US Jobless Claims Double To Record 6.65mln

Okay, hi guys, uh, Anthony here. We've just got initial jobless claims coming out shortly, so definitely I'm interested, uh, as much as you are to see how this comes out. And this does come after what we saw last time, which was this of course, which was US posting record layoffs. This was the graphic from last week, you'll remember, a record figure. And this dates back to going to the you know, the 1960s, basically since the dataset began. And you can see the quite incredible jump that we've had here. Interestingly, you know, in terms of layoffs, obviously the unemployment rate skyrocketed in the global financial crisis. We had a deep recession. However, it was much more graduated in terms of the feed-through effect in more nationwide job losses across America as compared to, say, a new immediate existential threat given it's a pandemic health crisis, meaning an immediate amount of jobs just halted or people laid off, meaning there's an incredible jump, uh, unprecedented in, in this sense. The question mark for me now is about how does today's number come out. Expectations for 3.5 million, we've got a range about 1 at the low up to around 5.25 at the high. As I've said in the briefing this morning, I've heard some people talk as as fantasiful as 10 million. I think that would be— I'd like to say that's crazy talk, but who knows. I mean, definitely from a market impact point of view, the closer it gets up and towards that type of figure, kind of north of 6 going towards 7, 8 million, certainly the more violent and aggressive that initial knee-jerk reaction will be, uh, for sure. But Yeah, a couple of different things then to, to have a quick talk about. For one, let's just talk about from a trading perspective a couple of the charts. And one is I just want to refresh your memory about how exactly the S&P 500 reacted the last time we had the jobless numbers. Now this is the S&P over the course of a kind of a week's activity, and you can look at here on the far left-hand side, this was the last US jobless claims number. So I've just shown you the graphic, and obviously you'll remember quite vividly. It was a really— it's a bad number in reality, obviously. Mass layoffs leading to a massive spike in people applying for benefits in America. However, markets skyrocketed after that because it wasn't as bad as people have feared. Now, what I'm kind of more concerned with now is about where do we go to from here, and it's about the consistency on these elevated levels of which this jobless rate might might last. And that leads me on to this. Now we just jump here. Now a lot of people talk about, you know, a V-shape or U-shape recovery. I just really wanted to touch upon that briefly because beyond just this initial reaction we're going to see, the reason why it is quite important— non-farm payrolls is a little bit, I guess, is going to reflect some of this, this initial jobless situation we've had over the last 2 weeks, but only a very small portion. So yes, the job decline in American payrolls tomorrow will be almost a consensus estimate of nearly -300,000, but that number is probably going to get way more significant in the following month's report given how the reference period is set for when they conduct the data set. So here then, understanding how consistently and to how high the jobless rate is and things like non-farm payrolls, consequently the unemployment rate which we'll see tomorrow, is going to determine then what type of shaped recovery do we see. Because this was a great kind of sentence or two that I saw that really hits the nail on the head and explains this. The key determinant is the, the shock's ability— so let's say the coronavirus— to damage an economy's supply side, and more specifically capital formation. When credit intermediation is disrupted and the capital stock doesn't grow, the recovery is slow. Workers exit the workforce, skills are lost, productivity goes down. The shock becomes structural. Yeah, so this is where we're reacting to these data points because we're thinking about what is the shape here of this recovery, and the depths of the phase we're in now, which is the immediate aftermath, will then define the type of recovery we're likely to see and how structural it is. So here, that this case study is looking at examples of the global financial crisis. Now, Canada actually averted a recession. They managed to perform a V-shaped recovery in this instance. So that's that classical kind of immediate hit but immediate recovery. You then start looking at the U-shaped recovery, which is kind of an immediate withdrawal or immediate decline in interest rates and QE as we had 2008, 2009, 2010, and so on, but then a powerful but more graduated recovery. And then you've got someone like Greece in the European debt crisis, in the fallout in the early 2010s, era where they've had kind of an L-shaped recovery. They've just never really got back to where they were. As you can see here, pre-crisis growth trend is a million miles away from where the actual growth trend is as of now, 2019, 2020. Um, so the question mark will be, however consistently and how bad these numbers are, will we see more— I think a V-shaped recovery now is probably lesser believed from a consensus viewpoint. A U-shaped, possibly. Let's not forget we've had an unprecedentedly large fiscal stimulus injection by nearly every government in the world, particularly in the developed world. America, that $2 trillion package from Trump, he's talking about a full stimulus package. The UK's done it as well. Germany now altering their fiscal kind of management of their economy and providing stimulus. So the one thing I'd say is I don't think we'll get an L-shape. Will we get a U-shape? I actually think we might get a, a Nike swoosh kind of shape, if I could add another one, which isn't quite as powerful as a U but not quite as bad as an L. So again, context is what I'm trying to provide here for these numbers. All right, we've got about 2 minutes, so let's just have a quick look at the charts. So this is the S&P. Yeah, a bad number, bad. What does that look like? Well, the range top end is 5.25 million, so you've got to get above that for this to really break I would say this near-term range, uh, and that's going to be the kind of the daily low really since UK and Europe has come into the market. Any move low below there, I've been looking to target the, the initial late Asia session European entrance point at 2466. And then the bigger test of course would be this Sunday, Sunday reopening low, and also the low that was seen late yesterday in the Wall Street session. So this is talking about a negative development In that sense as well, I'd also be looking for gold to pop higher. It's already been rallying going into the numbers and it's up $30. But a bad number, I definitely think we get up to that range kind of low up at $1,631 here in the knee-jerk reaction. And then oil will probably fit in tandem with the, with the number in a fairly correlated move. WTI already up $2, up and around its highs. It's either going to be a low number, it adds to positivity, a bad number, let's say jobless at 6-7 million, this needs to come back down again. Alright, we've got about 30 seconds. I'll put the squawk on. So they'll call out the numbers now shortly. Gonna leave my audio running so you guys can hear everything.

10 seconds. 6.648 million, 6.648 million. That's above the top end of the range of 6 million for the initial jobless claims number. Continuing claims, that's 3.029 million, 3.029 million for the expected 4.882 million. 4-week average, that's at 2.612 million, 2.612 million. US international trade, that's negative 39.9 billion. CAD trade balance, that's negative 0.98 billion. Just to recap, US initial jobless claims, we get that prints at 6.648 million. That's well above the expected 3.5 and outside of the top end of the indicative range of 6 million.

Yeah, so just turn the squawk off for a second. You can see equities now starting to look a little heavier. You can see the DAX here on the left, bit of a downtick. The NASDAQ just below its pivot and the support point that was holding through much of the European session. Making the S&P chart here a little bit bigger so you can see, that was that lower bound level that was same with the NASDAQ holding up some of the price action at 8150. So a little bit of a downtick, not massive at this point. So the number again, 6.648 million, so it's much worse than expected. It's not though fantastic in terms of how bad it is. It's, you know, there was talk on the streets, few people talk about 10 million, definitely is nowhere near that, but certainly, uh, it's almost double of what we had last week. So look, it is, it is a negative. So gold session highs now, you can see that gold just pushing up a little bit more, up 31 now on the day. Will this be enough? I mean, the determinant factor here is I'd want to see equities and a correlated move start to get a little bit more traction. But gold, you know, fundamentally this is a supportive piece of information. So another push-up now, 25 coming up, 25, 26 now on the print. So yeah, gold getting a little bid on the back of that. Let's have a look at WTI crude. Yeah, not too much of a reaction there. I mean, we're talking about indirect kind of correlated moves here. I mean, it's more about that idea of a bigger, broader impact on the economy by a higher jobless rate equating to a higher unemployment rate. So worth just keeping an eye on. Does that provide a bit of a cap given the rally that we've already had? I mean, in oil here, depends how brave you're feeling. I mean, you've got that R2, that daily high. Might this be the cap that's needed now to see a bit of a pullback and reversal in price for the rest of the day? Um, yeah, I mean, a pretty decent risk-reward. I'd say you could look for an entry point around these levels with your stop loss just above the previous high at 60 and look to play the market back down. And again, you're looking for more follow-through. At the moment, it's a little bit, um, there's a little bit of lack of appetite, it looks like, to really drive it forward, uh, given that, you know, everyone's obviously more bearish in their tilt to how they think the job situation is going to play out. But yeah, you can see that the initial reaction makes a little bit of sense, perhaps a little bit uncommitted. Um, when we get to the open on Wall Street, perhaps then things start to, to to show their hand a little bit more definitively. But as I said, hopefully that's a bit of a snapshot of just what's going on. I'll let you guys continue with your day. Hopefully that was useful.