Oil prices decline $3 a barrel as market remains uncertain on supply outlook By Reuters

© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County

By Jessica Resnick-Ault

NEW YORK (Reuters) – Global benchmark oil prices traded as much as $3 a barrel lower as the market opened for Monday’s trading session, reflecting fears of oversupply after Saudi Arabia and Russia postponed to Thursday a meeting about a potential pact to cut production.

Late last week, prices had surged, with both U.S. and Brent contracts posting their largest weekly percentage gains on record due to hopes that OPEC and its allies would strike a global deal to cut crude supply worldwide.

The COVID-19 pandemic caused by the novel coronavirus has cut demand and a month-long price war between Saudi Arabia and Russia has left the market awash in crude. During the month, prices have plummeted as the market has waited for a plan to cut production from OPEC and its allies.

Over the weekend, Saudi Arabia sent a signal that a production cut deal may be ahead, potentially muting the price decline. U.S. President Donald Trump said he will put pressure on Saudi Arabia and its allies for such a deal.

“I don’t know that anyone is going to get too aggressively short before the meeting,” said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.

Brent crude () traded lower by $2.39 a barrel, or 7%, by 6:16 p.m. EDT (10:16 GMT) after earlier touching a session low of $30.03 a barrel.

U.S. crude () traded down $2.41 a barrel, or 8.5%, at $25.93 a barrel.

Saudi Arabia’s decision to postpone its posting of the international prices for its crude for the first time indicates that it is not eager to flood the market with low-priced crude before a potential agreement. “That’s a pretty clear sign that they are open to cutting production in May,” McNally said. The kingdom delayed the release until Friday to wait for the outcome of the meeting between OPEC and its allies regarding possible output cuts, a Saudi source told Reuters.

Trump said on Saturday that he will put tariffs on Saudi and Russian production, potentially accelerating an output cutback.

OPEC and its allies postponed an emergency meeting scheduled for Monday, led by Saudi Arabia, where the oil cuts could be agreed upon. A senior Saudi source told Reuters on Sunday that the kingdom would now host the meeting via videoconference on Thursday and the delay was to allow more time to bring other producers on board.

Russian President Vladimir Putin put the blame for the crash in prices on Saudi Arabia on Friday – prompting a response from Riyadh the following day disputing Putin’s assertions.

OPEC and its allies are working on a global agreement for an unprecedented oil production cut equivalent to around 10% of worldwide supply in what they expect to be a global effort including countries that do not exert state control over output, such as the United States.

Trump has, however, made no commitment to take the extraordinary step of persuading U.S. companies to cut output.

Per Magnus Nysveen, head of analysis at Rystad Energy, said the decline in global demand because of the coronavirus pandemic and the global lockdowns was larger than the proposed cuts by the OPEC+ alliance.

“It is not strange for the market to hike prices by enthusiasm such as Friday’s, but for the levels to stay stable for more than a day or two, it takes concrete developments and deals on the ground,” he said.

Darknet Market to Permanently Ban Vendors Preying on COVID-19 Fears By Cointelegraph

Darknet Market to Permanently Ban Vendors Preying on COVID-19 Fears

Dark web marketplace, Monopoly Market, has taken a stand against scammers claiming to sell cures and treatments for COVID-19 on its platform.

On other darknet platforms, listings are rife with coronavirus keywords — with vendors selling everything from narcotic cocktails marketed as ‘coronavirus vaccines,’ to coronavirus-infected blood and saliva.

Continue Reading on Coin Telegraph

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Commodities Week Ahead: Trump & The Oil Market

© Reuters.

By Barani Krishnan

Investing.com – Should Donald Trump tax the import of Saudi and selective foreign crude as a last resort to save U.S. oil producers?

The president threatened on Saturday to “do whatever I have to do” in order “to protect … tens of thousands of energy workers and our great companies”. Just a day ago, he denied any plans to impose tariffs on any imported oil although he acknowledged it “is certainly a tool in the toolbox”.

Trump’s shifting stance is understandable. Within the same 24 hours, both Saudi Arabia and Russia have turned into a joke his tweets from earlier in the week that they were ready for a truce in their oil production-and-price warfare and go back to output cuts with other producers under the OPEC+ alliance that could even include U.S. companies. 

The only saving grace for Trump is that the OPEC video conference that Saudi King Salman agreed to host at the president’s request is still on. But instead of Monday, it might now be held on Friday, an OPEC source told CNN, although there was no certainty that wouldn’t be scrapped too.

It was prospects of that meeting – and Trump’s tweets that the Saudis and Russians were ready to lead the world in cutting 10-15% from global supply — that gave U.S. crude a record 32% gain last week and U.K. an even higher 37%, after 18-years lows for both in the $20s. 

With doom and gloom hanging over the market again, crude prices could see a renewed dive in Asian trading later today. Yet, Trump’s warning that he might use the tax wrench in his toolkit to fix imported barrels could prevent a freefall. The House of Saud will be rather eager to call the president on his bluff — if that’s what it is — though the Kremlin will be keen too. The variance in their interest is based on the fact that the United States imports 95% more Saudi crude than Russian.

The question of whether Trump should go ahead with tariffs leads one into a deeper debate: i.e. Is it right to save U.S. oil producers and hurt the country’s refiners, who depend critically on Saudi and other foreign-sourced crude to make the kind of fuel products that gasoline-friendly American shale oil isn’t capable of?; Will U.S. import taxes be a big enough deal to force the Saudis and Russians to back down from their production-and-price standoff and negotiate a reduced output deal? 

Shale Might Want Trump’s Intervention, Not Broader Industry

From Oklahoma to Texas, the clarion call for federal intervention in the oil market comes from the drillers working the prolific U.S. shale basins that have turned the country into a 13-million barrels-per-day behemoth surpassing even Saudi Arabia and Russia — whose production typically peak at 12 million and 11 million bpd, respectively. 

The U.S. oil industry is now a critical component of the domestic economy, supporting 10.9 million jobs.

The so-called fracking boom has provided gasoline at under $3 per gallon to most Americans for the past six years. It has also given U.S. crude a 3.5-million-barrel export advantage in markets that the Saudis and Russians couldn’t fill because they were too busy cutting output to keep global prices supported — while their American rivals were busy producing and marketing their oil without any care other than profit.

This “drill baby, drill!” phenomenon in U.S. oil can be easily understood once one learns of the industry’s makeup.

Some 91% of the oil wells in the United States  are owned by independent producers who produce 83% of the country’s crude and 90% of its . 

And who are these independents? They can be publicly traded companies or even small family companies. Under U.S. law, an independent energy producer is one who does not have more than $5 million in retail sales of oil and gas in a year or who does not refine more than an average of 75,000 barrels per day of crude oil during a given year. There are about 9,000 independent oil and natural gas producers in the United States. These companies operate in 33 states and the offshore and employ an average of just 12 people.

It explains why it has been virtually impossible all these years to bring such a diverse bunch of wildcatters to a table with a collective-minded group like the Organization of the Petroleum Exporting Countries to strike a deal that will benefit oil producers throughout the world. 

It’s not just the diversity and sheer mass of participants that have stood in the way of an U.S.-OPEC deal. It’s also the American antitrust law that prohibits any kind of coordination and control in oil production. It was a law that interestingly became the basis for the NOPEC – or No Oil Producing and Exporting Cartels Act – that the Trump administration was toying with two years ago, then to sue OPEC for cutting production. 

The antitrust law has been there for years. But it has surfaced in the news lately as talk emerged for the first time of coordinated production cuts by U.S. oil companies fearing  they have no chance of surviving the present crisis unless they do what OPEC has been doing all this while. Two of the companies, Pioneer Natural Resources (NYSE:) Co. and Parsley Energy Inc, have written to regulators in their home state of Texas to ensure that all oil producers contribute to cuts in the state — which produces about 4 million bpd or a third of U.S. output. 

Ryan Sitton, an aggressive and vocal member of the Texas Railroad Commission, which regulates the state’s oil industry, has dived passionately into the shale-saving mission. Sitton has chatted on the phone with OPEC Secretary General Mohammad Barkindo and Russian Energy Minister Alexander Novak, offering a cut of 500,000 bpd on behalf of the TRC. Sitton says he hopes to have a conversation next with Saudi Crown Prince Mohammad bin Salman. He even has the backing of the premier of Canada’s Alberta region for cuts (more on Canada’s role in U.S. energy to follow)

Sitton’s enthusiasm for cuts, however, is not shared by everyone at his TRC office or the wider petroleum industry.

“One commissioner does not speak” for the commission, TRC member Christi Craddick tweeted, adding that “Texas operators will be heard” at a hearing scheduled on April 14.

TRC Chairman Wayne Christian tweeted his initial disagreement too: “If a release or tweet comes from an individual commish, it does not signal consensus from the agency.”

There’s more. On Friday, Trump met with the CEOs of Exxonmobil, Chevron (NYSE:), Occidental Petroleum (NYSE:), Devon Energy (NYSE:), Phillips 66 (NYSE:), Energy Transfer Partners and Continental Resources — all top names in the U.S. energy business. American Petroleum Institute CEO Mike Sommers, who represents the broader industry, was there too. Production cuts were never discussed, say those who attended the meeting. 

The American Petroleum Institute and another trade group, the American Fuel & Petrochemical Manufacturers, have actually counseled the president against intervention.

“We are not seeking any government subsidies or industry-specific intervention to address the recent market downturn at this time,” they argued in a letter to Trump. “Imposing supply constraints, such as quotas, tariffs, or bans on foreign crude oil would exacerbate this already difficult situation, jeopardize the short and long-term competitiveness of our refining sector world-wide, and could jeopardize the benefits Americans experience as a result of our increasing energy dominance.”

Why Taxes Won’t Work for Oil Refiners Or Lead to Output Cuts

And then there’s the refiners. There are 11 main companies behind the 68 refineries in the United States – namely Marathon Petroleum (NYSE:), Valero Energy (NYSE:), Phillips 66, Exxon Mobil (NYSE:), Chevron, PBF Energy, Shell (LON:), BP (LON:), PDV, Koch and Motiva.

None of them ostensibly want taxes on oil imports because such tariffs will hurt a very major component part of their business: refining the heavier, or sour, crude that is typically not produced in the United States and which is critical for making the diesel for trucks and trains, jet kerosene for planes and heavy fuel oil for ships. The decades-old U.S. Gulf Coast refinery system is mainly configured to run on a healthy dose of lower quality heavy crude.

“Any import tax on crude is going to be so harmful to U.S. Gulf Coast refiners,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.  “You’re not going to be lashing out at Saudi Arabia. You’re going to drive up the cost of diesel. It’s the last thing the U.S. economy needs at this time.”

In 2019, the United States imported about 9.1 million bpd of petroleum from nearly 90 countries.

Aside from the Saudi Arabia and the Middle East, the sour and heavy oils are largely found in Venezuela, Mexico and Canada.

Due to U.S. sanctions on Venezuela, not one barrel of oil from that South American country now lands in the United States.

Mexico’s oil output has been in a steady decline for years. About 650,000 barrels of Mexican oil is imported into the United States each day.  

As for Canada, it is the largest provider of crude to the United States, channeling 4.42 million barrels daily, or 49% of U.S. needs. Canada can and wants to do a lot more for America. But it has run out of pipelines used to transport crude to its southern neighbor, limiting production.  

U.S. President Donald Trump on Friday signed a new permission for TransCanada Corp to build the long-delayed Keystone pipeline for imports of Canadian oil, replacing his previous permits in a fresh attempt to get around the blocking of the $8 billion project by a court in Montana. Still, that’s a project literally in the pipeline and won’t immediately solve U.S. needs in the event of a sudden supply crunch.

Which brings us to Saudi imports.  For the week ended Jan 24, U.S. crude oil imports averaged 6.7 million barrels per day and Saudi oil accounted for 407,000 bpd. That’s just about 6% of the total. Yet, it’s a very significant component due to scarcity in the supply of such heavier oils.

As for Russian oil imports, they stood at 18,637 barrels per day in June, just under 5% of the Saudi volumes.

The bottom line is this: The Saudis and Russians can always find markets for their oil. If America wants to tax their oil, they can take their crude elsewhere. Also, if their plan is to destroy U.S. shale and divvy up that 3.5 million barrels held by American exporters  between themselves, there should be no reason for any retreat on their part.

Trump does not have much love for Putin, and he can expect the Russian leader to respond in kind. 

But with Saudi Arabia, the president and his son-in-law Jared Kushner have invested time and energy in developing their relationship with Crown Prince MBS. They have defended the kingdom through the controversial Yemen war and the horrible murder of the journalist Jamal Khashoggi. Washington also provides military protection for the Saudis in the Gulf and has profited as well from Riyadh by selling the kingdom billions of dollars of U.S. arms. Trump seems ready to forsake those ties now if necessary, though the Saudis also seem prepared to do so, to get the market share they want for their oil.

* This is the first of a two-part series that examines the Trump administration’s attempts to save the U.S. oil industry amid the collapse in demand for crude from the coronavirus crisis and the production-and-price war between market titans Saudi Arabia and Russia. Part two will be published tomorrow.

Multi-strategy hedge funds outperformed peers as market plunged

BOSTON (Reuters) – Multi-strategy hedge funds – those that bet on a broad array of markets using teams of traders, leverage and centralized risk management – have flourished as stocks ended their worst three months since the 2008 financial crisis.

FILE PHOTO: Richard Schimel speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2017. REUTERS/Lucy Nicholson/File Photo

Balyasny Asset Management, which invests $6 billion, ended the quarter with a 4.8% gain in its main fund after returning 3.7% in March, an investor said. Verition Fund Management’s Verition Multi-Strategy Fund returned 4.5% for the year to date after a 3.75% gain in March, according to preliminary figures from an investor. And Cinctive Capital Management is up 3.25% in 2020 after a roughly 1.5% gain in March, an investor said.

Spokesmen for the funds declined to comment.

Multi-strategy funds are designed to take less market exposure, with long and short positions often sized equally. This makes them more likely to perform better when funds that take more risk stumble in volatile markets.

The average hedge fund lost 6.9% in the first quarter, according to the HFRX Global Hedge Fund Index, with far deeper losses at some well-known funds. David Einhorn’s Greenlight Capital, for example, has lost 21.5%, while Renaissance Technologies’ RIEF fund is off 14.4% in the first quarter, investors said. Representatives of those funds declined to comment.

Arthur Salzer, chief investment officer at Toronto-based Northland Wealth Management, said multi-strategy hedge funds like Citadel were a throwback to a more lucrative era when fund managers produced strong performance no matter the direction of the markets.

“The ability to go anywhere and do anything really makes a difference – they are designed to protect capital,” Salzer said.

The multi-strategy funds performed far better, several investors said, because some dusted off playbooks from the last financial crisis and moved quickly to capitalize on disruptions as the spread of the coronavirus sparked panic selling.

At Cinctive Capital, the $1 billion hedge fund firm launched in September by Richard Schimel and Larry Sapanski, managers cut risk in early February and were able to jump on bargains two weeks ago, an investor said. The teams made money on long and short bets in the healthcare, technology, energy and consumer sectors, the investor said.

At Verition, a $1 billion firm that has returned an average 13% since its founding in 2008, the team made money on global credit and event-driven volatility and risk arbitrage strategies amid growing concerns that some planned mergers may collapse.

Among the deals announced before the coronavirus upended markets were jeweler Tiffany & Co’s plan to sell to LVMH and drugmaker AbbVie Inc’s $63 billion acquisition of Botox-maker Allergan Plc.

Shares of acquisition targets typically trade at a small discount to the deal price, accounting for the chance the deal fails, but in March deal price spreads widened dramatically, something Verition traders used to their advantage.

Other multi-strategy funds to perform well include Citadel’s Wellington, which rose 5.7% for the year through March 31, according to a person familiar with the returns, while Millennium USA and Point72 Asset Management were essentially flat for 2020 as of Friday.

Last year, investors cooled on multi-strategy funds, which oversee $526 billion, and pulled out $18.3 billion, according to data from research firm eVestment. This year is different: investors have added $10.57 billion in the first two months of the year.

Reporting by Svea Herbst-Bayliss and Lawrence Delevingne in Boston; Editing by Megan Davies and Matthew Lewis

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UK tells people not to move as housing market freezes By Reuters

© Reuters. Property sale signs are seen outside of a group of newly built houses in west London

By Iain Withers and Pamela Barbaglia

LONDON (Reuters) – The UK government has urged people to avoid moving house during the coronavirus outbreak, as the pandemic brings the country’s property market to a near standstill.

In guidance issued late on Thursday, the government said while “there is no need to pull out of transactions, we all need to ensure we are following guidance to stay at home and away from others at all times”.

The outbreak has restricted banks’ ability to offer new mortgages, while many have been swamped with inquiries from people asking for breaks on their existing home loans.

In line with the government’s advice, British lenders agreed on Thursday to give all homebuyers the option of extending mortgage offers by three months.

UK Finance, the banking industry body, said banks would grant homebuyers who have exchanged contracts the possibility of moving at a later date by extending their mortgage offer for up to three months.

“Lenders recognize that many people looking to move into their new home are facing significant stress and uncertainty due to the impacts of coronavirus,” said UK Finance boss Stephen Jones. “Current social distancing measures mean many house moves will need to be delayed.”

Banks were also urged to help customers “manage their finances as a matter of urgency” as homebuyers may go through financial hardship during the three-month extension because of the spread of the virus.

“It is possible that some borrowers’ financial circumstances may change during the three months. If this happens, or the terms of the purchase change, we will work closely with the borrower to achieve a sensible outcome,” said Robin Fieth, Chief Executive of the Building Societies Association (BSA).

While deterring new buyers, the pandemic is making completing transactions increasingly difficult as it is almost impossible for banks to carry out surveys and get other paperwork done during a nationwide lockdown ordered by Prime Minister Boris Johnson on Monday.

Banks held discussions with the government over the matter on Thursday.

One source with direct knowledge of the discussions said talks between ministers and lenders had focused on offering extensions and flexibility if people could not immediately complete their house purchase, rather than shutting down the market altogether.

“We want the housing market to remain open and people to be transacting,” this source said, adding the priority was to support homebuyers challenged by coronavirus disruption.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Fed’s stimulus eases global market fears, gets cash flowing By Reuters

© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington

By Gertrude Chavez-Dreyfuss, Kate Duguid and Abhinav Ramnarayan

(Reuters) – Investors across a broad range of asset markets breathed a sigh of relief Tuesday, a day after the Federal Reserve rolled out unprecedented measures aimed at boosting liquidity and bolstering investor confidence in the face of a spreading coronavirus pandemic.

As equities ripped higher around the world, a string of investment-grade companies tapped a better-functioning debt market for much-needed cash after the Fed’s measures helped ease a logjam that had frozen credit markets.

The rate at which companies could borrow high-grade, short-term loans mostly decreased, while rates for lower-grade paper continued to increase at some maturities and decreased modestly at others, according to Fed data.

The U.S. dollar edged lower against a broad range of currencies, while Treasury yields rose, a sign that investor concerns had eased, at least for the moment. Meanwhile, the marked its best one-day gain since 1933.

Few believe the markets have seen the last of the heavy bouts of selling and stretches of illiquidity that have plagued them during a month-long selloff that has slammed everything from equities to oil. Yet Tuesday’s moves were a potential sign that investors were giving at least a tentative stamp of approval to the Fed’s unprecedented interventions of the last week and a potential $2 trillion in fiscal stimulus from the government.

“The promise of fiscal stimulus in addition to what the Fed has begun to do encourages investors that we don’t have to go through this alone,” said Michael Farr, president of Farr, Miller & Washington LLC. “It lets us know that the government will … make sure the financial plumbing is working and well oiled.”

Among other signs of abating tensions, prices on credit default swaps fell, suggesting that worries about corporate insolvency was easing. The spread of Markit’s investment grade credit default swap index – used as a barometer of sentiment about the investment grade market – dropped around 14 basis points on Tuesday, indicating that investors were demanding less of a risk premium to hold the debt .

Nestle (S:) and Sanofi (PA:) were among the firms to tap credit markets where bids for their long-term debt totaled more than 24 billion euros.

The U.S. LIBOR-OIS spread, which measures the difference between secured and unsecured lending in the United States, also narrowed. The one-month spread on Tuesday slipped to as low as 98.7 basis points , down from 105.67 basis points last week. A higher spread suggests banks are becoming more nervous about lending to each other.

“Things are slowly starting to improve on the dollar funding front,” said Michael Chang, interest rates derivatives strategist at Societe Generale (PA:) in New York. “The Fed has done as much it could and it’s really in the hands of the fiscal policymakers.”

Meanwhile, a key measure of the premium investors pay for access to U.S. dollars remained close to its lowest since March 3. That measure, the euro-dollar swap spread, fell to 5.6 basis points, having risen as high as 86 basis points last week.

Senior U.S. lawmakers said they were approaching a deal on a $2 trillion coronavirus economic stimulus package, raising hopes that the divided U.S. Congress could soon act to try to limit the pandemic’s economic fallout.

Many investors remain braced for more volatility ahead, however. The trajectory of the coronavirus pandemic remains uncertain, while its economic toll is becoming increasingly clear.

U.S. unemployment could hit 30% and second-quarter economic output could be half the norm, St. Louis Federal Reserve President James Bullard told Reuters in an interview.

Some investors see “a lose-lose situation,” said Michael O’Rourke, chief market strategist at Jones Trading. “You either break the healthcare system or you break the economy.”

Dollar’s Worst Day in Four Years Looms After Market Stress Eases By Bloomberg

(Bloomberg) — The dollar’s red-hot rally hit a speed-bump after the Federal Reserve’s unprecedented stimulus encouraged traders worldwide to take on risk.

The dollar gauge fell as much as 1.5%, the most since 2016 on a closing basis, ending a 10-day rally that took the greenback to the strongest level on record. Stocks in Asia and Europe surged, while an improvement in liquidity conditions spurred a drop in U.S. Treasuries.

Norway’s led gains against the greenback, jumping the most on record, extended a rebound from a multi-year trough and the rose as much as 2.2%, even after the U.K. entered a full lockdown to contain the coronavirus. An index of emerging-market currencies was on course for its biggest advance in more than three years, a positive development for borrowers with debt in the U.S. currency.

“Markets are going to start feeling the full tsunami of liquidity the Fed is providing now,” said Nathan Sheets, head of macroeconomic research at PGIM Fixed Income and former FOMC economist. “The liquidity they’ve provided from their first line of defense — swap lines — to other domestic measures are all about the Fed making it clear to markets that they will play the role as an international lender of last resort.”

The relief sweeping over markets is in stark contrast to last week when investors sold almost everything but the dollar amid the growing fallout from the virus. A slew of emergency measures from major central banks including Japan and Australia failed to calm markets, with the worries centered on a liquidity crunch.

Those pressures now seem to be moderating. In the latest move on Monday, the Fed said it would buy an unlimited amount of government bonds to keep borrowing costs low and expand its Money Market Mutual Fund Liquidity Facility. It had earlier extended its dollar-liquidity swaps to other policy makers including those in Australia and Brazil.

A gauge of Asian stock markets advanced the most since 2009 on Tuesday, while European equities are headed for their best day since 2010. Meanwhile, the spread between more liquid current bonds, known as “on-the-runs” and older so-called off-the-run securities has tightened. The Bloomberg dollar spot index was trading down 0.9% as of 8:48 a.m. in New York.

Still, strains in funding markets remain, and options traders aren’t convinced that the dollar’s retreat will mark a complete turnaround in sentiment. The premium to go long the dollar over the next month versus its major peers still trades near its highest in eight years.

While China appeared to have contained the disease, it is still spreading in other places, with the death toll now exceeding 16,500. Investors are also waiting for a U.S. stimulus plan which has yet to be passed by Congress.

Weak economic data out of Europe and the U.S. are both likely to reignite haven appetite for the greenback, said Viraj Patel, foreign exchange and global macro strategist at Arkera Inc in London, who sees Tuesday’s drop as a technical correction rather than a fully-fledged sell-off.

“We are still in the eye of the storm,” he said. “You’re potentially seeing more countries in Europe going into lockdown and more states in the U.S. potentially going into lockdown, you’re going to see more demand for the dollar.”

Caution Abounds

As a result, the gains in risk and commodity currencies were small compared with their recent declines, with most still flirting with multi-year lows. The Australian dollar is still near the weakest since 2002.

While the pound gained after last week’s historically poor performance, few expect major gains are in store. Fears are still lingering about a hard Brexit at the end of the year, coupled with concerns about the U.K.’s support for self-employed workers thrown out of work by the lockdown.

Caution is particularly evident among developing Asian exchange rates. While Group-of-10 currencies rebounded strongly against the dollar, moves in emerging Asia were more restrained, led by South Korea’s won, which climbed about 1%.

The Fed’s policy “boost to EM assets should be more secondary,” said Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Bank Ltd. “The yield-hunting investment should only take place when major markets started to stabilize.”

(Adds moves in other markets from second paragraph.)

©2020 Bloomberg L.P.

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Fed’s money market move lifts Northern Trust fund above key threshold

BOSTON (Reuters) – Liquidity at a $2.2 billion prime money-market fund run by Northern Trust Corp fell below the key 30% U.S. regulatory threshold twice last week, but rebounded above that level after the U.S. Federal Reserve shored up the industry.

FILE PHOTO: An employee walks past a company logo at Northern Trust offices in London, Britain August 1, 2019. Picture taken August 1, 2019. REUTERS/Toby Melville

As the coronavirus roils the global economy and squeezes Wall Street for cash, money-market reforms put in place after the 2007-2009 financial crisis are weathering a major test.

Several institutional prime funds, whose investors include large corporations, were at risk of falling below the 30% threshold before the Fed took extraordinary steps reminiscent of the last financial crisis to backstop the money-market industry.

The Northern Prime Obligations Portfolio disclosed that its weekly liquidity level fell to 27% of assets twice last week, according to the fund’s website – reducing its buffer for quickly converting assets into cash to meet investors’ redemptions.

However, Chicago-based Northern Trust, a bank and wealth manager, said on Monday the latest weekly liquidity level for the fund was nearly 41%.

The Fed’s action gave Wall Street confidence to buy short-term corporate debt, releasing pressure on a market that seized up last week amid a global panic.

Prime institutional money fund assets last week fell 16% to $271 billion. While these funds make up a small slice of the $3.8 trillion U.S. money-market fund industry, they are a key barometer of the health of the market for short-term, highly-rated corporate debt.

“On Wednesday, the Federal Reserve Board announced the establishment of a Money Market Fund Liquidity Facility,” Northern Trust spokesman Doug Holt said. “This has been helpful to facilitate liquidity for institutional and retail prime money market funds that want to sell credit investments.”

Funds are required to be able to convert at least 30% of their assets into cash within five business days to meet investor redemption requests.

Last week, Goldman Sachs Group Inc injected more than $1.8 billion into two prime money-market funds suffering heavy withdrawals. [nL1N2BE0BV]

And JPMorgan’s $45.6 billion Prime Money Market Fund weathered nearly $13 billion in withdrawals last week, pushing down its weekly liquidity ratio to 35% on Friday, from 40% earlier in the week, JPMorgan disclosures show.

Assets in the Northern Prime Obligations Portfolio have plunged more than 40% this month. Net withdrawals of $1.1 billion during a four-day stretch last week dragged down the fund’s weekly liquid assets.

The 30% threshold has become the most important metric tracked by institutional investors in prime money-market funds, said Pete Crane, president of money fund research firm Crane Data LLC.

A fund’s weekly liquidity level is published daily by prime money market funds. BlackRock called the ratio an “amber flashing light” for investors, in a report published this month for its clients.

If a fund’s weekly liquid assets drop below 30%, its board has the discretion to introduce redemption fees of up to 2% to slow investor withdrawals. It also could halt redemptions with so-called gates for up to 10 business days to insulate the fund from a redemption run, according to rules set by the U.S. Securities and Exchange Commission after the last financial crisis.

Another post-crisis rule change allows the net asset value of prime money-market funds to fluctuate. The floating NAV rule gives funds some relief if the value of their shares fall below $1 apiece, which is known as “breaking the buck.”

“Investors are getting used to it. There’s no longer a break the buck mentality anymore,” Fitch Ratings analyst Greg Fayvilevich said, referring to prime funds.

Now, it is all about their liquidity levels, he added.

Reporting by Tim McLaughlin; Editing by Megan Davies and Richard Chang

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Alongside Market Relief Package, US CFTC Warns of COVID-19-Linked Crypto Scams By Cointelegraph

Alongside Market Relief Package, US CFTC Warns of COVID-19-Linked Crypto Scams

United States derivatives markets regulator, the Commodity Futures Trading Commission (CFTC), has joined the list of global authorities warning the public against cryptocurrency scammers trying to capitalize on the widespread coronavirus fears.

In a statement issued on March 19, the CFTC highlighted that fraudsters commonly use major news events like the spread of COVID-19 in order to add credibility to their scam schemes or manipulate emotions.

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U.S. lawmakers ask Interior to cut offshore oil royalty rates due to market slump By Reuters

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WASHINGTON (Reuters) – Lawmakers representing U.S. Gulf coast states on Friday asked Interior Secretary David Bernhardt to temporarily cut the royalty rate oil and gas companies must pay on their offshore drilling operations to help the industry weather a market crash.

“Such an action in the short term will help mitigate a price war that is sinking prices and decreasing production,” the 14 lawmakers said in a letter to Bernhardt dated Friday and seen by Reuters. The congress members represent Gulf coast districts including in Texas and Louisiana.

A long list of businesses have been seeking assistance from the White House and the U.S. Congress to counter the impact of the global pandemic, which has infected more than a quarter of a million people worldwide, decimating travel and forcing massive disruptions in daily life.

The economic fallout of the outbreak combined with a price war between major oil producer nations Saudi Arabia and Russia has triggered a slump in crude oil prices () that threatens the once booming U.S. drilling industry.

The American Petroleum Institute on Friday asked for additional regulatory relief from President Donald Trump, including on things like waivers for seasonal fuel requirements, a suspension of non-essential inspections and audits, and certain leasing and permitting considerations.

The lawmakers said in their letter that Bernhardt has the authority to waive or suspend royalties on existing leases under federal laws covering the Outer Continental Shelf. There is a 12.5% royalty rate for leases in water depths of less than 200 meters and a royalty rate of 18.75% for all other leases. The rate has been unchanged for more than a century.

A spokesperson for the Department of Interior did not immediately respond to a request for comment.

Firing up offshore drilling has been a crucial part of Trump’s “energy dominance” agenda to maximize domestic production of crude oil, and coal.

On Wednesday, a major sale of oil and gas leases in the U.S. Gulf of Mexico generated $93 million in high bids, the lowest total for any U.S. offshore auction since 2016, reflecting caution in the drilling industry amid a steep slide in oil prices.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.