Notes/Observations
- Backdrop of dread with risk aversion gone wild. US Treasuries entire curve below 1%
- Oil falls over 30%as price fights erupts post OPEC+ meeting (Note: worst loss since 1991 Gulf War; Crashing oil prices could hit credit markets badly
- SP limit down until cash market opens up
Asia:
- China Feb YTD Trade Balance -$7.1B v +$40.0Be
- Japan Q4 Final GDP revised lower with annualized decline the largest since 2014 (Q/Q: -1.8% v -1.7%E; GDP Annualized Q/Q: -7.1% v -6.6%e
- North Korea fired off three unidentified projectiles Monday off its eastern coast
Coronavirus:
- Global cumulative cases 110,041 (+ 11,659 vs Friday); Cumulative deaths 3,825 (+442 vs Friday). Chinese cumulative cases 80,904 (+193 vs Friday); Cumulative death toll 3,123
- G20 statement: fin mins and central bankers stand ready to take appropriate fiscal and monetary measures to aid the coronavirus response and to support the economy
Europe:
- EU Commission’s top economic officials said to approve Italy’s recently announced spending plan
Brexit:
- PM Johnson, Chancellor of the Exchequer (Fin Min) Sunak and BOE Gov Carney said to have held talks over the response to the threat the virus poses to the economy. Recent talks fueling speculation about the possibility of coordinated action including interest-rate cuts
Americas:
- President Trump aides are drafting economic measures to combat virus, including expansion of paid sick leave; has not been presented to Trump yet
- Mid-East/ Energy:- Saudi Aramco to cut most of its prices and increase production amid attempt to take market share away from Russia. Cut prices for its medium crude shipped to the US by $7/bbl and also cut prices for Northern Europe and the Far East. Saudi Arabia would increase its production in April to above 10M bpd, could increase to maximum production capacity of 12M bpd if needed.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -5.08% at 348.36, FTSE -6.00% at 6,074.65, DAX -5.48% at 10,909.86, CAC-40 -6.11% at 4,825.28, IBEX-35 -4.75% at 7,978.00, FTSE MIB -8.90% at 18,948.22, SMI -3.04% at 9,441.00, S&P 500 Futures -4.96% limit down]
Market Focal Points/Key Themes:
- European Indices trade sharply lower across the board, after sharp declines in Asia and sharply lower US equity futures, as OIl slumps 20% as Saudi Arabia engages in an all out price war following the Opec meeting on Friday.
- Oil names are baring the brunt of the selling with Oil majors BP, Royal Dutch Shell and Total declining 15%, 14% and 11% respectively. Smaller Oil names also declining sharply, with the likes of Premier Oil down almost 60%, Tullow Oil down 36% and Gulf Keystone lower by over 20%.
- In other news Tesco shares down fractionally following the divestiture of its Thai and Malaysian unit for over $10B; XPO logistics trading higher as the company acquires majority stake in the UK contract logisitics Ops from Huehne + Nagel, while Siltronic declines following their Q4 earnings.
- Looking ahead notable earners include KLX Energy Services and Thor Industries among others.
Equities
- Consumer discretionary: Tesco [TSCO.UK] +1% (confirms divestment)
- Energy: BP [BP.UK] -17% (oil prices drop)
- Financials: Deutsche Bank [DBK.DE] -12% (potential further rate cuts concerns)
- Industrials: Daimler [DAI.DE] -9% (coronavirus concerns on demand)
- Technology: AMS [AMS.CH] -10% (reports Apple could delay launch of new iPhone), Siltronic [WAF.DE] -10% (earnings)
Speakers
- France Fin Min Le Maire: Europe needed to work on a fiscal stimulus plan; needed more economic coordination on virus outbreak. Coronavirus to have a severe impact on growth and believed France 2020 GDP growth could be below 1.0% (**Note: current target is 1.3%). ECB had room to maneuver
- Italy Finance Ministry: Temporary economic hit is needed to combat coronavirus. Govt to spare no effort to ensure package was agreed at the EU level. Commit to reducing debt once the crisis is over
- Italy Dep Econ Min: Govt and Bank of Italy studying State guarantee scheme to support banks offering moratorium to household and companies following coronavirus outbreak
- Poland Central Bank’s Lon: Coronavirus outbreak was an argument to cut rates quickly. Should act preemptively and cut rates now rather than wait for economic slowdown to happen amid coronavirus risk
- Japan Top Currency Official Takeuchi: MOF, BOJ and FSA discussed the nervous markets; reaffirmed the necessity to act appropriately. Overly volatile market movements were not good. Had no comment whether there was FX intervention in today’s session
- Japan govt to announce increase special financial for small and mid-size firms to ¥1.6T (**Reminder: Japan PM Abe stated that would offer interest free loans with no collateral to small and medium sized businesses impacted by coronavirus)
- China Govt Medical adviser (top expert) Zhong Nanshan said to see global coronavirus outbreak to last until June (prior until May)
- IEA Monthly Report cut its 2020 global oil demand growth from 825K bpd to 735K bpd and maintained 2020 Non-Opec supply growth at 2.1M bpd. Extraordinary uncertainty clouded the oil market supply and demand future. 2020 annual global oil demand to fall y/y (1st time since 2009)
Currencies/ Fixed Income
- The USD-Index was at a 17-month low below the 94.75 level as oil tumbles and fears intensify over the coronavirus epidemic. Markets almost pricing in 75bps Fed rate cut in March
- The extreme risk aversion sentiment pushed the JPY and CHF currencies sharply higher. USD/JPY tested 101.55 during the Asian session while USD/CHF probed below the 0.92 level.
- On The yield front the entire US curve was below the 1.0% level. The 10-year Treasury tested 0.35% at one pint which was lower by 40bps
Economic Data
- (CH) Swiss Feb Unemployment Rate: 2.5% v 2.6%e; Unemployment Rate (seasonally adj): 2.3% v 2.3%e
- (DE) Germany Jan Current Account Balance: €16.6B v €24.8B prior; Trade Balance: €13.8B v €15.0Be; Exports M/M: 0.0% v +0.9%e; Imports M/M: +0.5% v +0.5%e
- (DE) Germany Jan Industrial Production M/M: 3.0% v 1.7%e; Y/Y: -1.3% v -3.9%e
- (FI) Finland Jan Preliminary Trade Balance: -€0.4B v +€0.3B prior
- (FR) Bank of France Feb Industrial (Business) Sentiment: 96 v 95e
- (SE) Sweden SEB Housing-Price Indicator: 47 v 45 prior
- (CZ) Czech Jan National Trade Balance (CZK): +15.1B v +16.3Be
- (CZ) Czech Feb Unemployment Rate: 3.0% v 3.1%e
- (TW) Taiwan Feb Trade Balance: $3.3B v $4.4Be; Exports Y/Y: +24.9% v +2.9%e; Imports Y/Y:+44.7% v +5.8%e
- (SE) Sweden Q4 Current Account (SEK): 38.8B v 65.0B prior
- (CH) Swiss weekly Total Sight Deposits (CHF): 598.5B v 595.8B prior; Domestic Sight Deposits: 503.6B v 502.2B prior
- (CZ) Czech Feb International Reserves: $147.8B v $148.0B prior
- (EU) Euro Zone Mar Sentix Investor Confidence: -17.1 v -11.4e (1st negative reading since Nov and lowest since 2013)
Fixed Income Issuance
- None seen
Looking Ahead
- (IL) Israel Central Bank Feb Minutes
- 06:00 (EU) Daily Euribor Fixing
- 07:00 (BR) Brazil Feb FGV Inflation IGP-DI M/M: -0.1%e v +0.1% prior; Y/Y: 6.3%e v 7.7% prior
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:30 (CL) Chile Feb Trade Balance: No est v $1.2B prior; Total Exports: No est v $6.7B prior; Total Imports: No est v $5.5B prior; Copper Exports: No est v $2.7B prior
- 07:30 (CL) Chile Feb International Reserves: No est v $37.5B prior
- 08:00 (MX) Mexico Feb CPI M/M: 0.3%e v 0.5% prior; Y/Y: 3.6%e v 3.2% prior; CPI Core M/M: 0.4%e v 0.3% prior
- 08:00 (TR) Turkey to sell 2025 I/L Bonds
- 08:15 (CA) Canada Feb Annualized Housing Starts: 206.5Ke v 213.2K prior
- 08:30 (CA) Canada Jan Building Permits M/M: -3.0%e v 7.4% prior
- 09:00 (UK) Daily Baltic Dry Bulk Index
- 09:50 (FR) France Debt Agency (AFT) to sell €3.8-5.0B in 3-month, 6-month and 12-month bills
- 10:45 (EU) ECB weekly QE bond buying update
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills
- 17:00 (NZ) New Zealand Feb ANZ Heavy Truckometer M/M: No est v 4.8% prior
- 17:45 (NZ) New Zealand Q4 Manufacturing Activity Q/Q: No est v 0.9% prior; Activity Volume Q/Q: No est v -0.3% prior
- 19:50 (JP) Japan Feb M2 Money Stock Y/Y: 2.8%e v 2.8% prior; M3 Money Stock Y/Y: 2.3%e v 2.3% prior
- 20:01 (UK) Feb BRC Sales Like-For-Like Y/Y: 0.4%e v 0.0% prior
- 20:30 (AU) Australia Feb NAB Business Confidence: No est v -1 prior; Business Conditions: No est v 3 prior
- 21:00 (PH) Philippines Jan Trade Balance: -$3.3Be v $2.5B prior; Exports Y/Y: 3.0%e v 21.4% prior; Imports Y/Y: -4.55e v -7.6% prior
- 21:30 (CN) China Feb CPI Y/Y: 5.2%e v 5.4% prior; PPI Y/Y: -0.35e v +0.1% prior
- 22:30 (HK) Hong Kong to sell 3-month and 6-month bills
- 22:35 (JP) Japan to sell 5-Year JGB Bonds
