MORNING BID-Oil shock 2020

A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own.

The shock of sub-zero oil prices is still reverberating across world markets. U.S. crude futures are back in negative territory after briefly rising to around $1.40 a barrel. With COVID-19 related lockdowns in most countries likely to be extended or at least maintained in some form, physical demand for crude should remain low.

Monday's plunge was attributed to the Tuesday expiry of the May futures contract - traders had to try and dump the contract or be forced to take delivery of crude barrels for which there is no storage space. But as Deutsche Bank analysts warn, if demand doesn't improve, this story may be repeated when June futures expire.

Deutsche notes some lower quality crudes had already been trading near zero; one grade known as Wyoming Asphalt Sour actually fell last month to minus 19 cents a barrel.

As for global markets, world stocks are down half a percent, U.S. futures are down a similar amount, European and Asian bourses have fallen 2% or so. U.S. oil shares fell almost 4% yesterday and European oil stocks are down a similar amount.

Overall though, equity falls look relatively restrained in comparison with crude futures. Let's not forget swathes of the world economy benefit from cheap oil; in theory it could help fuel a post-pandemic rebound especially coupled with all the stimulus that's been deployed.

Oil exporters such as Norway and Russia also peg their pricing to Brent which remains at around $25 a barrel. Still, we are seeing pressure building again on Gulf currency pegs especially as U.S. President Donald Trump may consider halting Saudi oil imports to stem the glut. That's sent 9-month dollar-riyal forwards to 2-1/2 year highs.

Corporate headlines worldwide continue to flag possible bankruptcies (US retailer Lord & Taylor, Virgin Australia), job cuts (HSBC) and poor earnings outlooks (Peugeot, Carrefour). Still, some companies – notably FAANGs Amazon and Netflix -- aren't complaining, with shares at record highs ahead of Netflix posts Q1 earnings.

A few examples of economic newsflow - Australia's economy could shrink 10% in the first 2020 half. South Korea's Q1 contraction will be the biggest since 2008 and its exports in the first 20 days of April plunged by almost a third.

The German ZEW sentiment survey will be one of the first indicators for Q2 before tomorrow's flash PMIs. The dollar is holding firm, while the euro is pressured before EU finance ministers' Thursday meeting – rather than joint debt issuance which southern European states want, they may embrace some kind of part-mutualisation of debt. Italian bond yields have backed off from the 2% level as markets settle down to wait.

Europe's earnings season is intensifying -- Carrefour cut its 2019 dividend (minus 50%), while CEO Alexandre Bompard will waive 25% of his fixed salary for two months. LMC Automotive revised down forecasts, noting global vehicle production may now fall more than 20% in 2020.

Other news: Sika grew in Q1 but dropped its 2020 guidance; Novartis, which is testing the malaria drug hydroxychloroquine for effectiveness against COVID-19, hopes to have first results by June; Ferrari workers are signing up for voluntary coronavirus screening to return to work.

European bright spots -- high-frequency trading firm Flow Traders' profit rose more than 10 times from last year, while Adyen, which handles online payments for Facebook and Uber, enjoyed growth in Q1 revenues and core earnings.

Emerging stocks are suffering the biggest daily tumble in three weeks, down around 1.5%. Bourses across the Middle East are deep in the red. Media reports of North Korean leader Kim Jong Un's illness fanned questions over succession - this is also weighing on the Korean won, which slipped 0.7% against the dollar. +++ DIARY +++ Philly Fed non-manufacturing survey UK employment Feb Germany ZEW April Korea Q1 GDP US existing home sales March US earnings – Coca Cola, Procter and Gamble, Phillip Morris, JetBlue Air, Northern Trust, Netflix