Over the past week, risky assets recovered a significant part of their lost positions, and the dollar depreciated due to increased demand for risky assets amid expectations of an approaching peak of the pandemic, as well as additional economic support measures adopted in the USA and the EU.
Federal Reserve announced the expansion of the economic support program by 2.3 trillion dollars. In particular, the regulator allocated $600 billion for loans to small and medium-sized businesses, $850 billion for a corporate loan program, and $500 billion for loans to states and municipalities. For the first time, the Fed will also buy junk bonds and exchange-traded funds (ETFs).
Risky Assets | After long negotiations
EU finance ministers were able to agree on the financing of economic support measures in the amount of 550 billion euros. Public spending will be financed through cheap loans that governments can obtain from the European Stability Mechanism.
OPEC+ countries reached an agreement to cut oil production by 9.7 million barrels per day. These cuts come into force on May 1 and will be effective until the end of June. From July, the cuts will amount to 8 million barrels and will remain at this level until the end of the year.
A number of countries that are not members of OPEC +, including the USA, Canada, Brazil, Indonesia, and Norway, also announced their readiness to cut production. These countries will reduce production by 4-5 million barrels. The price of oil erased most of the gains won on the expectations of the OPEC + agreement.
This is due to the fact that the agreed production cuts will not fully compensate for the decline in demand caused by the coronavirus pandemic. It was estimated that oil demand fell by about 30 million barrels per day.
Main events of the week
- On Tuesday, JPMorgan Chase, Wells Fargo, and Johnson & Johnson will report quarterly earnings.
- On Wednesday, US retail sales and crude oil inventories will be presented. Bank of Canada will hold a monetary policy meeting. Goldman Sachs, Citigroup, and Bank of America will report earnings before the market open.
- On Thursday, data on employment change in Australia, the business climate index in Germany and jobless claims in the United States will be presented. Intuitive Surgical will present a quarterly report of million barrels per day after the market close.
- On Friday, data on retail sales in Australia, GDP and industrial production in China, and the consumer price index in the eurozone will be published.