By Noreen Burke
Investing.com - With President Donald Trump warning that the U.S. now faces the toughest two weeks of the coronavirus pandemic and economic data beginning to lay bare the full impact of the lockdown investors are bracing for worse to come this week. The main focus will once again be on U.S. labor market, with Thursday’s initial jobless claims report, which has already shown an unprecedented jump of around 10 million over the past two weeks. Oil prices look set to crater again on Monday as the price war between Saudi Arabia and Russia intensifies. Meanwhile, Wednesday’s Federal Reserve meeting minutes may give some insight into the mindset of policymakers as they delivered emergency rate cuts. Here’s what you need to know to start your week.
- Trump warns Americans to brace for big spike in virus fatalities
Trump has told Americans to brace for a big spike in coronavirus fatalities in the coming days, as the country faces what he called the toughest two weeks of the pandemic.
"There's going to be a lot of death," Trump said at the White House briefing on Saturday.
The United States has the world's highest number of known cases of COVID-19, the flu-like respiratory disease caused by the coronavirus. More than 306,000 people have tested positive in the United States and over 8,300 have died, according to a Reuters tally.
White House medical experts have forecast that between 100,000 to 240,000 Americans could be killed in the pandemic, even if sweeping orders to stay home are followed.
"We are coming up to a time that is going to be very horrendous," Trump said. "We probably have never seen anything like these kind of numbers. Maybe during the war, during a World War One or Two or something."
- Oil set to crater as OPEC+ meeting postponed
Oil price fluctuations have added an extra layer of complication to the coronavirus related market turbulence, crashing 70% from January highs before bouncing on Trump's claim to have brokered a Saudi-Russia deal to cut output.
But prices look set to drop sharply on Monday after OPEC and Russia postponed a Monday meeting to discuss oil output cuts until April 9, as a war between Russia and Saudi Arabia over market share intensified.
Oil recovered from last week's lows of $20 per barrel with Brent settling at $34.83 on Friday, still far below the $66 level at the end of 2019. Prices had their biggest one-day gain ever on Thursday when Trump said he expected Russia and Saudi Arabia to announce a major production cut.
On Saturday, Trump focused instead on tariffs as a response to the oil price crash.
"If I have to do tariffs on oil coming from outside or if I have to do something to protect our ... tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," the president said.
- Jobless claims set to surge again
Thursday’s data on initial jobless claims will be the main release for markets this week. Jobless claims have surged to record levels in the past two weeks, as containment measures to try and slow the spread of coronavirus mean shutdowns are becoming widespread across the U.S. As a result, companies are increasingly shutting their doors and laying-off staff.
Economists are forecasting a reading around the five million mark for initial claims this week.
“With risks skewed towards the containment measures lasting into May, we would not be surprised to see unemployment hit 15% in coming months with our best guess being that the economy contracts 40% in 2Q,” analysts at ING wrote in a note.
- Fed minutes
The Fed is to publish what will be closely watched meeting minutes on Wednesday, which investors expect to outline details on the decisions to deliver emergency rate cuts and inject waves of stimulus into the economy.
Calendars released by the U.S. central bank on Friday showed that Chairman Jerome Powell and Trump held two phone calls on Feb. 7 and again briefly on Feb. 26. What exactly they discussed was not immediately clear, but Powell released a statement on Feb. 28 acknowledging evolving risks from the virus and promising the central bank would act as appropriate to support the economy.
The Fed delivered an emergency rate cut on March 3.
- Eurozone to debate coronabonds
Euro zone finance ministry officials are to hold discussions this week about how best to aid poorer states buckling under the coronavirus strain. It's safe to say a solution that satisfies everyone won't come by the April 9 deadline. The same divisions remain within the bloc -- Germany and the Netherlands are fiercely opposed to proposals for joint 'coronabonds', favored by France, Italy and Spain.
Joint bonds would assure poorer countries -- and investors -- that prosperous bloc members stand behind them, keeping borrowing costs in check. But likelier options this time around include credit lines from the euro zone's bailout fund, more lending from the European Investment Bank and using a joint long-term budget directly or for guarantees for leveraged borrowing.
Germany will probably dodge joint bonds this time. But another whatever-it-takes moment is inevitable.
--Reuters contributed to this report