By Geoffrey Smith
Investing.com -- The ADP (NASDAQ:ADP) payrolls report will show how many jobs the private sector shed in April, while U.S. government data will show whether the glut of oil in the domestic market is easing. The Trump administration is considering phasing out its Covid-19 task force, as the President ramps up his rhetoric on the need to reopen the economy. The Eurozone economy is due to shrink by 7.7% this year, with the southern periphery suffering most, according to new EU forecasts. Disney reported a collapse in earning and Airbnb is cutting its workforce by 25%. Here's what you need to know in financial markets on Wednesday, May 6th.
1. Trump ramps up reopening talk as administration eyes closing down its virus task force
The White House is considering phasing out its Covid-19 task force, according to its head, Vice President Mike Pence.
The administration wants to shift to a different approach of handling the pandemic, now that its first wave appears to be subsiding.
President Donald Trump appeared to accept the risk of subsequent waves of infection on Tuesday, saying of his push to reopen the economy: ““Will some people be affected? Yes. Will some people be affected badly? Yes. But we have to get our country open and we have to get it open soon.”
Data from Europe suggest that those countries that have relaxed their lockdown requirements have generally seen a rise in new infections since.
2. Private payrolls, EIA inventories data due
Market optimism faces two more stiff challenges, with the release of ADP’s monthly report on private payrolls and the government’s report on U.S. oil stockpiles. Those data come ahead of weekly jobless claims data on Thursday and the official government labor market report on Friday.
Analysts polled by Investing.com expect the private sector to have shed over 20 million jobs in April due to statewide lockdown measures.
The EIA inventory data are expected to show a rise of 7.76 million barrels in crude stocks, a little less than the 8.4 million-barrel increase reported by the American Petroleum Institute on Tuesday. Attention will also be given to the rise in stocks at the Cushing hub (the API said 2.7 million barrels, more than indicated in an early report by consultancy Genscape), which faces looming capacity limitations. Traders will also be looking for evidence of a pickup in gasoline demand.
3. Stocks set to open higher
U.S. stock markets are set to open higher again, as investors continue to bet that the U.S. economy can reopen without triggering another rise in infections and fresh lockdowns.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 211 points, or 0.9%, while the S&P 500 Futures was up 0.9% and the Nasdaq 100 contract was up 0.8%.
Investors are having to look through some unrelentingly bleak corporate updates. In addition to Disney, which reported late on Tuesday (see below), unlisted AirBnb said it will cut 25% of its workforce, while Reuters reported that the U.S. airline industry is burning through $10 billion a month, citing draft congressional testimony from the Airlines 4 America industry group.
4. Grim forecasts for the euro zone; Germany to announce further reopening measures
The eurozone economy will shrink by 7.7% this year, the European Commission said in its spring economic forecasts. It also said that inflation will drop to 0.2%, as discretionary spending withers against a backdrop of reduced income.
The Commission said that the currency union’s southern periphery - Italy, Greece, Spain and Portugal – will be the hardest hit by the pandemic, something likely to sustain the north-south tension illustrated on Tuesday by Germany’s Constitutional Court ruling on the European Central Bank’s quantitative easing program. Eurozone sovereign yield spreads drifted a little wider on the news, while the euro fell two a two-week low of $1.0782.
The forecasts came after data showing the biggest ever drop in eurozone retail sales in March, and the sharpest monthly drop in German factory orders in at least 30 years.
On the brighter side, Germany is expected to announce a further easing of lockdown measures including, possibly, the resumption of its national soccer league.
5. Disney earnings slump
Walt Disney (NYSE:DIS) suspended its dividend after saying the Covid-19 pandemic had driven net profit down by over 90% in its fiscal second quarter, which ran through March.
The entertainment giant was hit not only by the closure of its theme parks but also by a sharp drop in box office receipts and in advertising at its TV stations. The company expects worse for the current quarter, given that the pandemic impacts only started to become evident relatively late in the past one.
One bright spot in an otherwise gloomy report was the spread of Disney+. The company said it now has 54.5 million subscribers. While that’s less than one-third of Netflix’s, it still makes Disney’s service the second-most popular service around.