Market movers today
It is still all about COVID-19, the oil price and policy responses – and right now it is difficult to see what can change this markedly near term, in particular in light of the relentless rally in fixed income and sell-off of risk assets yesterday. However, watch out for policy responses on an ongoing basis – both from central banks and governments.
If the risk sell-off continues in the coming days, we may get more Fed action ahead of the meeting next week. We do not think the ECB will act ahead of its meeting on Thursday but stress that we have refined our ECB view to now expect a QE volume increase, see yesterday’s ECB Preview Update.
For the Scandies, we highlight one data release: Norway’s regional survey, see p. 2.
Selected market news
Following Monday’s rout across risk assets tentative signs of stabilisation were seen overnight as markets weighed hopes of policy easing. The oil price consolidated with Brent now hovering around the USD37/bbl mark after the plunge below USD32 as the week opened. Equities recovered in Asia with Nikkei up close to 0.5% at the time of writing after US equities ended the day more than 7% lower (Dow Jones, S&P) and trading was briefly suspended as NYSE circuit breakers were triggered. EUR/USD failed to break 1.15 yesterday and USD/JPY has edged markedly higher overnight to now trade just off 105 after plummeting below the 102 mark on Monday.
Virus spreading and precautions continue to set the agenda, however, and confirmed cases outside mainland China have tripled over the past week. WHO said overnight that we are now very close to a global pandemic – but arguably one that can be controlled provided the right initiatives are taken. Italy notably opted to extend the quarantine in its Northern region to the whole country, i.e. people are only allowed to travel if they can prove that it is necessary for work or health reasons. Meanwhile, US president Trump proposed a range of measures to Congress in order to ease the economic pain from the virus including payroll taxes and assistance to hourly wage earners. The Fed significantly expanded both its overnight and term repo auctions.
Meanwhile, Norwegian rates and FX have been repriced markedly not least after the oil price started to fall freely and EUR/NOK was inches away from breaking through the 11 mark yesterday. Norges Bank governor Olsen last night emphasised that the central bank follows the market situation closely, including the liquidity situation for banks. Indeed, on the back of the escalation in the COVID-19 spreading and the renewed oil price war we have changed our call and now expect Norges Bank to cut the key policy rate by 25bp to 1.25% on 19 March. We also expect the central bank to introduce an explicit easing bias signalling a higher than 50% probability of another rate cut. As such, today’s Norwegian releases have become much less important given the outdated nature of the data.
