Brent futures erased earlier losses on Friday amid reports that OPEC+ is set to hold an emergency virtual meeting on Monday to stabilise global markets. Most Asian stocks and currencies are still declining, with US stock futures also in the red at the time of writing. News of the OPEC+ meeting comes after President Trump suggested on Twitter that Saudi Arabia and Russia could lower crude supply to stem the decline in Oil prices.

Crude prices are in need of a saviour, which must come by way of coordinated supply cuts by major producers, at least to put a firmer floor under prices. Even if the supply-cuts do materialise, it is unlikely to send ‘black gold’ soaring, considering the demand destruction already caused by the coronavirus.

With crude futures having plummeted by more than 50 percent year-to-date, prices can only hope to remain above the $30/bbl psychological level if OPEC+ can overcome its differences and reduce their collective output. Such coordination is needed to bring supply levels closer to the depressed demand that will accompany a global recession, which may then translate into a gentle lift for Oil prices. Aside from potential cuts, the other positive development for the market yesterday was the announcement that China would start building its reserves, taking advantage of the low-price environment.

US jobs announcement to hold little sway over Dollar index

Friday’s non-farm payrolls is not expected to reveal the true extent of the devastation in the US jobs market, seeing as the reference period ended before there were broad closures to businesses as part of the lockdown measures. Still, the non-farm payrolls print is set to post its first decline in a decade, which is expected to bring the US economy’s growth engine to a halt. With the Dollar index (DXY) now trading back above the 100 psychological level, the anticipated gloom contained in the jobs print is unlikely to significantly dampen the Greenback, which remains in demand amid the despairing global economy.

Riskier assets to be depressed by hard data

Global recession fears are now being confirmed by the incoming economic prints, from the shocking surge in US jobless claims, to the record drop in Italy’s manufacturing PMI and plummeting retail sales in Hong Kong. The coronavirus is clearly extending its reach across the globe, paralysing economic activity, while infecting over a million people and claiming over 53,000 lives in just four months.  

Even after the health crisis has peaked, the economic ramifications are set to continue to be a drag on risk assets, with emerging markets being particularly vulnerable. Until the virus case count peaks and global economic conditions can find a more solid footing which means the business earnings outlook improves, risk sentiment may only experience fleeting bouts of positivity in the interim, as risk aversion remains the dominant de facto mode in global markets.

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