Oil prices fell below zero for the first time in history last night as the global lockdown decimated demand for the commodity in the midst of a price war between suppliers.
Indian stocks have opened weak this morning, down over 3%, which is in line with the performance of the US Dow Jones overnight.
Join us as we follow the top business news through the day.
Crude oil futures plunges into -ve, but MCX seeks interim settlement at Re 1; Sebi gets into action
Amid historic price volatility in the oil market, the Multi-Commodity Exchange (MCX) may have run aground some basic rules of trade settlement.
PTI reports: “Crude oil futures contract price may have plunged into negative territory in the international market, but India’s leading commodity exchange MCX has fixed an interim settlement price of Re 1 per barrel — a move some traders said would help big brokers avert losses amounting to hundreds of crores of rupees at the cost of others having taken a short position.
Officials said capital market regulator Sebi is aware of the situation and is actively looking into the issue, while the matter has reached the government authorities as well, and they want an immediate action if the exchange has acted against regulations or was trying to benefit any particular trader at the cost of others.
Last night, the NYMEX WTI Crude futures May 2020 contract settled at an unprecedented USD (-)37.63 a barrel, after slipping into the negative zone on fears of fast-filling storage facilities globally and an unprecedented plunge in demand due to the novel coronavirus pandemic.
Multi-Commodity Exchange (MCX) of India, which uses the NYMEX price for determining its own settlement price and the available RBI’s reference rate for USD-INR for conversion, however, said in a circular that due to the unprecedented price fluctuation in the international markets in crude oil, the due date rate for Crude Oil futures contract expiring on April 20, 2020, is under finalisation.”
46% drop in hiring at Microsoft, only 3 job openings at LinkedIn
Data on job openings in the popular professional networking site LinkedIn confirm the impact that the global lockdown has had on the hiring activities of companies.
IANS reports: “As new coronavirus shuts down economies and companies freeze fresh hiring, tech giant Microsoft has seen nearly 46 per cent drop in hiring activity while its professional career website LinkedIn has listed even worse — just 3 openings for its entire operation.
According to data compiled by alternative data platform Thinknum, Satya Nadella-run tech giant listed 5,580 openings on its main careers site on March 22.
“By April 20, that number sunk to 3,028, a 46% drop in hiring activity,” said the platform that allows investors to get data-driven investment ideas by monitoring companies’ websites.
On March 1, LinkedIn listed 510 openings.
“Microsoft-owned career website LinkedIn has seen an even starker drop in hiring. As of this week, LinkedIn shows only 3 openings for its entire business,” the web platform revealed.
LinkedIn’s main source of revenue comes from job listings but there are very few new jobs as industries after industries are being hit by the COVID-19 pandemic.”
Only dozen-odd MFIs can gain from RBI’s special liquidity window
The Reserve Bank of India’s special liquidity window to help micro-finance institutions, it seems, may not be good enough to help the sector tide over the crisis due to stringent conditions placed on borrowers.
PTI reports: “Only a dozen-odd of the 52 micro lenders have investment grade ratings and are thus eligible to issue debt instruments that can be picked by banks using the Rs 50,000-crore special liquidity tap that the Reserve Bank of India has opened up over the weekend.
Last April 17, the central bank announced a Rs 50,000-crore focused liquidity injection through what it calls a new model of its targeted long-term repo operations (TLTRO 2.0) aimed solely at small and medium non-banking financiers, housing finance companies and micro-lenders.
“Our own survey shows that only 12 members, one with ‘AA’ and 11 with ‘A’, have investment grade ratings, and, therefore, they are the ones who are most likely to get the money under TLTRO 2.0,” Micro Finance Institutions Network (MFIN) Chief Executive Harsh Shrivastava told PTI. MFIN is a self-regulatory organisation (SRO) of NBFC-MFIs.
The rest of the players have either BBB/BB or lower ratings, he added.
Shrivastava, however, welcomed the TLTRO 2.0 saying it can help large micro-lenders with investment grade ratings to get cheaper funds.”
Time for India to think long-term during COVID19 crisis, says Arvind Panagariya
The coronavirus pandemic offers India an opportunity to move more jobs into the formal sectors, believes the former vice-chairman of NITI Aayog.
PTI reports: “Eminent economist Arvind Panagariya has said that India must now think long-term to create better paying formal sector jobs by seizing the opportunity presented by multinationals possibly moving out of China to diversify their operations in the wake of the COVID-19 pandemic.
Panagariya, Professor of Economics at Columbia University and Director, Raj Center at Columbia’s School of International and Public Affairs, emphasised that the one thing the current crisis has revealed is the vulnerability of Indian workers to a shock that forces a near end of economic activity.
The COVID-19 pandemic is a “time for thinking long-term. It will be a pity to let the crisis go to waste. The current crisis will only last till a vaccine becomes available. We must think beyond that,” Panagariya told PTI.
“After 70 years of development effort, we have still left our workers predominantly employed on tiny farms (70 million of them averaging less than a quarter hectare in size) and in informal or self-employment in tiny enterprises that give them barely subsistence level of income on a daily basis.
Panagariya stressed that the COVID19 crisis has made it evident that India needs to create better paid, formal sector jobs and that requires moving workers out of tiny farms and enterprises into more productive and better paying jobs.
That in turn requires a shift of industrial and services activity away from micro enterprises to small, medium and large ones.”
Infosys shares fall 4% after Q4 earnings
The Indian earnings season has kicked off to a poor start with IT major Infosys refusing to offer any guidance on its likely revenue in FY21.
PTI reports: “Shares of IT major Infosys on Tuesday declined nearly 4 per cent after the company refrained from providing a revenue outlook for FY21, citing uncertainty amid Covid-19 outbreak that is expected to impact its business in the near-term.
The scrip fell 3.85 per cent to Rs 627.70 on the BSE.
On the NSE, it dropped 3.90 per cent to Rs 627.80
After market hours on Monday, Infosys reported a 6.3 per cent rise in consolidated net profit for March quarter, but refrained from providing a revenue outlook for FY21, citing uncertainty amid COVID-19 outbreak.
The country’s second-largest IT services company – which saw revenue growing 8 per cent to Rs 23,267 crore in the March quarter – anticipates a continued slowdown in the near-term influenced by a broad-based global economic recession.”
US to add 75 million barrels of oil to strategic petroleum reserve
The United States plans to add more oil into its strategic reserves after the sharp fall in prices last night.
Notably, other countries such as China and India have also been capitalizing on historically low oil prices to shore up their reserves.
IANS reports: “President Donald Trump has said the US is “looking to” add 75 million barrels of oil to its Strategic Petroleum Reserve (SPR) as oil futures tumbled into negative territory.
“Based on the record low price of oil that you have been seeing, it is at a level that is very interesting to a lot of people,” Trump said on Monday at a White House press briefing, Xinhua news agency reported.
“We are looking to put as much as 75 million barrels into the reserves themselves that would top it out,” he said, adding “we would get it for the right price,” he said.
The SPR, the world’s largest supply of emergency crude oil, was established by the US federal government in the 1970s primarily to reduce the impact of disruptions in supplies of petroleum products.
As of Friday, the SPR held 635 million barrels of crude oil, including 384.7 million barrels of sour crude and 250.3 million barrels of sweet crude.
Trump’s remarks came after US oil futures prices crashed to the negative territory for the first time in history on Monday, fuelled by Coronavirus-related demand shock and oversupply fears.”
Rupee plummets 30 paise to 76.83 against US dollar in early trade
The fall in domestic equities amid upcoming earnings announcements and a strengthening US dollar weighed on the rupee this morning.
PTI reports: “The Indian rupee depreciated by 30 paise to 76.83 against the US dollar in opening trade on Tuesday, tracking weak domestic equities and strengthening of the US dollar overseas.
Forex traders said the rupee opened on a weak note as the US Dollar edged higher past the 100 level mark.
The rupee opened weak at 76.79 at the interbank forex market and then fell further to 76.83, down 30 paise over its last close.
The rupee had settled at 76.53 against the US dollar on Monday.
“Investors braced for further cues on the economic toll from the coronavirus in a week lined with corporate earnings and data this week,” Reliance Securities said in a research note.
Domestic bourses opened on a negative note with benchmark indices Sensex trading 915.95 points lower at 30,732.05 and Nifty down by 256.60 points at 9,005.25.”
South Korean markets tank after worries over Kim Jong-un’s health
India Q4 profits likely to dip by 25%
Piyush Pandey reports from Mumbai:
India Inc. is likely to forgo a fourth of its profits in the fourth quarter due to Covid-19 pandemic even as outlook for FY21 looks bleak.
In the throes of an unprecedented global pandemic, FY21 has begun on a lackluster note with India as well as several world economies in an extended lockdown.
This has impacted the underlying demand and supply dynamics and is expected to have an adverse impact on economy and corporate earnings.
The fourth quarter profits of Nifty firms are likely to decline by 20% and overall profit after tax (PAT) is likely to fall by 25% YoY with the laggards being automobiles, oil and gas and metals, according to a Motilal Oswal Research report.
While the government has already announced several relief measures to take care of the weaker sections, the return to normalcy is likely to be very gradual and calibrated.
However, consumer or private Banks (benefit of low base) and healthcare are expected to be the key outperformers for this quarter.
All the key matrices are expected to post multi-quarter low growth figures as demand is likely to take a broad-based hit across sectors with almost double-digit top line decline for the Nifty stocks.
“Estimating earnings in such fluid global and local environment is fraught with risks, and to that extent, is expected to undergo more revisions as we move forward in FY21. Lower crude oil prices and cost reduction measures would provide cushion to the weak earnings, in our view,” said the report.
Shares rattled by US crude plunge
Ashish Rukhaiyar reports from Mumbai:
The benchmark Sensex lost over 1,000 points during early morning trade as weak global cues on account of negative crude prices and the statement by US President Donald Trump that he will suspend immigration affected investor sentiments.
The 30-share barometer touched a low of 30,634.41, shedding 1,014 points compared to yesterday’s close of 31,648.00. At 9:45 AM, the Sensex was trading at 30,837.28, down 810.72 points or 2.56%.
Sensex constituents like ICICI Bank, Reliance Industries, HDFC, HDFC Bank, Axis Bank, TCS and Maruti Suzuki India contributed the maximum to the losses in the first hour of the trading session.
Overall, more than 1,100 stocks were in the red as against 406 that gained. The broader Nifty was at 9,019.85, down 242 points or 2.61%.
The India VIX index was trading more than 4% higher in the morning session.
“Nifty has witnessed resistance near 9400 levels and corrected, we believe the current correction would extend further to drift near to 8950 levels,” said Vikas Jain, Senior Research Analyst, Reliance Securities.
“Multiple negative news flow from global markets like immigration suspension announced by Mr. Trump, sharp volatility in crude oil prices would put further pressure on markets overall,” he added.
Elsewhere in Asia, both Hang Seng and Nikkei were trading over 2% lower with lost other benchmarks also in the red. The overnight Dow Jones lost 2.44%. Meanwhile oil futures rebounded on Tuesday after falling below zero for the first time in history. The NYMEX WTI crude contracts were trading around $1.48 per barrel.
What is a negative crude future and does it mean anything for consumers?
The price of a barrel of benchmark U.S. oil plunged below $0 a barrel on Monday for the first time in history, a troubling sign of an unprecedented global energy glut as the coronavirus pandemic halts travel and curbs economic activity.
Here is an explanation of what negative crude prices mean in the real world:
What does a negative futures price mean?
The price of a barrel of crude varies based on factors such as supply, demand and quality. Supply of fuel has been far above demand since the coronavirus forced billions of people to stop traveling.
Because of oversupply, storage tanks for WTI are becoming so full it is difficult to find space. The U.S. Energy Information Administration said last week that storage at Cushing, Oklahoma, the heart of the U.S. pipeline network, was about 72% full as of April 10.
Finance Minister asks PSBs to ensure timely credit to businesses
To prevent companies affected by the lockdown from going bust, the Finance Minister has urged public sector banks to extend credit to help them tide over the crisis.
PTI reports: “With resumption of various business activities from Monday, the finance ministry has asked public sector banks to ensure timely credit to businesses that have been affected due to the COVID-19 related disruptions.
Last week, the Ministry of Home Affairs (MHA) had released a set of select business activities that will be allowed from Monday.
In a letter dated April 16, the Department of Financial Services (DFS) wrote to the chairman of State Bank of India and heads of other state-run banks that the timely origination, sanction and disbursement of fund and non-fund based credit is critical for revival of economic activity.
“Therefore, banks are advised to place in the public domain their time bound outreach and processing plans with clear-step timeframes and communicate clear responsibilities and timeframes to all levels for securing sourcing of loan requests and their appraisal, sanction, documentation and disbursement,” the letter read.”
U.S. oil prices fall below zero, hit minus $37.63 per barrel
Traders fled from the expiring May U.S. oil futures contract in a frenzy on Monday, sending the contract into negative territory for the first time in history, as barely any buyers are willing to take delivery of oil barrels because there is no place to put the crude.
May U.S. crude futures plunged to a depth never before seen, settling on the day at minus $37.63 a barrel, a decline of some 305%, or $55.90 a barrel. Prices set a low of negative $40.32.
With demand down 30% worldwide due to the coronavirus pandemic, and the main U.S. storage hub in Cushing, Oklahoma expected to fill up in a matter of weeks, very few want to be stuck with oil barrels that they have to take delivery on at some point during May.