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ECB President Christine Lagarde press conference live stream
ECB announces coronavirus response package without rate cut
ECB left interest rates unchanged today. That is, main refinancing rate is held at 0.00%, marginal lending facility rate at 0.25%, deposit facility rate at -0.50%. In response to coronavirus pandemic, ECB decided a package of measures. There will be additional longer-term refinancing operations (LTROs) to provide liquidity support. In TLTROIII, considerably more favorable terms will be applied during the period from June 2020 to June 2021. Also, a temporary envelop of additional net asset purchases of EUR 120B will be added until the end of the year. Full statement here.
EUR/CHF recovers mildly but there is no following through buying. Markets will turn focus to President Christine Lagarde’s press conference.
US initial jobless claims dropped to 211k, PPI slowed
US initial jobless claims dropped -4k to 211k in the week ending March 6, below expectation of 215k. Four-week moving average of initial claims rose 1.25k to 214k. Continuing claims dropped -11k to 1.722m in the week ending February 29. Four-week moving average of continuing claims rose 5.25k to 1.728m.
PPI final demand came in as -0.6% mom, 1.3% yoy in February, versus expectation of -0.1% mom, 1.9% yoy. PPI core was at -0.3% mom, 1.4% yoy, versus expectation of 0.2% mom, 1.7% yoy.
Eurozone industrial production rose 2.3% in Jan, above expectation of 1.2%
Eurozone industrial production rose 2.3% mom in January, well above expectation of 1.2% mom. Production of intermediate goods rose by 3.2% mom, capital goods by 2.6% mom, non-durable consumer goods by 0.8% mom and durable consumer goods by 0.7% mom, while production of energy fell by -0.1% mom.
EU27 industrial production rose 2.0% mom. Among Member States for which data are available, the highest increases in industrial production were registered in Ireland (+5.7%), Hungary (+4.6%) and Slovakia (+4.5%). The largest decreases were observed in Denmark (-2.1%), Latvia (-1.9%) and Lithuania (-1.8%).
Ifo: 56.2% of German companies negatively affected by coronavirus
Ifo Institute said 56.2% of German companies are suffering from negative impacts of coronavirus epidemic. Only 2.2% of all companies reported a positive impact. Situation is worst for tour operators and travel agencies, with 96% negative affected.
In manufacturing, 63% reported negative impacts. 76.4% said business trips were canceled or delayed. 52.0% noted difficulties in supply of preliminary products or raw materials. Companies in the electrical, mechanical engineering, furniture and chemical industries are most affected.
In trade, 63% are negatively affected. 65.9% said there are delays or failure of deliveries in purchasing. 58.7% noted decline in demand.
BoJ Kuroda pledges appropriate policy actions again after meeting PM Abe
Japan Prime Minister Shinzo Abe and BoJ Governor Haruhiko Kuroda held a meeting today, just ahead of next week’s monetary policy meeting. After the meeting, Kuroda said the central bank has already been providing ample liquidity and steeping up asset purchases to counter recent market moves, which fluctuate “widely. He related that “we’ll take appropriate steps as necessary in a timely manner, while closely monitoring developments.”
Released earlier in Japan, large manufacturer sentiment dropped to a near nine-year low in Q1. The BSI large manufacturers index dropped to -17.2, down from -7.8, worst since 2011. Nevertheless, outlook in Q2 in expected to improve to -5.5, and then 6.1 in Q3.
ECB to deliver coronavirus response package as pandemic worsens
ECB rate decision is a major focus today and expectation is high for the central bank, to follow global peers, to deliver stimulus measures to ease coronavirus impact. Europe is in no doubt on fire now, with 12,462 coronavirus cases and 827 deaths in Italy. Prime Minister Giuseppe Conte tighten up country wide lockdown on Wednesday, closing all shops except supermarkets, food stores and chemists. He still sounded cautious as “we will only be able to see the effects of this great effort in a couple of weeks.”
Situation in other European countries are also worsening, with 2,821 cases and 48 deaths in France, 2,277 cases and 55 deaths in Spain, 1,966 cases and 3 deaths in Germany, 652 cases and 4 deaths in Switzerland, 629 cases in Norway, 514 cases in Denmark, 503 cases and 5 deaths in the Netherlands, 500 cases and 1 death in Sweden, 314 cases and 3 deaths in Belgium, 246 cases in Austria. The outbreak is already a serious blow to the domestic economy as well as a serious threat on production with supply chain disruptions. Also, tightening of financial conditions is worsening and broadening.
At this point, it’s unsure what more the ECB could do and how effect the new measures could be, given that interest rate already negative for long time and asset purchase restarted last year. ECB might opt for another -10bps cut in deposit rate and ramp up to QE to EUR 40B per month. There might also be targeted funding operations for banks.
Here are some suggested previews:
DOW dropped 5.8%, futures down another 1000pts after Trump’s Europe ban
DOW dropped -1464.94 pts or -5.86% overnight. DOW futures is down a further -1000 pts after Trump’s announcement. Technically, it’s still on track to 100% projection of 29568.57 to 24681.01 from 21702.34 at 22214.78.
This level is inside an important support zone between 55 month EMA (now at 22627) and 38.2% retracement of 6469.96 to 29568.57 at 20744.89. Initial support is expected there to halt the selloff.
However, decisive break there will firstly hints on further downside acceleration. Also it would open up the case for decline to next key support level at 61.8% retracement at 15293.62.
US bans travelers from Europe for 30 days, excluding goods
US President Donald Trump announced a ban on travelers to the US from Europe for 30 days, in a step to slow down the spread of coronavirus pandemic. The ban would apply to countries in the Schengen economic and travel zone, while UK and Ireland would be exempted. Also, goods are not included in the ban.
Trump said he would ask Congress for legislative action for measures to counter the economic impact of the coronavirus, including payroll tax relief. The Small Business Administration is also instructed to provide capital and liquidity to companies in need.
Separately, NBA said it will suspend its season after a played was tested positive for the coronavirus. Famous action Tom Hanks has been tested positive too while he’s in Australia. Total cases in the US surged to 1322, with 38 deaths, as of the time of writing.
US oil inventories rose 7.7m barrels, WTI stays in consolidations
US commercial crude oil inventories rose 7.7m barrels in the week ending March 6, way above expectation of 2.0m. At 451.8m barrels, oil inventories are about 2% below the five year average for this time of year.
Earlier today, OPEC slashed said global demand will rise by just 60k barrels a day this year, a sharp a reduction of 920,000 bpd from its previous forecast. It said, “considering the latest developments, downward risks currently outweigh any positive indicators and suggest further likely downward revisions in oil demand growth should the current status persist.”
WTI crude oil is staying in consolidation above 27.50 low for now. Some more sideway trading is expected until certain breakthrough in Saudi Arabia-Russia oil price war, on either side. We’re not expecting a firm break of 27.69 (2016 low. Meanwhile, rebound attempt should be capped by 42.05 support turned resistance.
NIESR: US on course to grow 0.2% in Q1, but supply chain headwinds substantial downside risks
NIESR said UK economy remains on course to grow 0.2% in Q1. However, coronavirus outbreak poses a major threat to outlook.
Dr Kemar Whyte Senior Economist – Macroeconomic Modelling and Forecasting: “Economic activity in the UK appears to have been picking up at the beginning of the year. But the outbreak of the Coronavirus poses a major threat to the economic outlook. With supply chain headwinds now arising as a result of the outbreak, there are substantial downside risks to the near-term outlook.”
UK Sunak delivers GBP 30B coronavirus relief package
UK’s new Chancellor of Exchequer Rishi Sunak delivers a massive GBP 30B relief package today to counter the devastating impact of coronavirus. He pledged to “doing everything we can to keep this country, and our people, healthy and financially secure.” Additionally, he said he’s in “constant communication” with BoE for “coordinated” and “comprehensive” response to the coronavirus.
The plan include GBP 5B emergency fund for the National Health Service, and “whatever it needs, whatever it costs”. People will also be given financial support if they need to cope with coronavirus, with statutory sick pay for everyone who’s been told to self-isolate, and more generous welfare rules. Additionally, the government will refund sick pay bills for 14 days in full, for two million companies with less than 250 staff.
US CPI slowed to 2.3%, but core CPI picked up to 2.4%
US CPI rose 0.1% mom in February, above expectation of 0.0% mom. Core CPI rose 0.2% mom, matched expectations. Annually, CPI slowed to 2.3% yoy, down from 2.5% yoy, matched expectations. Core CPI accelerated to 2.4% yoy, up from 2.3% yoy, above expectation of 2.3% yoy.
BoE Carney: It’s a big package to bridge across economic disruption
After the emergency rate cut by -50bps to 0.25%, BoE Governor Mark Carney and his successor Andrew Baily appeared as at press conference. He said today’s”comprehensive and timely package” will help households and businesses “bridge across the economic disruption” caused by the coronavirus. He hailed that it’s a “big package”, with a ” a huge term funding certainty for the financial sector”. Also, “there are fiscal measures that are coming”.
It’s “too early” to judge if there will be a recession in the UK, he added. “We have a sense of the direction, a sense of the orders of magnitude, could be large.” Though, “there is no reason for it to be as bad as 2008 if we act as we have, and if there is that targeted support.”
UK GDP stagnated in January, production contracted
UK GDP grew 0.0% mom in January, below expectation of 0.2% mom. Services rose 0.1% mom. Production dropped -0.1% mom. Manufacturing rose 0.2% mom. Construction contracted -0.8% mom. Agriculture rose 0.1% mom.
In the three months to January, GDP was also flat without growth. During the period, services rose 0.0% 3mo3m, production dropped -1.0% 3mon, construction rose 1.4% 3mo3m.
Industrial production came in at 0.1% mom -2.9% yoy in January, versus expectation of 0.4% mom -2.3% yoy. Manufacturing production was at 0.2% mom -3.6% yoy, versus expectation of 0.4% mom -3.3% yoy. Goods trade deficit widened to GBP -3.7B, versus expectation of GBP -7.5B.
Sterling mildly lower after BoE’s -50bps emergency rate cut, no follow through selling yet
BoE announced emergency measures to counter the economic shocks from coronavirus today, including a rate cut. Bank rate is lowed by -50bps to 0.25% on unanimous vote. Asset purchase target is kept unchanged at GBP 435B. Also, a new Term Funding scheme with addition a incentives for SMEs is introduced.
The central bank said, “the reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.” Additionally, the Financial Policy Committee has reduced the UK countercyclical capital buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect. The rate had been 1% and had been due to reach 2% by December 2020.
Sterling dips mildly after the release but there is no follow through selling so far, despite the unexpected announcement that’s somewhat expected for this week. GBP/CHF’s fall from 1.3110 is in progress. As long as 1.2336 resistance holds, near term outlook remains bearish for a test on 1.1674 low.
Economists downgrade Singapore 2020 growth forecasts from 1.5% to 0.6%
According to a survey by Monetary Authority of Singapore, economists now expect the country’s economy to grow only 0.6% this year. That’s sharply lower than 1.5% growth as expected in the previous survey in December. That is within the government’s forecast range of -0.5% to 1.5%.
The respondents were also pessimistic across all key sectors. Manufacturing is expected to contract by -0.3% this year, versus prior forecast of 0.7% growth. Wholesale and retail are expected to contract by -0.7%, comparing to prior forecast of 0.4%. Accommodation of food services would contract -1.6%, versus prior forecast of 2.1%.
Finance and insurance are expected to growth 2.5%, lower than prior forecast of 3.5%. Construction is expected to grow 2.4%, just slightly revised down from 2.5%.
Australia consumer sentiment dropped 5-yr low, spectacular drop in economic expectations
Australia Westpac consumer sentiment dropped -3.8% to 91.9 in March, hitting the lowest level in five years. More importantly, it’s the second lowest level since the global financial crisis. Across the five component sub-indexes, biggest fall was around expectations for the economy, The “economy, next 12 months” sub-index recorded a spectacular -12.8% drop taking it to 77.9, a five year low.
Westpac said, “The Reserve Bank Board next meets on April 7. Given the clear risks being faced by the Australian economy over the next few months the Board is likely to lower the cash rate by a further 0.25%.”
And, cash rate will hit RBA’s lower bound of 0.25%, “the next policy approach is likely to involve a form of unconventional monetary policy where indications are that the Board favours the approach of setting a rate target further out the yield curve and signalling the commitment to defend that target”.
RBA Debelle: Too uncertain to assess coronavirus impacts beyond Q1
RBA Governor Guy Debelle said in a speech that because of the coronavirus, the global economy will be “materially weaker” in Q1 and in the period ahead. For Australia, RBA has estimated the impact of education and tourism sectors. These services exports, which account for 5% of GDP, would drop at least -10% in Q1. That translates into -0.5% subtraction of GDP just from these two sources. But that, he added, “it is just too uncertain to assess the impact of the virus beyond the March quarter.”
Debelle also said, the coronavirus is “a shock to both demand and supply”. Monetary policy “does not have an effect” on the supply side. But It can work to “ensure demand is stronger than it otherwise would be”. The government’s intention to support jobs, incomes, small business and investment will “provide welcome support” to the economy. “The combined effect of fiscal and monetary policy will help us navigate a difficult period for the Australian economy.”
ECB downgrades 2020 growth to 0.8%, oil price fall poses significant downside risks to inflation
In the post meeting press conference, ECB President Christine Large warned that the spread of coronavirus has been as “major shock” to global and Eurozone growth prospects. And, “even if ultimately temporary in nature, it will have a significant impact on economic activity”. There will be slowdown in production as a result of supply chains disruption, reduced domestic and foreign demands. In addition, the heightened uncertainty negatively affects expenditure plans and their financing.”
She urged government and all other policy institutions to “take timely and targeted actions to address the public health challenge of containing the spread of the coronavirus and mitigate its economic impact”. In particular, “an ambitious and coordinated fiscal policy response is required to support businesses and workers at risk.”
In the march ECB staff macroeconomic projections, GDP growth for 2020 was downgraded from 1.1% to 0.8%, with “very muted growth in H1. 2021 growth was revised down from 1.4% to 1.3%. 2020 HICP inflation is projected at 1.1%, and 1.4% in 2021, unchanged. But recent sharp decline in oil prices poses significant downside risks to short-term inflation outlook.
Full introductory statement here.