Market movers today
It is still all about the COVID-19 virus in and outside of markets – but OPEC has thrown plunging oil prices into the equation: after Friday’s collapse in OPEC+ talks, the oil market is essentially facing a price war.
Policy responses have and will take centre stage after the forceful response from notably the Fed last week. However, we may be disappointed near term, see also. This week, Thursday’s ECB meeting is highly anticipated, see ECB Preview , but the Bank of Japan, Bank of England and the Fed will be on the radar as well.
Today, we get the Sentix investor confidence, which will give us a gauge for the current situation in the euro area; it is likely to be dismal but also possibly outdated already in the current situation. We will also get German industrial production, but this is from January and as such pre-dates the COVID-19 outbreak.
In the Scandi sphere, main focus is oil developments for Norway; in Sweden, besides global development, it is also about inflation this week; more on page 2.
Selected market news
After Friday’s collapse in OPEC+ talks, the oil market now looks to be facing an all-out price war. The crude oil price plunged at the open with Brent trading just above USD32/bbl at the time of writing. Notably Russia and Saudi Arabia alike have around 2-2.5mb/d in spare capacity, which they seem willing to use to drive down prices amid the negative demand shock from COVID-19, where notably the transport sector is taking a severe hit at present. There is a clear risk that this combination of a negative demand and positive supply shock could force Brent below USD30/bbl and down towards the 2016 low near term, see Flash Comment OPEC: Prospect of an oil price war .
Needless to say, risk sentiment suffered another blow on the rout in oil markets. Trading in the S&P500 future went limit down after the index fell close to 5% overnight and Asian indices plunged with Nikkei down close to 5.7% at the time of writing. The US 10Y Treasury yields fell below 0.5% for the first time and the 30Y yield crunched below 1%. Unsurprisingly in this environment USD/JPY collapsed with the cross going through the 103 mark, EUR/USD continues to inch higher still, now eyeing the 1.15 level, while EUR/NOK briefly went above 10.9.
Over the weekend Italy closed down close to a fourth of the country as Lombardy and neighbouring states were put in quarantine to contain virus spreading. The Italian death count has seen a worrisome rise, hinting at more infections than official statistics indicate. Overnight Chinese figures showed exports plummeted in February as virus lockdowns hit – a possible hint of what could be seen elsewhere going forward. Friday’s US job report was strong but should not prove any obstacle for the Fed to cut again. Indeed, stay alert to more from the Fed: in the current environment another inter-meeting cut cannot be ruled out and our base case is now that the Fed will cut by an additional 100bp
