With the coronavirus pandemic raising the risk of a prolonged global downturn, investors continued to seek the safety of the U.S. dollar and government bonds, pushing U.S. Treasuries yield near their lowest in three weeks.
U.S. West Texas Intermediate (WTI) crude lost $1.14, or 4.5% to $24.18 a barrel in early Asian trade after having surged a record 24.7% on Thursday. Brent futures dropped $0.70, or 2.67% to $29.24.
Trump said on Thursday he had spoken to Saudi Crown Prince Mohammed bin Salman, and expects Saudi Arabia and Russia to cut oil output by as much as 10 million to 15 million barrels, as the two countries signalled willingness to make a deal.
Saudi Arabia said it would call an emergency meeting of the Organization of the Petroleum Exporting Countries, Saudi state media reported.
The amount Trump talked about would represent an unprecedented cut amounting to 10% to 15% of global supply, if he meant output per day - a common unit of measurement.
But Trump did not specify and some analysts say the omission may be intentional.
“He is a business man and smart enough to know these things. A cut of 10-15 million barrel per day (bpd) would be simply impossible,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“How could Riyadh and Moscow agree on such a big cut, just about a month after they had fought over a cut of 1.5 million.”
In early March, talks over production cuts between the two countries collapsed, leading them to start a price war that pushed oil prices to the lowest levels in nearly two decades.
Nor did Trump make any offer to reduce U.S. production, now the world’s largest.
“Both Riyadh and Moscow will also be looking for participation from U.S. producers, and this may prove now to be the biggest obstacle to an agreement,” Royal Bank of Canada analysts said in a note.
As oil prices retreated, E-Mini futures for the S&P 500 also fell 0.78% in Asia.
MSCI’s Asia-Pacific index outside Japan dipped 0.15% while Japan’s Nikkei rose 0.3%, helped by overnight gains in Wall Street shares. On Thursday, the S&P 500 gained 2.3%.
SAFE ASSETS IN DEMAND
Investors sought the perceived safety of government bonds. Benchmark U.S. 10-year notes fell in price to last yield 0.593%, near a three-week low of 0.563% touched on Thursday.
More evidence of the damage from widespread stay-at-home orders to contain the spread of coronavirus emerged in the United States, with an unprecedented number of workers - 6.6 million - filing jobless claims.
Projections released by the U.S. Congressional Budget Office showed U.S. gross domestic product will decline by more than 7% in the second quarter as the health crisis takes hold.
Global coronavirus cases surpassed 1 million with more than 52,000 deaths as the pandemic further exploded in the United States and the death toll climbed in Spain and Italy, according to a Reuters tally.
Highly rated U.S. corporate bond issuers raised a record $110.502 billion this week, according to Refinitiv IFR data, as firms borrowed cash in fear the coronavirus crisis may soon limit their access to capital markets.
In the currency market, the dollar maintained its firmness against a basket of currencies as investors and companies continued to hoard the world’s most liquid currency.
The dollar index has risen 1.88% so far this week, even as extreme tightness for dollars in some markets since last month has eased.
The euro steadied at $1.0853 after four straight days of losses. The yen also stepped back to 107.95 per dollar from Wednesday’s two-week high of 106.925.
Gold prices rose ovenright as U.S. jobless claims hit a new peak, intensifying fears of the coming economic slowdown and drove investors toward the safe-haven metal.
Spot gold traded at $1,613.5 per ounce after a 1.28% rise on Thursday.
Reuters
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