US Open – OPEC agreement hangs on Russia, Stocks lower on travel curbs, Gold shines

US stocks are in for a soft open following yesterday’s huge rally after global travel restrictions grow.  The disruption in travel and trade is intensifying and global equities will likely struggle to keep the fiscal and monetary stimulus rally going as sentiment continues to crumble.

Traders will pay close attention to the US weekly jobless claims release this morning.  The coronavirus economic impact could finally be hitting the US labor market. If the strongest part of the US economy starts to weaken, recession concerns will grow quickly.

On the election front, Bernie Sanders will talk with Elizabeth Warren, a critical moment for the progressives.  Bernie is down but not out, however he will not be able to survive a Warren endorsement of Biden.

Oil

Today’s OPEC meeting is more of an opening act since we will not find out what is Russia’s final decision. Oil was drifting lower but found some support after OPEC ministers agreed to the deepening of cuts by 1.5 million barrels per day.  Oil’s gains were somewhat limited despite today’s cut agreement coming in at yesterday’s OPEC+ JMMC technical committee recommendation which was slightly higher than the market consensus range of 750,000 to 1 million bpd.

This is a critical moment for OPEC + as a holdout tomorrow by the Russian’s could drive oil prices to their financial crisis lows.  The demand destruction that stemmed from the coronavirus will be a bigger shock than what happened in 2007-2008, so any failure from OPEC + could warrant another massive selloff with crude prices.

Russia will likely capitulate tomorrow but will do everything possible to drag this out to the last moment to secure the smallest share of the 1.5 million in production cuts.

Gold

Gold prices are edging higher as markets continue to focus on the spreading of the coronavirus in Europe and the US.  Global cases from the coronavirus outbreak are now over 95,000 and rolling quarantines are expected to pickup in the coming weeks.  California has declared a state of an emergency after 54 confirmed cases were reported in 12 counties.  Italy will shutdown all schools for 10 days and have all professional soccer (football) matches played behind closed doors.

Gold’s macro argument is simple. The virus hit to global growth and low interest rates globally could keep gold prices climbing higher.

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