To capitulate is to surrender or give up. In trading, this term is commonly used to indicate the point in time when investors give up on attempting to recapture lost gains as a result of rapidly falling prices.
While investors have largely shrugged off last Friday’s March jobs report it was only a few weeks ago when global rates and equities fell at an unprecedented velocity from its February highs on fears over the economic impact from the novel coronavirus. The unwavering combination of extraordinary Fed policy easing and three phases of fiscal stimulus with talks of the fourth phase from Washington has sent rates and equities bouncing off from their lows, if only temporarily.
Jobs Report
Last Friday’s jobs and unemployment data failed to capture the magnitude of the current coronavirus crisis. Data showed that non-farm payrolls plunged by -701,000 for March, which may not sound too terrible, however, that survey ended on March 14 or before the wave of nearly ten million people filing for unemployment. The official unemployment rate jumped up to 4.4% last month but will likely soar above 10% soon.
Overnight, global rates and equities rose on the headline news that measures to contain the COVID-19 pandemic is beginning to show results in some of the worst affected countries such as the United States, Italy, and Spain. Volatility in rates and FX appears to be on high alert but stabilizing at the moment. However, equities will be re-tested in the coming weeks as companies roll out Q1 2020 corporate earnings and revisions to forward guidance. Oil price volatility will remain elevated while investors await a meeting that was rescheduled to this Thursday between OPEC and Russia, in hopes to come up with a truce and reduce market supply (to prop up oil prices). WTI crude is trading at $27.315/bbl, 3.6% lower from Friday and the 10-year U.S. Treasury is trading at 0.647%, 3.8bps higher from Friday’s close.
On the data front this week we have FOMC minutes, weekly jobless claims, and inflation data. See calendar below:
