Notes/Observations
- ECB bond program bring relief to yields and spreads in region
- SNB kept policy steady but tweaked its language on CHF currency (franc) from ‘highly valued’ to “even more highly valued” and announced it would steps up FX interventions
- More rate cuts from Asian central banks (all scheduled meetings) included Philippines, Indonesia and Taiwan)
Asia:
- RBA cut the Cash target Rate by 25bps (as anticipated) in an extra-ordinary meeting and unveiled a bond buying facility that will target yield on 3-year Australian Government bonds of around 0.25%
- RBA Gov Lowe post rate decision press conference noted that he expected cash rate to remain at its current level for some years and that nothing is off the table with respect to policy
- Japan Fin Min Aso stated that govt was not considering cash payments to individuals as part of economic relief package
- New Zealand Q4 GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.8% v 1.7%e
- Japan Feb National CPI Y/Y: 0.4% v 0.5%e; CPI Ex Fresh Food (core) Y/Y: 0.6% v 0.6%e
- Australia Feb Employment Change: +26.7K v +6.3Ke; Unemployment Rate: 5.1% v 5.3%e
Coronavirus:
- Global cumulative 218,815 (+10.5%d/d); cumulative deaths 8,810 (+10.8% d/d)
- China cumulative: 81,238 (+0.1% d/d); cumulative deaths 3,250 (+0.3% d/d)
- Italy cumulative cases at 35,713 (+13.4%); total death at 2978 (+19%) -Spain cumulative cases at 14,746 (+24.5%); total deaths at 638 (+19.9%)
- New Zealand and Australia both announce border closing that banned all non-residents from entering the country (effective from Fri, Mar 20th)
Europe:
- ECB announced a €750B Pandemic Bond-Buying Program to run until end of 2020. To expand the range of eligible assets under the corporate sector purchase program (CSPP) to non-financial commercial paper making all commercial papers of sufficient credit quality eligible for purchase under CSPP
- ECB chief Lagarde: Extraordinary times required extraordinary action; there were no limits to our commitment to the Euro, would use full potential of our tools
- ECB’s Villeroy (France): ECB could do even more bond purchases if needed and was determined to act against fragmentation; Could strengthen action on commercial paper
- Schools in UK to be closed indefinitely, exams cancelled amid coronavirus pandemics
- EU Brexit Negotiator Barnier: an ambitious and comprehensive deal with the UK is possible
Americas:
- Senate passed a multibillion-dollar emergency aid package to confront the economic impacts of the coronavirus
- Fed’s Kashkari (dove, FOMC voter): Coronavirus pandemic could be devastating like the great Depression or worse; the faster Congress can act the better
- White House econ adviser Kudlow stated that US might take equity positions in companies as part of aid
- NYSE to temporarily close floor, move to electronic trading after positive coronavirus tests
- Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Rate by 50bps to 3.75%
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +1.11% at 282.76, FTSE +0.48% at 5,106.25, DAX +1.16% at 8,548.00, CAC-40 +3.14% at 3,872.85, IBEX-35 +2.71% at 6,445.00, FTSE MIB +4.54% at 15,807.50, SMI +2.29% at 8,530.00, S&P 500 Futures +0.01%]
- Market Focal Points/Key Themes: European indices open broadly higher but retrated a bit as the session progressed; theme around regulatory and government stimulus action; reports of extension of lockdowns around Europe; travel and materials sectors once again leading on the downside; better performing sectors include food and telecom; Lufthansa announces grounding of 90% of its aircraft; upcoming earnings expected in the US session include Lennar, Accenture and Commercial Metal
Equities
- Consumer discretionary: Lufthansa [LHA.DE] +8% (earnings), Next Plc [NXT.UK] +3% (trading update), Ocado [OCDO.UK] -7% (Q1 sales), Hugo Boss [BOSS.DE] -8% (withdraws outlook)
- Technology: Qiagen [QIA.DE] +1% (test kit) *
Speakers
- SNB Policy Statement tweaked its language on CHF currency (franc) from ‘highly valued’ to “even more highly valued” and announced it would steps up FX interventions citing rising global uncertainty. A return to normality in 2021 could bring stronger GDP growth . Stressed that the domestic financial system had sufficient liquidity but was examining relaxation of counter-cyclical capital buffer
- SNB President Jordan post rate decision press conference stated that the current situation could not be addressed by monetary policy alone. Ongoing talks with govt in early stages and too soon to further details of additional steps. Reiterated that could cut rates further into negative territory if needed
- Norway Central Bank (Norges): Continuously considering whether need to purchase NOK currency (Krona)
- German Econ Min Altmaier stated that ECB action showed Europe was determined to support economy. He stressed thab the region should coordinate on action to help the economies
- Italy PM Conte said to extend the country’s lockdown measures
- German IFO economists noted that the domestic economy was falling into recession
- German Institute for Economic Research (DIW): expected German GDP to contract by 0.1% in 2020. Virus outbreak to massively impact the German economy for the next two quarters. Recession could be worse if the uncertainty sparked by coronavirus outbreak persists
- Philippines Central bank (BSP) Policy Statement noted that it had enough policy space for an assertive reduction in policy rate but would remain data-driven going forward. Prepared to use full range of monetary instruments and deploy regulatory relief measures as needed and could recalibrate interest rate corridor, cutting RRR and suspending Term Deposit Facility auctions. Saw inflation at a lower path for both 2020 and 2021 with risks leaning to the downside
- Indonesia Central Bank Gov Warjiyo pre-rate decision press conference reiterated that it would maintain an accommodative policy stance and stressed that it would ensure market confidence and liquidity
- Taiwan Central Bank (CBC) Policy Statement noted that it would adopt an expansionary fiscal policy and expand the scope of its Repo Facility operations. It would provide TWD200B liquidity fund to banks and noted that the manufacturing industry would face difficulties due to virus outbreak. Taiwan would hold more policy meetings if virus outbreak spread and stressed it would maintain FX market order
- Taiwan Central Bank Gov Yang post rate decision press conference: Monetary policy would be more loose from now but not likely to see negative rates
- Japan PM Abe: Coronavirus was having a negative effect on economy and need to protect jobs
Currencies/Fixed Income
- European bond yields were dramatically lower after the ECB unveiled a massive new bond-buying program and ECB chief Lagarde signaled there’s “no limit” to the bank’s commitment to the euro. Italy 10-year govt yield began the session at 1.37%, lower by over 100bps with the Italy/German Gov’t bond spread at approx. +170bps (was at 320bps on Wed at one point) USD continued to exhibit strength against the major and emerging market currencies
Economic Data
- (NL) Netherlands Feb Unemployment Rate: 2.9% v 3.0% prior Forecasts
- (CH) Swiss Feb Trade Balance (CHF): 2.0 v 2.8B prior; Real Exports M/M: -3.3% v +1.8% prior; Real Imports M/M: -0.1% v -1.5% prior; Watch Exports Y/Y: -9.2% v +9.7% prior
- (ID) Indonesia Central Bank (BI) cut 7-Day Reverse Repo Rate by 25bps to 4.50% (as expected)
- Philippines Central Bank (BSP) cut Overnight Borrowing Rate by 50bps to 3.25% (as expected)
- (CH) SNB left both the Sight Deposit Interest Rate and Policy Rate unchanged at -0.75%;
- (TW) Taiwan Central Bank (CBC) cut Benchmark Interest Rate by 25bps to 0.125% (more-than-expected)
- (DE) Germany Mar Preliminary IFO Survey Business Climate Survey: 87.7 v 96.0 prior; Current Assessment: 93.8 v 99.0 prior; Expectations Survey: 82.0 v 93.2 prior
- (PL) Poland Feb Sold Industrial Output M/M: +2.2% v -0.2%e; Y/Y: 4.9% v 2.0%e
- (PL) Poland Feb PPI M/M: -0.2% v 0.0%e; Y/Y: 0.1% v 0.3%e
Fixed Income Issuance
- None seen
Looking Ahead
- (ES) Spain Debt Agency (Tesoro) to sell €4.0-5.0B in 2023, 2027, 2030 and 2033 Bonds
- 05:50 (FR) France Debt Agency (AFT) to sell €6.25-
- 06:00 (EU) Euro Zone Jan Construction Output M/M: No est v -3.1% prior; Y/Y: No est v -3.7% prior
- 06:00 (EU) Daily Euribor Fixing
- 06:00 (IE) Ireland Debt Office (NTMA) to sell €500M in 12-month bills
- 06:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
- 06:30 (PL) Poland to sell Bonds
- 06:30 (UK) DMO to sell £3.25B in 0.625% Jun 2025 Gilts
- 06:50 (FR) France Debt Agency (AFT) to sell €0.5-1.0B in inflation-linked 2028 and 2030 bonds (Oatei)
- 06:45 (US) Daily Libor Fixing
- 07:00 (PT) Portugal Jan Current Account Balance: No est v -€0.3B prior
- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One-Week Repo Rate by 50bps to 10.25%
- 08:00 (CH) Swiss SECO March Economic Forecasts
- 08:30 (US) Q4 Current Account Balance: -$108.6Be v -$124.1B prior
- 08:30 (US) Mar Philadelphia Fed Business Outlook: 8.0e v 36.7 prior
- 08:30 (US) Initial Jobless Claims: 220Ke v 211K prior; Continuing Claims: 1.74Me v 1.722M prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 13th: No est v $577.8B prior
- 09:00 (PL) Poland Central Bank (NBP) Mar Minutes
- 09:00 (UK) Daily Baltic Dry Bulk Index
- 09: 00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to cut Interest Rate by 50bps to 5.75%
- 10:00 (US) Feb Leading Index: 0.1%e v 0.8% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (CO) Colombia Jan Trade Balance: -$0.7Be v -$0.5B prior; Total Imports: $4.3Be v $4,1B prior
- 11:30 (US) Treasury to sell 4-week and 8-week bills
- 13:00 (US) Treasury to sell 10-year TIPS
- 17:00 (KR) South Korea Feb PPI Y/Y: No est v 1.0% prior
- 21:30 (CN) China Mar Prime Loan Prime Announcement: Expected to cut Key Rates by 7bps to % for 1-year to 3.98% and cut by 5bps to 4.70% for 5-year
- 22:00 (NZ) New Zealand Feb Credit Card Spending M/M: No est v % prior; Y/Y: No est v % prior
- 23:00 (CN) China to sell 3-month Bills
