By Geoffrey Smith
Investing.com -- OPEC reportedly agreed in principle to cut 1.5 million barrels a day of oil output in the face of collapsing demand. The deal still needs Russia to come onboard. The global air travel industry body said revenue losses from the coronavirus outbreak could be nearly four times what it first thought, at $113 billion. The House of Representatives passed an $8.3 billion spending bill to contain and treat the disease, but markets have still turned lower overnight and U.S. stocks are on course to give up half of Wednesday's gains. Here's what you need to know in financial markets on Thursday, March 5th.
1. OPEC sets up big output cut deal with Russia
OPEC ministers reportedly agreed to cut crude oil production by another 1.5 million barrels a day from current levels in an effort to bring output into line with collapsing demand.
The deal, first reported by Reuters, is conditional on cooperation from Russia and others. The non-OPEC members of the so-called OPEC+ bloc are due to discuss the measures in a meeting on Friday.
Russia has been reportedly pressing to keep output stable through the first quarter, despite increasingly obvious signs of demand destruction, intent on stopping the U.S. from making further gains in global market share. U.S. output hit a record high last week, and U.S. exports continued their rising trend.
U.S. crude futures rose some 50c on the news but pared gains to trade at $46.80 a barrel by 6:35 AM ET (1135 GMT), up less than 0.1% on the day, while Brent futures were up 0.1% at $51.23.
2. House passes Covid-19 spending measures; Trump continues to downplay disease
The House of Representatives passed a bill authorizing some $8.3 billion in spending to contain and treat the coronavirus in the U.S.
The number of confirmed cases in the U.S. has risen to 153, with 11 deaths recorded so far, concentrated in a single county of Washington state.
President Donald Trump, who has described the coronavirus as a Democrat hoax and who said last week that the number of cases would soon fall from 15 to “one or two”, again played down the risks to Americans in an interview on Fox News late on Wednesday.
3. U.S. stocks set to open lower as global warnings resume
U.S. stocks are set to open sharply lower, giving up around half of Wednesday’s gains, as the steady drumbeat of corporate warnings about the impact of the Covid-19 outbreak reminded markets of the limitations of policy measures such as interest rate cuts.
By 6:35 AM ET, the Dow futures contract was down 480 points or 1.8%, while the S&P 500 futures contract was down 2.0% and the Nasdaq 100 contract was down 1.9%.
In Europe, the benchmark Stoxx 600 index reversed early gains to be down 1.6%, after Covid-related warnings from auto supplier Continental (DE:CONG), which said it expected global car production to fall as much as 5% this year due to the outbreak. Fashion house Hugo Boss (DE:BOSSn) and U.K. broadcaster ITV (LON:ITV) also warned of hits to revenues.
4. IATA sounds alarm for airlines again (only much louder)
The International Air Transport Association sharply raised its assessment of the economic hit to the airline business from the coronavirus.
The IATA said in a statement that it now sees total revenue losses this year for the industry as high as $113 billion - nearly four times its previous estimate of $29 billion.
Airlines in the big Asia-Pacific markets are likely to be worst hit, likely to lose $50 billion in revenue. It estimated Europe could see losses of up to $44 billion, while the impact in the U.S. and Canada is likely to be smaller, at only $21.1 billion. On the flip side, the IATA said savings from lower fuel prices are likely to be no more than $28 billion and will in any case be partly delayed due to hedging.
“The airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” IATA head Alexandre de Juniac said.
On Wednesday, Europe’s largest regional airline Flybe – already struggling with long-standing profitability issues – collapsed after the U.K. government balked at a rescue plan.
5. Durable goods, jobless claims due; retail earnings in focus
On an otherwise light day for data, U.S. durable goods orders for February are due at 10 AM ET (1500 GMT). Before that, there’ll also be weekly jobless claims numbers. Costco (NASDAQ:COST) and Kroger (NYSE:KR) dominate a similarly light earnings schedule.
Markets are already pricing in further action from the Federal Reserve at its March meeting, although St Louis Fed President James Bullard played down such hopes in an interview with Bloomberg late on Wednesday.
Dallas Fed President Robert Kaplan is due to speak at 6:30 PM in one of the last appearances before the Fed’s traditional pre-meeting blackout begins. In Europe, Bank of England chief economist Andy Haldane is due to speak at 8 AM ET (1300 GMT), with an interest rate cut at the BoE’s next meeting now firmly in play.