(CercleFinance.com) – Before returning to the rise of the Paris Stock Exchange, first this incredible, inconceivable, surreal market event: the barrel of WTI delivery ‘May’ sees for the first time in all history of oil its price will fall below zero.
Anyone who owns a tank truck can fill it up and get paid up to $ 40 per barrel taken (and the session is not over).
At 8:45 pm, the barrel of WTI rose to -21 $, the reverse of its course of the day before.
In other words, the buyer is paid to take delivery of an almost unlimited quantity of a now free product: oil costs its owner $ 40 / barrel, which potentially loses -60 $ compared to Friday.
This scenario is – completely – crazy!
Paris had closed practically at the highest of the day, posting + 0.65% around 4.528, in this 1st session of the deadline ‘May’, after a session of the ‘3 witches’ which had given rise to an unexpected gain of more than 3.4%.
This therefore represents a gain of + 4% in a straight line – by a single algorithmic surge – and in ridiculously low volumes of 2.79 bnE.
The question we can’t help but ask is: what is better than last Thursday?
The same question arose for Wall Street while the Nasdaq-100 posted + 0.2% at 5:35 pm and rose to more than 8.850Pts (or + 1.2% in annual performance): what is better that on January 1, economic growth and profits will therefore grow more than expected in early 2020?
90 minutes from the close, with this surreal oil crash, some operators are starting to worry: how many traders and hedge funds are going to be ruined or cornered in the liquidation of all their assets because at ‘zero’ they have definitely lost everything … and the most incredible is that ‘zero’ does not even represent the maximum loss since the WTI posted a negative price of -30 $ around 8:35 p.m., which could cost those who have it 50 $ per barrel. bought recently at $ 20.
The question of closing such a market necessarily arises!
The Dow Jones fell -2% (as at the opening) after + 3% Friday, the S & P500 loose -1.7% only despite the unprecedented collapse of the barrel for essentially ‘technical’ reasons.
Holders of ‘May’ contracts are facing their expiration tomorrow and nobody seems able to take delivery of the ‘physical’, the storage capacities being saturated in the United States (reminder: the ‘WTI’ had reached a floor of 10 $ in October 1998, at the time of the LTMC crash).
The good reference is the ‘June’ contract, which still drops by -9%, to $ 22.8, the ‘Brent’ drops by -6% to $ 26.55 in London.
For several sessions, investors seem willing to welcome the fragile stabilization, even the beginning of improvement, which is looming on the front of the Covid-19 pandemic … but many see above all the interventionism of the FED, without which a return of the Nasdaq-100 to positive territory in 2020 (around 8.850Pts) would be absolutely inconceivable.
In terms of statistics for the week, the publication on Thursday of PMI ‘flash’ activity indices for Europe by IHS Markit will provide more information on the impact of the epidemic on the economy.
The release on the same day in the United States of weekly jobless claims figures will also say a great deal about the severity of the current crisis. ‘We await confirmation that the peak is reached in terms of flow’, we predict at Oddo BHF.
The results season will, in parallel, continue to be in full swing. Many large companies on both sides of the Atlantic will publish their quarterly reports.
Meanwhile, in the news of values, we note in particular that Fnac Darty (+ 1.3%) announces a turnover of 1.490 million euros for the first quarter of 2020, down 7.9% in published data and 10.3% like-for-like, following the closure of physical stores in March.
Vivendi (+ 4%) posted revenue of 3.87 billion euros for the first three months of 2020, up 11.9% (+ 4.4% at exchange rates and constant scope) compared to the same period in 2019, despite the Covid-19 crisis.
On the downside, Véolia finishes with a red lantern with -5.2%, just ahead of the title Klepierre which relapses under the 16E (-5.1%) while several commercial lessors make a line on the rents of the 2nd quarter 2020, according to the recommendations of the government.
Bolloré (+ 3.1%) posted sales growth of 5% for the first quarter of 2020, taking into account positive scope and exchange rate effects, and growth of 1% at scope and exchange rate constant, at 5,966 million euros.
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