Market movers today
Being the last major central bank to act on COVID-19, the stakes are high for the ECB today. We expect the ECB to keep rates unchanged and to focus on liquidity to support primarily the SME sector. We also expect a scale up of QE to EUR30-40bn for the coming months.
Following the ECB meeting we will keep an eye on a possible announcement from Danmarks Nationalbank (DN) at 17:00 CET. Should the ECB cut its policy rate 10bp, we see a higher likelihood that DN would keep its policy rate unchanged. If the ECB announces specific measures on liquidity provision due to the coronavirus crisis, DN may opt to copy those.
The spreading of COVID-19 and comments from policy makers and central banks will continue to be scrutinised as such comments are really the market movers right now.
The important Swedish inflation figure is released today.
Selected market news
Yesterday, the World Health Organisation (WHO) declared the coronavirus outbreak a global pandemic.
In the US as well as Europe new harsh measures were announced in an attempt to slow the spreading. The US banned all travel from Europe (the UK) the next 30 days, Italy is said to close all stores except groceries and pharmacies, in Denmark for a period of 14 days schools etc. will close, all non-critical public employees are sent home with pay and events with more than 100 people have to be cancelled and that bars, nightclubs etc. are closed – within a few days, they expect to have the legal mandate to demand it. Australia announced a stimulus plan and is also considering banning travel from Europe.
Financial markets continue to be under severe stress. US stocks fell 5% yesterday, the Nikkei index is down 4% this morning and stock futures in Europe have lost 5-6%. The price on Brent crude has dropped back to USD34/bbl. The rates market continues to price deep rate cuts from the Fed and for the ECB to cut rates today and later on. The currency market mirrors movements in stocks, bonds and commodities. Hence, USD/JPY fell close to 103 overnight and EUR/NOK traded above 11.00.
