy.

The Fed, beginning in late 2008, added a new crisis-response tool called quantitative easing (QE), a fancy academic name for printing trillions of dollars and using it to buy everything from mortgages to government debt. This was with the ostensible aim of increasing “the availability of credit” for things like home purchases, but also to “foster improved conditions in financial markets more generally.”

The dubious underlying logic was that rescuing the economy and rescuing the financial markets were the same thing. To save people, we had to save the economy in which they operate, which meant saving the high-risk investments of Wall Streeters, as much as they might suck.

What’s happening in the COVID-19 crisis is the next step: a financial bubble where the Fed isn’t the cleanup mechanism, but the source of the mania itself. While the real economy is seeing record disruptions, Wall Street has seen prolonged rallies of “rational exuberance” over the Fed’s decision to usher in “QE infinity” and essentially ban losing in finance capitalism.

Though this is a Trump bill — El Pompadour is so determined that the CARES Act be remembered as his work, he fought to get his signature on relief checks — it passed unanimously, by voice vote in the House, and 96-0 in the Senate.

Talk to Democrats on the Hill and they will tell you this is a bailout to be cheered and supported, nothing like the 2008 rescue. This time is different, the argument goes: Three-quarters of the money goes to real people.

This is true, if one squints and uses a narrow definition of “money.” The $2.3 trillion imagines $560 billion for “individuals” (including $300 billion in cash payments, much by way of the famed $1,200 “Trump” checks), plus $377 billion for small businesses, as well as $339 billion for state and local governments, and $100 billion for hospitals and other health care providers, plus some aid for students and children.

Technically, “only” about $500 billion of the congressionally passed rescue package goes to “big business.” Moreover, the big-business aid ostensibly comes with a range of draconian-sounding conditions barring greedy hijinks, meaning no layoffs, no stock buybacks, no big bonuses, etc., if companies want the handout.

The loophole comes via $454 billion created as part of that big-business package. This “emergency fund” will be dumped into a “special-purpose vehicle” used to backstop further lending by the Federal Reserve.

That $454 billion is designed to grow by a factor of 10 or more. “We can lever up to $4 trillion,” said Steve Mnuchin, playing the “free-spending Goldman Sachs-trained Treasury secretary” role that apparently is a prerequisite for financial-disaster narratives in modern America.

Democrats early on expressed concern about old-school Tammany Hall-style graft, i.e., that the fund would be used to invest in businesses with connections. “We’re not here to create a slush fund for Donald Trump and his family,” is how Elizabeth Warren put it.

However, once Democrats won superficial oversight concessions (including the creation of a Congressional Oversight Commission), Warren and everyone else in the caucus approved the “slush fund” concept, despite the far more radical issues it poses than individual graft.

The CARES Act “slush fund” imagines a future in which markets for all financial products are stressed, perhaps permanently, by lockdowns. In place of a heartless free market of panicked investors who might want to cut their losses and sell, the plan is to simulate real buying and selling of financial products like mortgages and bonds with directed deployments of the Fed’s endless trillions.

And they will be endless. As Fed chief Jerome Powell put it, the Fed is “not going to run out of ammunition” in the war against the economic crisis. Marcus Stanley of Americans for Financial Reform said, “The Fed’s perspective on this is, they want to create normalcy.” But what does “normal” mean in an economy that may be changed forever?

Investors were fleeing stocks, bonds, money-market funds, etc., in the first weeks of March for the perfectly logical reason that most businesses suddenly looked like dicey investments. But the instant the Fed announced its new purchasing programs, most of these markets bounced back nearly all the way up.

Major bond funds that were on the brink of failure on March 23rd — like BlackRock’s $30 billion LQD fund — rebounded and recovered nearly all of their value in the next days. The S&P 500 sank 34 percent in 23 trading sessions at the beginning of the crisis, then after the Fed’s announcement on March 23rd, rose 27 percent in its next 16 sessions. The NYSE Composite hit a low of 8,777 on March 23rd, then started a long march back up over 10,000 and then 11,000 from that day forward.

Investors have begun following the Fed. Analysts are encouraging clients to “buy what the Fed is buying,” because “the stimulus seems to be endless.” The boom isn’t in any particular kind of company or product, but in the Fed itself.

“The Fed is the market, and all the big players know it, while the real economy will stagger far behind,” is how Nomi Prins, author of Collusion and an expert on central-banking policy, puts it.

This plan is getting support from both the right and the left. Wall Street analysts are cheering Fed chief Powell’s decision to act “forcefully, proactively, and aggressively” to forestall financial collapse, while liberal economists seem to cheer the spectacle of the government abandoning harrumphing conservative rhetoric about fiscal restraint to invest massively in the economy.

“I’m more sympathetic than I might otherwise have been,” says noted progressive economist Dean Baker, adding that the extraordinary crisis has created real trouble for a lot of good companies that the Fed’s actions will address.

Decades ago, America started down the road of creating two economic worlds. Our once-mighty brick-and-mortar economy went into decline and began to be exported overseas, to cheap labor zones and countries with less-stringent environmental laws — places that, as economist Larry Summers infamously put it, were “vastly underpolluted.” That American factory workers would be left behind by this process was just their bad luck, another thing requiring a “suck it in and cope” attitude.

Not so for their bosses, though, who were rescued from the decline by transitioning to even-more-profitable work in a new, “financialized” economy. This world emphasized making money by moving it around in the capital markets — prioritizing fees, interest, capital gains, etc. A generation of minds that were trained in the logic of “financialization,” and its underlying principles — which include the idea that workers are fungible, parasitic drains on the more crucial “wealth creators” above — accelerated the aggressive tilt to the political right by America’s wealthy in recent decades.

Even the experts at the Federal Reserve, whose official mandate includes attaining “maximum sustainable employment,” became more and more removed from their real-world purpose over the years, devoted instead to tending to the needs of this second, sandcastle economy over the problems of disenfranchised working people, whose fates mostly couldn’t be helped. And why not? What Fed official ever interacts with anyone not employed in the financial sector? How could the real world ever seep in?

The coronavirus bailout could end up being the last chapter in this hideous story. Although we’re seeing a graphic demonstration of how “unskilled” workers like home health aides and delivery people and grocery clerks are actually the vitally important people in our society, they’re not getting the radical rescue. There’s no sudden universal health care, no guaranteed sick leave, no massive jobs plan, just Band-Aids. They will die in massive numbers and emerge from this crisis, if and when it ends, poorer and more vulnerable than before.

But the financial markets are getting the World War II-style “whatever it takes” financial commitment, based upon the continuing fallacy that “wealth creators” must be the first in line for rescue in any crisis. This was a wrong assumption on the decks of the Titanic, a wrong assumption after 2008, and a criminally wrong assumption now.

Continuing belief in the trickle-down myth that has been destroying and dividing this country for decades will kill us faster than any pandemic. If we’re going to spend in “unlimited” amounts, let’s for once do it in the real world and for the people who need it most.

S&P futures slumped lower after Novartis CEO said a coronavirus vaccine may not be available until 2H 2021 and European stocks declined on Thursday as investors worried that the current economic downturn maybe be here for longer than initially presumed after Fed Chair Jerome Powell warned of unprecedented risks from the coronavirus, while waiting the latest American jobless data after another steep sell-off on Wall Street.

“Views are beginning to firm that the 2020 bear-market rally may have run its course,” said Perpetual Investment Management head of investment strategy Matthew Sherwood.

After two sessions of sharp declines, the three main US stock indexes slumped for a third day following a report that President Donald Trump is “looking at” Chinese companies that trade on American exchanges, and are now headed for their worst week since mid-March, as hopes of a quick economic recovery were dashed following sobering comments from Federal Reserve Chairman Jerome Powell and leading U.S. infectious disease expert Anthony Fauci.

Among early movers, Cisco Systems Inc rose 2.5% premarket after beating quarterly revenue and profit estimates, as lockdowns globally boosted demand for its remote-work tools and networking equipment.  Norwegian Cruise Line Holdings, the S&P’s worst performer since the sell-off began in February, rose in the premarket after saying there continues to be demand for cruise vacations, particularly beginning in the fourth quarter. The earnings season is in its final stretch with 448 S&P 500 companies having reported so far. On average, first-quarter earnings are expected to fall 12.2%, according to Refinitiv data.

The Stoxx Europe 600 Index fell, with insurance and auto shares among the biggest laggards. The Stoxx Europe 600 Basic Resources Index fell as much as 2.1%, as tensions between the U.S. and China flare up, while Fed warns about economic risk and Goldman Sachs sees iron ore falling. The big  four diversified miners all fell: Rio Tinto -1.2%, BHP -1.2%, Glencore -3.2%, Anglo American -3.5%.

Earlier in the session, Asian stocks fell, led by energy and finance, with Japan and Australia suffering some of the steepest falls after rising in the last session. The Topix declined 1.9%, with Sawafuji Elec and eRex falling the most. The Shanghai Composite Index retreated 1%, with Chahua Modern Housewares and Sailun Group posting the biggest slides

Emerging-market stocks and currencies weakened after Powell warned of unprecedented risks to the economy if policy makers fail to address the fallout from the coronavirus. MSCI’s measure of developing-nation equities resumed losses after a day of stability, while almost all currencies weakened against the dollar. Mexico’s central bank was forecast to cut its key rate by 50bps to the lowest since 2016 later in the day. Investors are assessing whether financial markets are adequately pricing the economic reality of a pandemic that’s shut down factories and prompted a surge in unemployment across the globe. The extra yield they demand to hold developing-nation debt instead of Treasuries climbed. “The chairman hit a nerve,” Commerzbank strategists including Frankfurt-based Ulrich Leuchtmann said in a note. “His speech provided a reason to allow already existing fears to take their course.”

The rally in global equities from March lows – which was driven by hopes of a pick up in business activity as several U.S. states eased lockdowns put in place to curb the spread of the coronavirus – is showing further signs of stalling this week amid comments from some big-name investors such as Druckenmiller and Tepper that stocks have run up too far amid the economic uncertainty. Fed Chairman Jerome Powell suggested that additional fiscal support could be needed to combat the effects of the pandemic. In that vein, Republicans rejected a $3 trillion stimulus measure drafted by House Democrats, but the draft plan has the seeds for an eventual, smaller compromise.

In FX, the biggest overnight mover was the dollar, which broke out of a descending triangle, jumping to the highest level since April 26. The Bloomberg Dollar Spot Index strengthened for a fourth consecutive session, rising alongside the yen, as souring market sentiment kept haven currencies in demand. The greenback’s advance continued against most of its G-10 peers amid risk-off moves in Asia and Europe after Federal Reserve Chair Jerome Powell warned of economic challenges from the coronavirus pandemic, and took negative rates off the table. “The downbeat message from Powell has contributed to more risk off trading conditions overnight which is also helping to support the U.S. dollar,” said Lee Hardman, currency analyst at MUFG.

Yesterday we explained why the next dollar surge may be only just starting as an avalanche of treasury issuance drains roughly $1 trillion in market liquidity.

The yen and Canadian dollar led gains among Group-of-10 currencies, while the euro hovered after slipping below 1.08 per dollar. The Swedish krona led losses and the Australian dollar weakened a fourth day against the greenback after the nation’s employment plunged by a record in April. The pound fell to a one-month low on weak risk sentiment and speculation over more central bank easing.

In rates, treasuries are bull-flattening for a third straight session, with long-end yields dropping back under 1.30% following solid demand for Wednesday’s 30-year bond auction. Treasuries also benefit from weakness in stocks after Novartis CEO said a coronavirus vaccine may not be available until 2H 2021. Treasury yields lower by more than 6bp at long end with 2s10s and 5s30s both flatter by more than 3bp; 10-year yield drops 4bps to 0.615%. European bonds mostly gained though underperformed Treasuries, amid fears of a lasting downturn. German Bunds are cheaper by 3bp vs. Treasuries, gilts wider by almost 4bp.

In commodities, WTI and Brent front-month futures remain on the front foot after a somewhat choppy APAC trading session, with fresh modest impetus across the complex derived from the latest IEA oil market report – which proved more optimistic vs. its OPEC and EIA counterparts. The agency cut their 2020 demand growth forecast by 690k BPD (vs OPEC’s 2.23mln BPD and EIA’s 2.9mln BPD) while stating that the decline in H1 oil demand is not as steep as originally feared – with an improvement in the balance seen amid deep production curbs and reopening economies, however, IEA Chief Birol stated that he does not believe the recently announced cuts (i.e Saudi, UAE, and Kuwaiti over-compliance) are enough to balance the markets.

To the day ahead now, the data highlight today will likely be the weekly US initial jobless claims. Meanwhile, there’s also be the final German CPI reading for April, Japan’s machine tool orders for April, the Italian trade balance for March and Canadian manufacturing sales for March. From central banks, Bank of England Governor Bailey will be speaking on a webinar, and we’ll also hear from the Fed’s Kashkari, Bostic and Kaplan, along with the ECB’s Vice President de Guindos. Finally, the ECB will be publishing their Economic Bulletin, while the Mexican central bank will be deciding on rates.

Market Snapshot

• S&P 500 futures little changed at 2,813.50
• STOXX Europe 600 down 1.7% to 328.36
• MXAP down 1.4% to 144.70
• MXAPJ down 1.3% to 465.75
• Nikkei down 1.7% to 19,914.78
• Topix down 1.9% to 1,446.55
• Hang Seng Index down 1.5% to 23,829.74
• Shanghai Composite down 1% to 2,870.34
• Sensex down 2.5% to 31,205.67
• Australia S&P/ASX 200 down 1.7% to 5,328.72
• Kospi down 0.8% to 1,924.96
• German 10Y yield fell 1.4 bps to -0.544%
• Euro down 0.03% to $1.0815
• Italian 10Y yield fell 8.7 bps to 1.628%
• Spanish 10Y yield fell 1.7 bps to 0.718%
• Brent futures up 2.6% to $29.96/bbl
• Gold spot little changed at $1,716.54
• U.S. Dollar Index little changed at 100.23

Top Overnight News

• Germany recorded the highest number of new coronavirus cases in five days as the government gradually lifts restrictions on daily life
• The coronavirus is threatening to turn the long- lasting fault line cleaving Europe between its richer north and poorer south into an economic chasm putting its currency at risk
• The Bundesbank is talking to German authorities amid a stand-off over a controversial court ruling that questions the European Central Bank’s bond-buying program, ECB Executive Board member Fabio Panetta said
• A change in the way Bank of Japan Governor Haruhiko Kurodatalks about the possibility of cutting the bank’s negative interest rate may suggest the option is now further down on the list of his favored tools
• Activity is continuing to pick up in funding markets on both sides of the Atlantic, though in Europe pricing remains a sticking point as rates have advanced in high-grade commercial paper
• The outlook for global oil markets has “improved somewhat,” with demand a little stronger than expected and supply reined in by a brutal price crash, the International Energy Agency said
• Roche Holding AG’s coronavirus antibody test was cleared by a U.K. health authority, a boost to Prime Minister Boris Johnson as he seeks ways to gradually relax lockdown restrictions
• While the rest of the world has sheltered at home, Swedes have continued eating in restaurants, shopping, and going to work. The Swedish model trades more disease for less economic damage

Asian stocks traded negatively with global risk appetite dampened by ongoing US-China tensions and ongoing questions about reopening efforts. ASX 200 (-1.7%) was led lower by energy and financials after similar underperformance of the sectors stateside and with participants digesting alarming employment data that showed a near-600k decline in jobs. Nikkei 225 (-1.7%) remained under the influence of a firmer currency and with earnings releases also providing a catalyst for price action including Sony. Elsewhere, Hang Seng (-1.5%) and Shanghai Comp. (-1.0%) were both downbeat as US-China tensions turned up a notch after source reports noted China will soon impose countermeasures on those seeking COVID-19 damages from China and after US President Trump extended the executive order protecting the US supply chain from Huawei and ZTE for an additional year, while the PBoC also disappointed expectations for an MLF announcement and associated 20bps rate cut which both failed to materialize. Finally, 10yr JGBs were initially higher as prices benefitted from the risk aversion and gains in T-notes, but with upside later reversed after a mixed 30yr auction which resulted in lower accepted prices.

Top Asian News

• New Zealand Projects Surging Debt on Historic Fiscal Stimulus
• Russia Outbreak Spreads to Neighbor With Jump in Mongolian Cases
• Australian Equities Drop as Employment Slumps by Most on Record
• Kuroda Hints Cutting Rates May Now Rank Lower in BOJ Toolkit

Europe has taken the downbeat lead from the APAC session (Euro Stoxx 50 -1.9%) as rising tensions between US and China continue to weigh on sentiment, whilst Fed Chair Powell’s heavy downplaying of NIRP does not aid the equity complex. Major bouses see broad-based losses with no real stand-out across major indices. Sectors reside firmly in the red across the board with steeper losses seen in cyclicals (ex-telecoms). The sector breakdown sees Auto and Parts alongside Travel & Leisure as the laggards. Telecommunications reside at the top of the list – losses in the sector are cushioned by earrings from Deutsche Telekom (+0.6%) who topped Adj. EBITDA estimates, confirmed guidance, and said the outbreak is having a limited impact on Co’s financials. Sticking with German earnings, Merck (+1.1%) remains underpinned after topping estimates on all Q1 metrics, whilst guidance printed in-line with analyst estimates. Other earnings-related DAX constituents include: Wirecard (-0.7%), RWE (-0.7%). Elsewhere, Fiat Chrysler (-1.7%) and PSA (-1.1%) are pressured after simultaneously pulling FY20 dividend; the dividend was a component of their merger. Finally, Roche (+0.2%) remains afloat after its COVID-19 antibody test had been approved by Public Health England. Co. is in talks with the NHS and the UK government regarding a phased roll-out of tests as soon as possible. UK government is in negotiations to purchase millions of kits.

Top European News

• Nosediving German Economy Isn’t Just Suffering Amid Virus
• BMW Faces Shareholder Scrutiny Over $1.8 Billion Dividend
• U.K. Virus Fight Boosted by Clearance of Roche Antibody Test
• U.K.’s Housing Revival Plan Seen Unlocking $100 Billion of Deals

In FX, we start with the AUD/NZD: Not quite role reversal, but the pecking order has changed down under to an extent following a near 600k plunge in Aussie payrolls, a marked rise in the participation rate and predictions for more pronounced jobs market pain to come. Aud/Usd has duly pulled back further from 0.6500+ peaks to pivot 0.6450 and Aud/Nzd is losing momentum below 1.0800 even though the Kiwi remains under pressure post-RBNZ on heightened NIRP expectations and the NZ Government boosting its COVID-19 recovery fund to the tune of 20% of GDP. Indeed, Nzd/Usd has now lost grip of the 0.6000 handle ahead of April’s manufacturing PMI.

• JPY – The Yen continues to buck the overall trend and outperform an otherwise strong Dollar, with the DXY looking more comfortable above 100.000 within a 100.420-140 range, as risk-off positioning intensifies and keeps Usd/Jpy capped on advances through 107.00. No adverse reaction to more dovish rhetoric from BoJ Governor Kuroda balanced with the unflinching belief that Japan will not return to deflation and it is not necessary to ease benchmark rates further even though recession will continue in Q2.
• GBP/SEK/NOK – The Pound continues to fall victim to bearish historical patterns and increasingly negative technical impulses as Cable relinquished another round number at 1.2200 to test deeper support ahead of 1.2150 (circa 1.2166) before finding underlying bids, with perhaps some fundamental weakness emanating from BoE Governor Bailey acknowledging that markets are anticipating more QE. Meanwhile, the aforementioned risk aversion has knocked the Swedish Krona out of its stride and back under 10.6000 vs the Euro, but firm crude prices following a less downbeat IEA monthly report in terms of global demand destruction are helping Eur/Nok in a downward trajectory near 11.0000, albeit off Wednesday’s sub-10.9250 two month lows.
• CAD/CHF/EUR – Buoyant oil is also underpinning the Loonie either side of 1.4100 vs its US counterpart in the run up to the BoC’s FSR, while the Franc is back in a bind or divergent position given Usd/Chf holding above 0.9700 in contrast to Eur/Chf edging back down towards 1.0500, as the single currency straddles 1.0800 against the Greenback after light stops were tripped at the big figure, but not larger ones said to be sitting beneath at 1.0775. Note, Eur/Usd is shrouded in a cluster of big option expiries today spanning 1.0750 to 1.0930 – check out the headline feed at 7.23BST for full details and the other major strikes in play.
• EM – Not even the deteriorating mood amidst heightened COVID-19 2nd wave and US-China relations or rising crude costs can dent the Try’s ardour it seems, as the Lira remains above 7.0000 and drawing traction currently from hopes that the CBRT can arrange swap lines with foreign peers..

In commodities, WTI and Brent front-month futures remain on the front foot after a somewhat choppy APAC trading session, with fresh modest impetus across the complex derived from the latest IEA oil market report – which proved more optimistic vs. its OPEC and EIA counterparts. The agency cut their 2020 demand growth forecast by 690k BPD (vs OPEC’s 2.23mln BPD and EIA’s 2.9mln BPD) while stating that the decline in H1 oil demand is not as steep as originally feared – with an improvement in the balance seen amid deep production curbs and reopening economies, however, IEA Chief Birol stated that he does not believe the recently announced cuts (i.e Saudi, UAE, and Kuwaiti over-compliance) are enough to balance the markets. Elsewhere, Saudi Arabia has reportedly cut oil sales by half to the US & Europe, deeper cuts than for Asia, as output has been reduced, according to sources. Shipments to some US and European buyers will fall by 60-70% vs. normally contracted volumes. This comes in the context of Aramco raising OSPs across the regions, lower sales to Europe and the US could be a function of the lower demand from lockdowns. Aside from that, news-flow has been light for the complex – WTI June resides around session highs north of USD 26/bbl (vs. low 25.18/bbl), whilst Brent July similarly sees itself north of USD 30/bbl (vs. low 28.88/bbl). Elsewhere, spot gold remains relatively flat north of USD 1700/oz and around the middle of today’s tight USD 1712-1719/oz range awaiting fresh macro stimulus or Dollar action. Copper prices meanwhile tracked losses across equities alongside the soured sentiment, and reside in proximity to USD 2.400/lb, having tested support at USD 2.3350/lb earlier in the session.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 2.5m, prior 3.17m; Continuing Claims, est. 25.1m, prior 22.6m
• 8:30am: Import Price Index MoM, est. -3.2%, prior -2.3%; Import Price Index YoY, est. -7.35%, prior -4.1%
• 8:30am: Export Price Index MoM, est. -2.3%, prior -1.6%; Export Price Index YoY, prior -3.6%
• 9:45am: Bloomberg Consumer Comfort, prior 36.9

DB’s Jim Reid concludes the overnight wrap

Yesterday we published Konzept – DB Research’s magazine. You can see it here. The theme of this edition is “Life after Covid-19” where we look at twenty articles covering how the world will be different going forward. We cover macro and micro themes as well as how the post virus landscape will change your life.

One of the lead features concerns whether this virus will end up being deflationary or inflationary. It’s fair to say that this argument splits DB Research like few others. To give you a feel for the debate we included the opposing views across two conflicting articles in the magazine. On this we have this morning launched a podcast (in our Podzept series) where I moderate a discussion between the lead authors. We have Robin Winkler in the red corner fighting for his deflationary views and Oliver Harvey in the blue corner countering with his inflationary views. You can listen here or you can subscribe to Podzept on Spotify, Apple & Google Podcast and Stitcher – simply search for Podzept.

In our monthly sentiment survey you can vote as to whether you think this crisis will be inflationary or deflationary. The survey has many other questions about your views on how the virus is impacting your life and the world around you. We also include market related questions. This link is here and the results will be published over the next few days.

As markets continue to grapple with what “Life after Covid-19” might look like, it was another weak day yesterday, with global equity markets falling further. We just about managed to cope with a downbeat assessment from Fed Chair Powell but couldn’t after additional evidence that the US/China relationship is souring further.

On the latter President Trump initially tweeted that “dealing with China is a very expensive thing to do. We just made a great Trade Deal, the ink was barely dry, and the World was hit by the Plague from China. 100 Trade Deals wouldn’t make up the difference – and all those innocent lives lost!” This was followed by China Global Times headlines saying that China is “extremely dissatisfied” with the possibility of the US sanctioning or otherwise punishing China over the coronavirus epidemic and would look to retaliate and were “mulling punitive countermeasures on US individuals, entities and state officials like Missouri’s attorney general, who filed lawsuits against China in seeking damages over the coronavirus pandemic.” This was all prior to a Bloomberg report saying that the Federal Retirement Thrift Investment Board in the US, a savings plan for federal employees, would not be allocating roughly $50 billion of its international fund to track an MSCI All Country World Index, capturing China. The move was reportedly backed by the President’s administration and some members of Congress.

Adding to the negative US/China news, the high profile founder of Appaloosa Management, David Tepper, called the US stock market the most overvalued that he had ever seen outside of the tech bubble in 1999, calling some tech valuations “nuts”. These comments mirrored those of fellow seasoned investor Stan Druckenmiler the day before. He called the risk-reward of equities the worst he had seen in his career. Tepper also questioned whether there have been misallocations of capital following the actions of the Fed, but also acknowledged that the stock market may not retest the March bottoms.

In terms of the moves, equity indices fell across the board with the S&P 500 down -1.75% and the NASDAQ also down -1.55%. Even though the market rallied nearly one percent in the last 30 minutes of trading this was still the first time in over 3 weeks that we’ve seen the S&P fall by more than 1% for two days in a row, while the VIX index climbed +2.2pts to its highest level in over a week. European bourses also experienced sustained declines, with the STOXX 600 down -1.94% and the DAX losing -2.56%.

Asian markets have followed in tow this morning with the Nikkei (-0.86%), Hang Seng (-1.11%), Shanghai Comp (-0.47%) and Kospi (-1.00%) all down. Elsewhere futures on the S&P 500 are trading flat while yields on 10yr USTS are down -1.1bps. In other overnight news, Saudi Aramco announced a cut in contractual volumes for June loading to at least eight Asian customers, signaling that the country might be adhering to the announced production cuts. WTI oil prices are up +0.55% as we type.

Fed Chair Powell in his hotly anticipated address yesterday warned that the outlook was “both highly uncertain and subject to significant downside risks.” Though Powell’s conclusions will probably come as no surprise, what was notable from his remarks was how he dwelled for some time on the permanent effects that a recession of such a large magnitude can have, commenting that they “can leave behind lasting damage to the productivity capacity of the economy.” So markets certainly had some pretty negative headlines to ponder. When it came to future policy, he said that “we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way”, and that “additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”

The main takeaway however was on negative rates, where Powell said that the FOMC’s views hadn’t changed and that it wasn’t something they were looking at. Following the remarks however, Fed funds futures are pricing negative rates in Jan 2021 on Bloomberg’s WIRP page.

With investors moving out of risk assets into safe havens, sovereign debt rallied yesterday on both sides of the Atlantic, with yields on 10yr Treasuries down by -1.3bps to 0.653%, and those on bunds also falling by -2.5bps. Fed Chair Powell’s comments did not seem to have too much influence on yields given 10yr yields did not move until the risk off tone hit all assets slightly later in the US session. There was a tightening in peripheral spreads in Europe, with those on ten-year Italian (-6.3bps), Spanish (-2.8bps), Portuguese (-5.4bps) and Greek (-3.7bps) debt all moving tighter over bunds. And over in the UK, 2-year gilt yields fell to a record low of -0.03%.

Late last night news came out of Italy that the government has approved a €55bn fiscal stimulus package, which will focus on liquidity for small businesses and individual loans. As much as 15 billion will be set aside for companies to pay workers currently on furlough, with additional emergency funds for the unemployed. There will also be roughly €4bn in tax cuts for Italians as well as a €500 bonus for some to use on holiday spending for some. The Italian stimulus plan came alongside news that BoE Governor Bailey said that additional bond purchases would be coming. He acknowledged that it is “pretty clearly” investors expect more QE and that the central bank has kept the option open to do more. There was also a bit more acknowledgment that the BoE are effectively financing the deficit for now and spreading the costs of the pandemic over time. Previously the BoE have been a bit more hawkish on acknowledging that they are effectively financing the government.

When it comes to the short-term path of the economy, economists will be paying close attention to the initial weekly jobless claims report today from the US covering the week through 9 May. This is the first since last Friday’s April jobs report confirmed that the US now has its highest unemployment rate since the Great Depression, at 14.7%, and unfortunately it’s likely that we haven’t seen the worst of that yet. In terms of today’s claims number, the call from our US economists is for a 2.503m reading, which would mark the 6th week in a row that the number has declined, down from a peak of 6.867m in the week to March 27th. However, even if you benchmark it from the pre-Covid total number of nonfarm payrolls, that implies we’re still seeing well over 1% of the workforce making initial claims in a single week.

The economic data yesterday begun with figures that showed GDP had contracted by -2.0% in Q1 (vs. -2.6% expected), which is the largest quarterly decline for the UK economy since Q4 2008. Unsurprisingly, the real damage was evident once the lockdown had begun in March, with a month-on-month decline of -5.8% (vs. -7.9% expected), in contrast to +0.1% growth in January and a -0.2% contraction in February. Furthermore, that’s the worst monthly contraction on record in monthly data that goes back to 1997.

Wrapping up with yesterday’s other data, and Euro Area industrial production fell by -11.3% in March (vs. -12.5% expected), which was the biggest monthly decline since the formation of the single currency back in 1999. Meanwhile US producer prices fell by -1.3% month-on-month in April (vs. -0.5% expected).

To the day ahead now, and the data highlight today will likely be the weekly US initial jobless claims. Meanwhile, there’ll also be the final German CPI reading for April, Japan’s machine tool orders for April, the Italian trade balance for March and Canadian manufacturing sales for March. From central banks, Bank of England Governor Bailey will be speaking on a webinar, and we’ll also hear from the Fed’s Kashkari, Bostic and Kaplan, along with the ECB’s Vice President de Guindos. Finally, the ECB will be publishing their Economic Bulletin, while the Mexican central bank will be deciding on rates.