By Geoffrey Smith
Investing.com -- New infections of Covid-19 are running at record rates across a swath of the U.S., and markets are – belatedly, some would argue - reacting negatively. The International Monetary Fund is due to update its growth forecasts for the world later. Stocks are set to open lower and gold is within touching distance of $1,800 an ounce for the first time in eight years, as Treasury Secretary Steven Mnuchin talks up another extension to the 2019 tax deadline. And the government will publish its weekly report on the state of U.S. oil supplies after an industry survey suggested crude stockpiles rose again last week. Here’s what you need to know in financial markets on Wednesday, June 24th.
1. Virus surge raises risk of fresh lockdowns; EU mulls ban on U.S. arrivals
The rise in new Covid-19 infections in many states across the U.S. is gathering pace, raising the risk of renewed lockdowns to bring it under control again. Texas, Arizona and California all reported record numbers of new infections on Tuesday.
Some 29 U.S. states now have a reproduction rate (so-called R-number) of over 1, a level that ensures the virus spreads exponentially. Hospitalizations are also rising rapidly – a fact that undermines claims that rising infection rates are simply a result of broader testing.
In Europe later, ministers are expected to announce a ban on arrivals from the U.S.
The virus continues to spread rapidly across Latin America too, with Mexico also recording a record number of new infections and 793 deaths. The Honduran President Juan Orlando Hernandez, meanwhile, has been hospitalized and is receiving oxygen, according to reports.
2. Mnuchin talks up new stimulus package, tax deadline extension
U.S. Treasury Secretary said the administration is “seriously considering” another package of economic support measures and may extend again the deadline for filing 2019 tax returns.
“We want to take our time because, number one, there’s a lot of money we still haven’t put out, and, number two, we want to make sure whatever we do…is much more targeted to the businesses that are most impacted” by the virus, Bloomberg quoted Mnuchin as saying at a conference it organized.
The tax deadline has already been pushed back once from April to the end of July.
3. Stocks set to open lower; Winnebago in the spotlight
U.S. stocks are set to open lower, as investors finally take on board the threat of the rising tide of new infections.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 270 points, or 1.0%, while the S&P 500 Futures was down 0.9% and the Nasdaq 100 futures contract was down 0.6%.
Of note later will be the latest update from Winnebago Industries (NYSE:WGO), whose stock has tripled on speculation that disruption to the travel business will spur demand for its recreational vehicles.
European stocks also turned sharply lower as fears that the U.S. could succumb to a second wave of infections outweighed a sharp rise in the German Ifo Business Climate index. The benchmark Stoxx 600 lost 1.7%.
With the exception of an isolated outbreak in the German meat-packing industry, infections have not risen noticeably in Europe since lockdown restrictions were lifted last month.
4. Gold hits 8-year high
The price of gold hit another eight-year high as the latest wave of coronavirus fears drove investors to place more bets on what is usually a haven asset.
By 6:30 AM, gold futures for delivery on the Comex exchange were up 0.7% at $1,794.80, after hitting an overnight high of $1,796.10 an ounce. Its latest rally has come at a time when other havens such as U.S. Treasury bonds have been relatively range-bound, reflecting the belief that gold is a better-value haven at a time when both nominal and real interest rates have tumbled.
Central banks around the world are still adding monetary stimulus where they can: the Bank of Japan, European Central Bank and Bank of England all increased their quantitative easing programs earlier this month against a backdrop of collapsing global growth.
The International Monetary Fund will later update its forecasts for the global economy in an update of its World Economic Outlook.
5. Crude gets the Covid-19 jitters; U.S. oil stocks eyed
U.S. crude oil prices caught the Covid-19 jitters, falling back below $40 on concerns that a new wave of infections will derail the current recovery in demand.
By 6:30, WTI futures were down 1.4% at $39.78, while the global benchmark Brent was down 1.0% at $42.19.
Prices have been under pressure since the American Petroleum Institute reported a 1.7 million barrel increase in U.S. crude stocks on Tuesday afternoon. The U.S. government’s official data are due at 10:30 AM. A rise of 300,000 barrels in crude inventories is expected.