Market movers today
On an otherwise quiet day on the data front, markets will continue to take their cue from the global developments on the coronavirus front and any hints from policymakers to alleviate the burden on the economy (see our take on the global economic impact and policy responses here).
OPEC+ ministers will gather in Vienna to discuss a further cut in production quota. Headlines about a push from Saudi Arabia for output cuts of more than 1m barrel/day underpinned the oil price yesterday, after a fall of c. 20% since the start of the year.
In Scandinavia , we get Swedish January production data , see page 2.
Selected market news
Yesterday marked a strong finish to the US equity session with the primary US indices completing a stellar performance akin to Monday’s rally. The sector break-down shows that especially healthcare stocks contributed to the move indicating that a big part of the rally was down to Joe Biden’s strong ‘Super Tuesday’ returning him as the most likely Democratic challenger for the US presidency. According to prediction markets Donald Trump remains the favourite to win in November but at a 50% implied probability it is close. In comparison Biden has surged from 15% to a 40% probability since the weekend.
Other contributors to the rebound in stocks were the US House of Representatives agreeing to a bipartisan USD8.3bn emergency virus spending bill, which alongside a Canadian rate cut and comments from Australia’s finance minister added to signs of a coordinated G7 policy response to the pandemic.
This morning most Asian equity indices are trading in ‘green’. Meanwhile the S&P future has erased some of its gains on the back of the state of California calling a state of emergency after its first COVID-19 death. Markets will continue to closely monitor the US spreading and with a higher reported US death rate than in the rest of the world, data implicitly suggest the amount of infected Americans could be underreported.
Bank of Canada cut rates by 50bp yesterday as a direct response to COVID-19. The bank also indicated a further preparedness to cut rates further stating that the Governing Council ‘stands ready to adjust monetary policy further if required ‘ and that ‘The Bank continues to closely monitor economic and financial conditions, in coordination with other G7 central banks and fiscal authorities’.
Yesterday afternoon Fed’s Bullard downplayed market expectations of an additional US rate cut at the forthcoming 18 March policy meeting. While Bullard is not a voter on Fed policy this year, his remarks led to markets pricing out a few bp in the short end. We still expect the Fed to cut the target rate by another 25bp at the 18 March meeting and pencil in an additional 25bp rate cut before or at the April meeting.
