Market movers today
The G7 finance ministers will hold a teleconference today at 13:00 CET on how to respond to the global Covid-19 outbreak. Markets have reacted very positively to the outlook of a co-ordinated policy response, which in turn has raised the stakes for the group of seven to deliver. A range of ECB and Fed speakers will also be on the wires during today’s session.
Apart from Covid-19 headlines, focus will – at least partially – return to US politics today. It is ‘Super Tuesday ‘ in the Democratic primaries where one-third of delegates are at play.
In the euro area, flash HICP figures for February are due for release. Core inflation had a disappointing start to the year dropping to 1.1% and we expect it to remain here in February. For headline inflation the outlook is more mixed: it is still boosted by increases in food prices, but with the recent fall in the oil price, the energy component is pulling in the other direction, leaving HICP inflation down at 1.2% in our view.
In Scandinavia, Danish currency reserves for February will reveal whether further intervention measures from Danmarks Nationalbank to support DKK were necessary during the month. In Sweden, Riksbank’s Anna Breman will speak (see next page).
Selected market news
After seven consecutive sessions of declines US stocks soared yesterday amid markets pricing in a co-ordinated policy response. This morning continued news flow on the spreading of the virus limited gains during the Asian session with the S&P future and US yields marginally down. At the time of writing commodities are modestly lower. Brent is back below the USD53/bbl level after improved risk appetite and expectations OPEC+ will cut production later this week had sent prices USD4 higher.
Yesterday, it was confirmed that G7 finance minister and central bank officials will hold a conference call today to discuss how to react to Covid-19. France’s finance minister Le Maire said a given policy response should be ‘as co-ordinated as possible’ and US media report that Fed Chair Powell will lead the call raising market perception that a large scale coordinated policy action could be announced as soon as later this session.
The last 24 hours have been eventful on central bank communication. First, Monday morning Bank of England and Bank of Japan followed the FOMC in signalling a willingness to ease monetary conditions to combat the adverse economic impact of Covid-19. Bank of England said it was cooperating with the Treasury and the Financial Conduct Authority to ‘ensure all necessary steps are taken to protect financial and monetary stability ‘. Soon after Bank of Japan issued an emergency statement promising to inject additional liquidity into markets possibly via higher levels of asset purchases. Then in the evening the ECB published a press release stating that it ‘stands ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks ‘. Finally, this morning the Reserve Bank of Australia cut interest rates by 50bp in a direct response to Covid-19, whilst leaving open the possibility of more easing.
