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”.

    Full release here.

    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.”

      Debelle’s full speech here.

      DOW had limited rebound as US still some way from coronavirus relief package

        US stocks rebounded notably overnight but DOW’s 1167pts rise was way short of Monday’s -2000 pts loss. President Donald Trump disappointed the markets as he failed to deliver the coronavirus response measures he mentioned on Monday. There was no resolution at his meeting with Republicans. Trump just said after the meeting, “Be calm. It’s really working out. A lot of good things are going to happen.” It’s reported that Republicans are skeptical on the payroll tax cut pushed by economic adviser Peter Navarro.

        Also, after the meeting, Trump sent Treasury Secretary Steven Mnuchin to meet House Speaker Nancy Pelosi to kick start a congressional response. After meeting with Pelosi, Mnuchin just said it’s too early to call the talks “negotiations”. Arguably, the US is still some way from concluding a certain relief package.

        High volatility will very likely continue in the financial markets ahead. DOW might be able to close Monday’s gap should there be any positive news out of the White House in the coming days. But there is no sign of a major bottoming yet. Corrective from 29568.57 is expected to extend to 100% projection at 22214.78 ahead, sooner or later.

        German Altmaier expects coronavirus to hit supply chains in coming weeks

          German Economy Minister Peter Altmaier said, “in some sectors, such as tourism, the exhibition and public events industry as well as in the hotel and restaurant trade, we are seeing a massive impact” from the coronavirus outbreak.

          He added, ‘we’re expecting supply chains to be impacted, especially in the industrial sector, and this will become visible in its full extent only in the coming weeks.”

          Saudi Arabia sees no need for May-June OPEC+ meeting

            Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman sounded hard-line in his comments regarding another OPEC+ meeting in Q2. He said, “I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures.”

            Russian oil minister Alexander Novak said he did not rule out joint measures with OPEC to stabilize the market, adding that the next OPEC+ meeting was planned for May-June.

            On the other hand, Iraqi oil minister Thamir Ghadhban said “the ministry is in contact with members inside and outside OPEC to discuss ways to prevent deterioration in oil prices.” Nigeria’s Minister of State for Petroleum Timipre Sylva urged OPEC and non-OPEC states to meet again to reconsider production cuts.

            Japan announces JPY 430B coronavirus relief package

              Japanese government announced a second coronavirus relief package that is worth JPY 430.8B. Prime Minister Shinzo Abe pledged to “carry out necessary and sufficient economic and fiscal management without hesitation or delay, while fully ascertaining economic moves and effects on the people’s livelihoods from now on as well”.

              The government would fund the package by tapping the rest of this fiscal year’s budget reserved around JPY 270B. Finance Minister Taro Aso said, if was not yet clear if the government needed an extra budget. The package will provide support to small and tiny business in needed of financing. It will also support improvements to medical facilities, promoting work from home and subsidies to working parents.

              Eurozone GDP grew 0.1% in Q4, unrevised from prior estimate

                Eurozone GDP grew 0.1% qoq in Q4, unrevised from initial estimate. Over the year, GDP grew 1.0% yoy. Household final consumption expenditure rose 0.1% qoq. Gross fixed capital formation rose 4.2% qoq. Exports rose 0.4% qoq. Imports rose 2.2% qoq. Employment grew 0.3% qoq in both Eurozone and EU27.

                EU 27 GDP grew 0.2% qoq, 1.2% yoy. Among Member States for which data are available, Ireland (+1.8%), Malta (+1.7%) and Romania (+1.5%) recorded the highest growth compared with the previous quarter, followed by Lithuania and Hungary (both +1.0%). Negative growth was observed in Greece and Finland (both -0.7%), Italy (-0.3%) and France (-0.1%). In Germany, the GDP remained stable.

                Full release here.

                BoJ Kuroda: Markets are making very unstable moves

                  BoJ Governor Haruhiko Kuroda told the parliament today, “there’s uncertainty on when the coronavirus will be contained, and markets are making very unstable moves”. BoJ will “continue to keep an eye out on how the spread of the virus could affect Japan’s economy and prices, particularly via domestic and overseas market developments, and act appropriately as needed without hesitation.”

                  Japan Finance Minister Taro Aso reiterated that the government will only tap the remainder of this fiscal’s budget to finance the coronavirus response package. “We need to ascertain the current situation first”, he said, “at this stage there’s no saying” whether the government needs an extra budget. He also noted, “financing will focus on small and tiny businesses who face the need of financing over the next two to three weeks.”

                  Australian PM Morrison: Coronavirus impact could be larger than global financial crisis

                    Australian Prime Minister Scott Morrison warned today that the coronavirus could have larger impact to Australian economy than the global financial finances in 2008. That’s because “the epicenter of this crisis as opposed to that one is much closer to home”, referring to the close tie with China.

                    Also, “there is the potential for heightened risk aversion to flow over into reduced business and consumer spending, reduced demand across our economy. These effects would be greater if coronavirus were to have a significant impact on the health of our workforce, which is what we need to plan for, and that’s something we’re working very hard to prevent at the moment.”

                    Morrison said the government will soon announce stimulus response to the coronavirus outbreak. It’s reported by the Australian newspaper that the measures could worth about AUD 10B.

                    Australia NAB business confidence dropped to -4, further deterioration likely

                      Australia NAB business confidence dropped from -1 to -4 in February. Business conditions dropped from 2 to 0. Looking at some details, trading conditions dropped from 5 to 4. Profitability conditions dropped from 1 to -5. Nevertheless, employment conditions ticked up from 1 to 2. Forward orders dropped sharply form -1 to -4. Stocks dropped from 0 to -6. Exports dropped from -1 to -2.

                      Alan Oster, NAB Group Chief Economist: “Both conditions and confidence fell in the month, but not by as much as we had feared. That said, both continue to track below average and with forward orders weakening its likely we could see further deterioration”.

                      “With leading indicators softer, it is unlikely we will see a material improvement in conditions in the near term. With conditions and confidence continuing to track below average – there are risks around future capex and employment growth.

                      Full release here.

                      Trump pledges dramatic actions after DOW dropped -2013pts

                        Wall street experienced massive selloff overnight, on double whammy of global coronavirus pandemic and oil price war. DOW declined -2013.76 pts or -7.79%, S&P lost -7.60%, NASDAQ dropped -7.29%. 10-year yield hit another record low at 0.398 before closing at 0.499, down -0.207. Fed fund futures are now pricing in 100% chance of -75bps rate cut to 0.25-0.50% at March 18 meeting.

                        President Donald Trump said at the White House that he plans to announce “very dramatic” actions to support the economy on Tuesday. The measures will include payroll tax cut and “very substantial relief” for industries hit by the coronavirus outbreak.

                        DOW’s steep fall from 29568.57 resumed earlier than we expected, by breaking 24681.01 temporary low. Further decline should be seen to 100% projection of 29568.57 to 24681.01 from 21702.34 at 22214.78 in the near term. The projection sits inside an important long term support range, with 55 month EMA at 22632.99, and 38.2% retracement of 6469.95 to 29568.57 at 20744.89. We’d expect strong support from there to end the current leg of selloff, and bring sustainable rebound.

                        Entire Italy in lockdown as coronavirus cases surged to 9172, 463 deaths

                          Coronavirus outbreak in Italy continued to worsen as total cases surged past South Korea to 9172, up 24% from a day ago. Total deaths increased by 97 to 463. Prime Minister Giuseppe Conte announced on Monday that the whole country will be placed under lockdown until next month. People could only travel for work, medical reasons or emergencies until April 3. All schools and universities are closed too. The numbers are showing that there has been a significant growth in infections, people in intensive care and deaths,” Conte said. “Our habits have to change right now. We must give things up for Italy.”

                          Situation in Europe in general remains worrying. There are 1412 cases and 30 deaths in France, 1231 cases and 30 deaths in Spain, 1224 cases and 2 deaths in Germany, 374 cases 2 deaths in Switzerland, 321 cases 5 deaths in the UK, 321 cases 4 deaths in the Netherlands, 261 cases in Sweden, 239 cases in Belgium, 227 cases in Norway, 131 cases in Austria.

                          China, the origin of the outbreak, continued to stabilize with 19 news cases to 80754, with 3136 deaths. Similarly, South Korea added 35 cases to 7513, with 54 deaths. Iran will likely surpass South Korea soon, with 7161 cases and 237 deaths. There are 708 cases reported in the US with 7 deaths, and 530 cases in Japan with 9 deaths.

                          US trading halted for 15 minutes as circuit breaker triggered

                            US stocks gap lower at open, with DOW down more than -1800 pts. S&P 500 also loses -7%. The massive sell-off triggered a key market circuit breaker in morning trading. Trading is halted for minutes at 13:35GMT.

                            BoJ Kuroda: Uncertainty heightening, sentiment deteriorating, markets unstable

                              BoJ Governor Haruhiko Kuroda told the parliament today, “uncertainty over Japan’s economic outlook is heightening. Investor sentiment is deteriorating somewhat, with market moves unstable.”

                              He added, “we’ll take appropriate action without hesitation as needed with an eye on the impact of the spread of the coronavirus, particularly through domestic and overseas market moves.”

                              The comments raises the chance of some sort of policy stimulus to be announced after meeting on March 18-19. But it’s unsure which part of BoJ’s toolbox would be adopted.

                              Germany unveils EUR 12.4B coronavirus relieve package

                                German government announced additional EUR 12.4B in state investment to help companies hit by the coronavirus outbreak. The package agreed by the coalition include liquidity support to companies suffering coronavirus related cash crunch There will be expansions to access to the government subsidized scheme called “Kurzabeit”.

                                Olaf Scholz, finance minister, pledged that Germany was prepared “to do everything needed to stabilise the economy and secure jobs”. “We will ensure that there is always enough liquidity available for business”. He added that it’s impossible to say if Germany will slip into recession this year.

                                Italian PM Conte promised massive shock therapy to overcome coronavirus impacts

                                  Italian Prime Minister Giuseppe Conte promised “massive shock therapy” to overcome the impact of the coronavirus outbreak. The country announced on Sunday massive lockdown across much of its north, including the financial capital Milan. He told La Repubblica, “we will not stop here. We will use a massive shock therapy. To come out of this emergency we will use all human and economic resources.

                                  Conte will meet representatives of opposition to discuss new economic measures. the coalition government is also studying various initiatives. Meanwhile, he also called for EU to loosen borrowing limit to allow room for more fiscal measures. He said, “Europe cannot think of confronting an extraordinary situation with ordinary measures.”

                                  Eurozone Sentix plunged to -17, a new Lehman moment in the making

                                    Eurozone Sentix Investor Confidence dropped sharply to -17 in March, down from 5.2, missed expectation of -11. That’s the lowest level since April 2013. Current Situation index dropped from 4.0 to -14.3, lowest since October 2019. Expectations index plunged from 6.5 to -20.0, lowest since August 2012.

                                    Global Overall index dropped form 8.1 to -12.0, lowest since July 2009. Current Situation index dropped from 10.5 to -8.8, lowest since November 2009. Expectations index dropped from 5.8 to -15.3, lowest since October 2011. Regional readings suggested Eurozone, Germany, Eastern Europe, Japan, Asia ex-Japan and Latin America are all in recession. Swiss, Austria, USA and global are in downturn.

                                    Sentix said, the coronavirus is “plunging the global economy into recession”. And the data puts the current slump in an “inglorious chain”, Lehman (2008), Fukushima (2011) and the oil credit crisis (2016). It’s also putting pressure on the economy in Eurozone. The set of data “means nothing other than that investors are preparing for a long period of economic weakness.” In addition to ECB’s “wise steps”, “wisdom may require this time that fiscal policy in particular shows itself to be generous”. It warned, if no action is taken, no one should be surprised by a new ‘Lehman’ moment that would increase the chaos.

                                    Full release here.

                                    Oil price in worst decline since 90s on price war

                                      Oil price is having the worst loss since Gulf War in 1991, on fear of price war after OPEC+ talks ended in dramatic failure. It’s reported that Saudi Arabia wanted to slash production to offset the steep decrease in demand due to coronavirus pandemic. But Russia rejected the idea, arguing that cheap crude will help wipe out competition from US shale.

                                      As the talks collapsed, it’s reported that Saudi Arabia plans to boost output next month to well above 10 million barrels a day, or even to 12 million barrels. That’s seen as an act of a full price war between OPEC and Russia, to force the latter to go back to the negotiation table.

                                      WTI crude oil hits as low as 27.50 today, breaching 2016 low of 27.69. At this point, we’re not expecting sustainable trading below 27.69 yet, unless the situation worsen dramatically. There is prospect of a rebound should Russia comes back to negotiation. But any rebound attempt will likely be capped below prior resistance at 42.05.

                                      AUD/JPY slaughtered again in thin panic market, still heading to 60 anyway

                                        AUD/JPY suffered another wild ride in thin, panic, early Asian session again today. It’s a move that resembles what happened early last year. On January 3, 2013, AUD/JPY hit as low as 70.2 (depending which chart you’re reading), but recovered strongly to close at 76.05. The fate of the cross, however, will likely be different considering the material risks the world is facing.

                                        From a technical point of view, outlook with remain bearish as long as 71.50 resistance holds. 100% projection of 80.71 to 69.96 from 76.54 at 65.78 will remain the focus after today’s “false break”. Sustained trading below this level will pave the way to 161.8% projection at 59.13.

                                        That will coincide with 100% projection of 102.83 to 72.39 from 90.29 at 59.85, as well as 60 round number. We’d expect enough support only from there to bring sustainable rebound.

                                        Asian market plunged as coronavirus spreads quickly in Europe

                                          Asian markets recorded some wild move today, as global spread of coronavirus accelerated further over the weekend. stocks are in deep red, with, Nikkei down -5.5% currently. Hong Kong HSI is down -3.5%. China Shanghai SSE is down -2.4%. Singapore Strait Times is down -4.2%. Oil price plunges over -25% as additionally pressured by price-war fear. Gold’s reaction is relative limited, struggling to stay above 1700 handle. In the currency markets, Aussie leads Canadian and New Zealand lower. Yen, Euro and Swiss are the safe haven currencies that surge.

                                          Coronavirus in situation China, the origin of the global outbreak, continues to stabilize, with just 40 new cases and 22 deaths reported for Sunday. Total accumulated cases now stands at 80735, with 3119 deaths. New cases in South Korea also slowed some what, as total stands at 7382 with 53 deaths. Italy (7375 cases, 366 deaths) and Iran (6566 cases, 194 deaths) are quickly catching up and will likely surpass South Korea very soon.

                                          Situation in Europe is very worrying with 1209 cases in France, 1040 in Germany, 674 in Spain, 332 in Swiss, 278 in UK, 265 in the Netherlands, 203 in Sweden, 200 in Belgium, 176 in Norway, 104 in Austria. US, with 542 case, will be the next point of focus regarding the coronavirus spread.

                                          Hong Kong HSI gapped through 25995.15 structural support and hit as low as 25025.05 so far. Current down side momentum suggests that 24520.63 (2018 low) will likely be taken out soon to resume whole down trend from 33484.07 (2018 high). Next down side target will be 61.8% projection of 33484.07 to 24540.63 from 29174.92 at 23647.87. But we’d expect further fall, in the medium term, to 100% projection at 20231.48 at least.