By Geoffrey Smith
Investing.com -- The Senate will hold a hearing on the health implications of reopening the economy, with Anthony Fauci heading the cast of testimony-givers. Elon Musk is daring the authorities in Alameda County to arrest him as he reopens Tesla (NASDAQ:TSLA)'s plant in the Bay Area, while global markets remain twitchy amid signs of renewed outbreaks of Covid-19. The dollar strengthened as Fed officials batted away the prospect of negative rates. The price of oil resumed its recovery on the back of nearly 1.2 million barrels a day in additional production cuts by Gulf producers, mostly Saudi Arabia. Here's what you need to know in financial markets on Tuesday, May 12th.
1. Senate to hold hearing on reopening
The Senate will hear testimony from senior health officials – including Anthony Fauci, the country’s top expert on infectious diseases - on the implications of reopening the U.S. economy.
The hearing will take place via teleconference because both witnesses and senators are, in part, self-isolating after coming into contact with infected people.
The number of U.S. deaths fell for a fourth straight day on Monday to only 837, while the number of confirmed new cases also fell for a third straight day.
On Monday, President Donald Trump had said at a news conference that “we have prevailed” with regard to ramping up testing.
2. Global markets remain twitchy as mini-outbreaks flare
Global markets are still in cautious mode, afraid of the possibility of a second wave of infections after the discover of five new cases in Wuhan, China, and a new cluster of cases in South Korea linked to the nightclub district of the capital, Seoul.
In addition, Germany’s Robert-Koch-Institute said on Sunday that the reproduction rate of the virus had rebounded above 1 in the wake of lockdown restrictions being eased earlier in the month. The so-called r0 rate had fallen as low as 0.65 only last week but rebounded on an uptick of cases in slaughterhouses and care homes.
Elsewhere, Russian President Vladimir Putin has abandoned his nationwide lockdown even though the rate of new infections stayed above 10,000 for a 10th straight day. The lockdown has caused Putin’s approval ratings to plummet to their worst in over a decade, after exposing weaknesses in the country’s health system and social safety net.
3. Stocks set to open slightly higher; CPI, Fed speakers eyed
U.S. stocks are set to open modestly higher, amid a growing chorus from analysts and investors that the April relief rally had gotten ahead of itself.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 57 points or 0.2%, while the S&P 500 Futures contract and the Nasdaq 100 Futures contract were up in parallel. The three indices had been mixed on Monday.
The dollar, meanwhile, is strengthening after three top Federal Reserve officials each downplayed the likelihood of the Fed cutting the target fed funds range to below zero. Atlanta Fed President Raphael Bostic said negative rates were “one of the weaker tools in the toolkit”, while Charles Evans said he saw no use for them. CPI data for April at 8:30 will likely not change their view.
There will be a further barrage of Fed speeches starting with the St. Louis and Minnesota Fed Presidents James Bullard and Neel Kashkari at 9 AM ET, followed by Philadelphia’s Patrick Harker and top banking supervisor Randall Quarles at 10 AM.
Separately, the Fed will also start its flagged purchases of bond ETFs today.
4. Musk reopens Tesla plant
Elon Musk reopened Tesla’s plant in Fremont, daring Bay Area officials to arrest him.
The Tesla founder has expressed his frustration at the closure of the Fremont facility in increasingly forceful fashion in recent days, as Alameda County keeps the factory shut despite a broader relaxation of restrictions on manufacturing at the state level. Governor Gavin Newsom said he would defer to county officials.
The news comes after Tesla (NASDAQ:TSLA) stock hit its highest in over two months last week, supported by hopes of a revival in sales as the U.S. and European economies reopen.
5. Oil gains momentum after Saudi leads more output cuts
Oil prices resumed their recovery on the back of additional output cuts announced on Monday by Saudi Arabia, Kuwait and the United Arab Emirates.
The additional cuts will remove another 1.18 million barrels of oil a day from the global market from June 1, hastening the process of rebalancing a market still suffering from an unprecedented drop in demand. Saudi Arabia is cutting 1 million b/d, the UAE 100,000 b/d and Kuwait 80,000 b/d.
Elsewhere, BP (NYSE:BP) CEO Bernard Looney said the pandemic could bring forward the date when global oil demand peaks. Looney said he expected the impact on fuel demand to be long-lasting and, in some regards, permanent.
By 6:30 AM, U.S. crude futures were up 5.4% at $25.45 a barrel, while the international benchmark Brent was up 3.1% at $30.54 a barrel. The American Petroleum Institute will report its weekly analysis of U.S. oil supplies at 4:30 PM ET, as usual.