Notes/Observations
- Risk aversion flows rise as market disappointed with President Trump’s nation-wide address; investors who were looking for a more robust fiscal response to curb potentially slower economic growth
- ECB under pressure to act after the Fed and BOE carried out an emergency 50bps cuts recently
Asia:
- Australia PM Morrison announced A$17.63B in stimulus measures (A$11B to be deployed before the end of June 2020),would not extend beyond June 30,2021; households to receive A$750/person; Total stimulus worth A$22.9B
- BOJ Gov Kuroda stated that he discussed financial market moves with PM Abe, to conduct appropriate asset buying and provide ample liquidity to markets
- Japan Govt Spokesperson: At this point no need to declare state of emergency on coronavirus Coronavirus:
- Global cumulative: 126,254; cumulative deaths 4,637
- China cumulative: 80,980(+25); cumulative deaths 3,173(+11)
- Italian case approaching 12,500; South Korea reported 114 new cases and 6 deaths
Europe:
- Italy PM Conte ordered closure of “all” shops except for groceries and pharmacies for the entire country, bars and restaurants must close unless they could keep 1 meter distance between customers; factories can continue to work with precautions
Brexit:
- UK govt expected to announce its stepping up its response to Covid-19; efforts to switch to delaying rather than containing spread of virus Americas: – President Trump announced that the US govt to restrict travel from Europe for the next 30 days (exception for UK) as response to the coronavirus outbreak; called on Congress to take legislative action to aid small businesses, workers, and all those who might be financially affected by this pandemic
- President Trump said to have ‘urged’ US Treasury Sec Mnuchin to put pressure on Fed Chair Powell regarding stimulus
- White House Trade adviser Navarro: Payroll tax cut would be highly effective stimulus, Trump wanted the payroll tax temporarily cut to zero
- Fed increases size of overnight repo operations through Apr 13th
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -6.15% at 312.70, FTSE -5.94% at 5,544.95, DAX -6.65% at 9,744.68, CAC-40 -6.15% at 4,326.73, IBEX-35 -6.18% at 6,977.00, FTSE MIB -5.29% at 16,979.50, SMI -6.15% at 8,590.00, S&P 500 Futures -4.90%]
- Market Focal Points/Key Themes: European indices open down significantly, moving lower as session wore on; travel and airline stocks under pressure following US ban on travel from Europe;Energy sector under pressure as crude falls again; materials underperforming following drop in commodities; Telecom and healthcare among better performers; focus on expectation over ECB measures; earnings expected in upcoming US session include Oracle, Autogrill and Slack Technologies
Equities
- Consumer discretionary:Moss Bros [MOSB.UK] +50% (to be acquired), Lufthansa [LHA.DE] -12%, Air France-KLM [AF.FR] -14%, IAG [IAG.UK} -18% (US bans flights from Europe), Dufry [DUFN.CH] -11% (earnings), WH Smith [SMWH.UK] -12% (trading update), Galliford Try [GFRD.UK] -16% (earnings; overstated assets)
- Energy: RWE AG [RWE.DE] -11% (earnings)
- Financials: Intu Properties [INTU.UK] -10% (earnings)
- Technology: Finablr [FIN.UK] -53% (urgent steps to keep liquidity)
Speakers
- EU Council President Michel: To access US travel ban; wants economic disruption must be avoided
- UK Chancellor of the Exchequer (Fin Min) Sunak: coronavirus impact on economy would be temporary. No evidence that border closings and travel bans would work. Confirmed that govt approach to focus on delaying the spread of the virus (from prior view of containing)
- France Labor Min Muriel: More difficult to achieve unemployment targets at this time
- Spain Foreign Min Gonzalez: To take more steps to support tourism. Urged EU to take more steps to address coronavirus outbreak
- Poland Central Bank’s Lon: Rate cut of 50bps would help economy; MPC should also consider non-convential measures
- German Kieler Institut fuer Weltwirtschaft think tank (IFW) sees German 2020 GDP contracting due to affects from coronavirus outbreak
- German VDMA Engineering association: Spread of coronavirus is noticeable setback for German engineering industry
- India govt said to allow States to borrow an extra INR600B to help overcome the economic slowdown
- China Commerce Ministry (MOFCOM) spokesperson Gao Feng stated that the recovery in China’s factory activity was accelerating. To actively expand imports and act to stabilize foreign trade. Trade was facing rising external uncertainty as coronavirus spreads; saw increasing downward pressures on global economy
- China National Health Commission: country had passed peak of coronavirus epidemic
- China Premier Li: Impact of the coronavirus epidemic on the domestic economy could not be underestimated, but we must spare no efforts to stabilize employment
- Iran Foreign Min Zarif: Have asked IMF for $5.0B for assistance to address coronavirus impact
Currencies/Fixed Income
- Safe haven flows again dominated in the aftermath of President Tump’s address on the conronavirus outbreak. Markets appeared to want a more robust fiscal response to curb potentially slower economic growth rather than the travel ban.
- EUR/USD only marginal higher with focus on the ECB meeting later today. ECB seen under pressure to act after the Fed carried out an emergency 50bps cut last week amid increasing expectations that the global economy would experience a negative shock from the coronavirus outbreak. Markets currently fully pricing a 10bps cut in Deposit Rate. There are mixed views on whether ECB would cut rates further into negative territory or stimulate vis other means like expanding its asset purchase program (Some calls for increase in QE from €20B up to €40B/month). ECB could respond with targeted financing measures such as TLTROs for banks to lend to SMEs.
- USD/JPY moved below hourly support of 104.30 that reopened the test towards parity on safe-haven flows.
- USD/CHF lower by 0.3% to trade at 0.9360 just ahead of the US morning.
- US 10-year yield lower by almost 20bps to test below 0.69%.
Economic Data
- (FI) Finland Jan Final Retail Sales Volume Y/Y: 3.3%e v 2.2% prelim
- (CZ) Czech Jan Industrial Output Y/Y: -1.4% v -1.5%e; Construction Output Y/Y: 6.0% v 4.5% prior
- (SE) Sweden Feb CPI M/M: 0.5% v 0.5%e; Y/Y: 1.0% v 1.1%e
- (SE) Sweden Feb CPIF M/M: 0.5% v 0.5%e; Y/Y: 1.0% v 1.1%e
- (SE) Sweden Feb CPIF (ex-energy) M/M: 0.8% v 0.7%e; Y/Y: 1.6% v 1.5%e
- (IT) Italy Q4 Unemployment Rate: 9.7% v 9.8%e
- (IS) Iceland Feb International Reserves (ISK): 855B v 835B prior
- (ZA) South Africa Jan Total Mining Production M/M: +6.0% v -0.5%e; Y/Y: 7.5% v 1.0%e
Fixed Income Issuance
- None seen
Looking Ahead
- 06:00 (EU) Euro Zone Jan Industrial Production M/M: +1.5%e v -2.1% prior; Y/Y: -2.9%e v -4.1% prior
- 06:00 (GR) Greece Q4 Unemployment Rate: No est v 16.4% prior
- 06:00 (EU) Daily Euribor Fixing
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €5.5-7.0B in 3-year, 7-year, 10-year and 20-year BTP bonds
- 06:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
- 06:30 (IE) Ireland Debt Agency (NTMA) to sell 1.10% May 2029 Bonds
- 07:00 (IE) Ireland Feb CPI M/M: No est v -0.7% prior; Y/Y: No est v 1.3% prior
- 07:00 (IE) Ireland Feb CPI EU Harmonized M/M: No est v -0.7% prior; Y/Y: No est v 1.1% prior
- 07:00 (IE) Ireland Jan Property Prices M/M: No est v -0.6% prior; Y/Y: No est v 0.9% prior
- 07:00 (IL) Israel Feb Trade Balance: No est v -$2.3B prior
- 07:00 (ZA) South Africa Jan Manufacturing Production M/M: -1.0%e v -2.8% prior; Y/Y: -4.3%e v -5.9% prior
- 08:00 (UK) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to cut Key Rate by 100bps to 10.00%
- 08:00 (IN) India Feb CPI Y/Y: 6.7%e v 7.6% prior
- 08:00 (IN) India Jan Industrial Production Y/Y: +0.5%e v -0.3% prior
- 08:30 (US) Feb PPI Final Demand M/M: -0.1%e v +0.5% prior; Y/Y: 1.8%e v 2.1% prior
- 08:30 (US) Feb PPI (ex-food/energy) M/M: 0.1%e v 0.5% prior; Y/Y: 1.7%e v 1.7% prior
- 08:30 (US) Feb PPI (ex-food/energy/trade) M/M: 0.1%e v 0.4% prior; Y/Y: 1.5%e v 1.5% prior
- 08:30 (US) Initial Jobless Claims: 220Ke v 216K prior; Continuing Claims: 1.73Me v 1.729M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 08:45 (EU) ECB Interest Rate Decision: Expected to leave 7-day Main Refinancing Rate unchanged at 0.00% to %; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.50%
- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 6th: No est v $B prior
- 09:00 (UK) Daily Baltic Dry Bulk Index
- 09:30 (EU) ECB chief Lagarde post rate decision press conference
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:30 (US) Treasury to sell 4-week and 8-week bills
- 12:00 (US) Fed Reports Q4 Financial Accounts: Household Change in Net Worth: No est v $0.574T prior
- 13:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves
- 15:00 (AR) Argentina Feb National CPI M/M: No est v 2.3% prior; Y/Y: No est v 52.9% prior
- 15:00 (AR) Argentina Jan Capacity Utilization: No est v 56.9% prior
- 17:00 (KR) South Korea Feb Export Price Index M/M: No est v -0.8% prior; Y/Y: No est v -2.7% prior
- 17:00 (KR) South Korea Feb Import Price Index M/M: No est v -0.8% prior; Y/Y: No est v -2.7% prior
- 17:30 (NZ) New Zealand Feb Manufacturing PMI: No est v 49.6 prior
- 17:45 (NZ) New Zealand Feb Food Prices M/M: No est v 2.1% prior
- 19:20 (PE) Peru Central Bank (BCRP) Interest Rate Decision: expected to leave Reference Rate unchanged at 2.25%
- 23:00 (CN) China to sell 3-month Bills
- 23:30 (JP) Japan to sell 3-Month Bills
