Market movers today
Coronavirus developments remain the dominating theme for markets as the global number of infections continues to increase (see below).
On the data front, we get the US jobs report for February today. Judging from the latest ADP and ISM signals, we expect to see a decent report with ongoing healthy job creation. However, for market sentiment a range of Fed speakers later in the day will probably be of more interest to gauge the probability of further rate cuts to come, see Fed Monitor: We expect easing of a further 50bp during the spring.
German factory orders for January will reveal how the battered manufacturing sector has started into the year before the virus and Chinese production disruptions hit.
In the Nordics, industrial production figures in Denmark and Norway are also on the agenda, as is a first glimpse of January’s mainland GDP growth in Norway. Further, in Sweden, Riksbank’s Ohlsson will speak (see page 2).
Selected market news
Virus woes continue to set the agenda in- and outside of markets as the total number of confirmed infection cases is closing in on 100,000. Measures to attempt to contain spreading continue to dominate the news flows outside of China with virus quarantines and broadening travel restrictions. While a few central banks have delivered and the G7 has vowed to stand ready, governments are now also weighing possible fiscal responses to the effect of the outbreak on economic activity. Yesterday, the US Senate passed a c. USD8.3bn emergency spending bill to President Trump with the aim of combating the outbreak itself and provide loans to small businesses. Separately, in the Democratic presidential candidate race, Warren left yesterday, leaving now only Biden and Sanders.
Still, equities sold off close to 3.5% during the US open and significant losses were again posted in the Asian session with Nikkei down more than 3% at the time of writing. US Treasury yields plunged to new lows, with the 10Y now just shy of the 0.8% mark. The crude-oil price continued to decline with Brent below USD50/bbl yet again despite yesterday’s OPEC proposal of larger than expected output cuts of 1.5mb/d. However, the cartel has threatened not to cut production at all despite retracting demand if Russia does not join in when members meet with non-OPEC including Russia later today.
Meanwhile, Fed’s Kaplan said virus developments over the next 10-14 days will be key to whether the FOMC will deliver more. Crucially, he noted that the Fed should see through financial conditions today and that monetary policy is not focused on eliminating volatility. This hands-off-for-now message contributed to keep equities under pressure during the day. It is also a clear hint that if central bankers focus on measures directed at bridging the credit crunch that companies may suffer in the current environment, they might reduce the risk of credit events but risk assets may well continue to deteriorate. Focus will now gradually turn to the ECB next week but ahead of that the stream of Fed speakers today will be key for risk sentiment heading into the weekend; some -75bp is priced from the Fed by autumn.
