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Risk Appetite Finding Some Composure

Notes/Observations

  • The raft of monetary and fiscal stimulus in numerous regions seem to help to finally calm market nerves into weekend
  • California lockdown prompts fear of a US recession; speculation that next week’s US initial claims could approach 2M

Asia:

  • China Mar Prime Loan Prime Announcement: Keeps both 1-year and 5-year LPR rates unchanged at 4.05% and 4.75% respectively
  • PBoC adviser Ma Jun: Have relatively large room for further both Broad and targeted RRR cuts; takes time for RRR cuts to pass to loan prime rates (LPRs) Fed/RBA: establish $60b swap line
  • Reserve Bank of Australia (RBA) purchases A$5.0B in 2-8-year bonds (1st bond buying operation)
  • Japan Gov, ruling party and opposition all met yesterday to consider a “record breaking” stimulus package ‘

Coronavirus:

  • Global cumulative cases 244,517 (11.7% d/d; cumulative deaths 10,030
  • China cumulative cases: 81,307 (+0.1d/d); cumulative deaths 3,253 (+0.1% d/d) -US cumulative cases at 11597 (+25%) -Italy cumulative cases at 35,713 (+14.9%); death toll rises 14.3% to 3,405 -UK cumulative cases at 3,229 (+20%)

Europe:

  • ECB chief Lagarde in a FT op/ed noted that monetary policy had to keep financial sector liquid amid the coronavirus outbreak – – ECB’s De Guindos (Spain): ECB will prevent economic crisis from becoming financial crisis; ECB can always do more; reiterates European fiscal response is needed
  • Spain government ordered hotels and lodging establishments to close due to coronavirus

Americas:

  • California issued a ‘Stay at Home’ aka lockdown
  • US Treasury Sec Mnuchin stated that goal was to get ‘bill’ passed and signed by Trump on Monday (March 23rd); Mnuchin and White House Adviser Kudlow were expected to meet with US Senators on Friday (March 20th) regarding stimulus
  • US Sen McConnell coronavirus relief plan reportedly included direct payments of $1,200 per person, $2,400 per couple
  • Fed: Discount window borrowing increased by $6.7b to $28.2b over the weekend ending Mar 18th
  • Economists noted that upcoming initial jobless claims data could top record 1.5 million next week

Mid-East/Energy:

  • President Trump stated that he would get involved in the oil market dispute at the appropriate time; Low oil prices were devastating to Russia

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +4.77% at 301.52, FTSE +3.57% at 5,335.70, DAX +5.93% at 9,121.00, CAC-40 +6.28% at 4,097.62, IBEX-35 +5.93% at 6,756.00, FTSE MIB +3.49% at 16,007.50, SMI +3.42% at 9,086.50, S&P 500 Futures +4.16%]
  • Market Focal Points/Key Themes: European indices open higher across the board remaining supported during the session; support attributed to central bank responses; series of companies report suspending dividends to conserve liquidity during virus outbreak; BOE canceles annual stress test; France reportedly planning lockdown extension; rising crude supporting energy stocks after Trump hints getting involved in Russia-Saudi dispute; upcoming earnings expected in the US session include Tiffany’s

Equities

  • Consumer discretionary: Marks & Spencer [MKS.UK] -6% (trading update)
  • Industrials: Siemens [SIE.DE] +9% (new CEO) , A.P. Maersk [MAERSK.DK] +9% (COVID-19 update)

Speakers

  • Norway Central Bank (Norges) cut the Deposit Rate by 75bps to 0.25% for its 2nd intra-policy move in Mar and added that it was not ruling out further rate cuts
  • BOE canceled the planned 2020 annual banking sector stress test. The cancellation would help lenders focus on meeting the needs of UK households and businesses via the continuing provision of credit. Noted that the 2019 tests showed banking system resilient to deep and simultaneous recession in UK and global economies
  • ECB’s Villeroy (France): ECB’s new package would be effective; Council determination to act was unanimous. Saw no liquidity problems and stressed that ECB had all the necessary flexibility
  • ECB’s De Cos (Spain): To do whatever it take to respond to the virus impact; Europe needed an ambitious fiscal response. ECB Asset program to be flexible; could relax limits
  • ECB’s Costa (Portugal) Coronavirus outbreak to have a deep impact on global economy. He added that in the absence of adequate measures, this pandemic’s impact on GDP might be much greater than the impact of the great financial crisis
  • German Fin Min Scholz: ECB was making sure that liquidity was available to markets. Germany is prepared to take stakes in companies and the govt was unlikely to avoid additional borrowing
  • EU Commission President Von der Leyen stated that it would loosen debt rules as it saw the need to be both flexible and generous. Reiterated stance that open for possible request from UK PM Johnson on extending the Brexit deadline – France Govt said to consider extending its lockdown
  • Italy govt said to be considering extendind the country’s lockdown to at least May 1st
  • UK Debt Management Office (DMO): To publish a revised 2020/21 borrowing remit on Apr 23rd to account for the measures implement to combat the coronavirus outbreak
  • Germany Labor Agency IAB stated that it saw 2020 German GDP of -2.0%.
  • If crisis was severe and only normalizes at year-end then unemployment could rise above 3M
  • German VDMA Engineering association: Global machine sales to be lower in 2020 compared to year ago levels; expected there could be recovery in H2 of 2020 but not be able to compensate for losses we are seeing before then
  • Italy Think-Tank REF forecasted Italy Q1 GDP -3.0%, Q2 GDP -5.0%
  • Poland Central Bank’s Lon: Recent 50bps rate cut was adequate and did no recession risk in Poland
  • Poland Central Bank Hardt said to oppose more rate cuts. Too low interest rate might limit the possible impact range for non-standard measures and cause unnecessary imbalances
  • Poland Central Bank official Sura: To focus on GDP as inflation is in check; would amplify our actions if necessary
  • Philippines Central Bank (BSP): monitoring to see if further rate cuts were needed; looking into a range of other measures. BSP was prepared to temper destabilizing FX swings

Currencies/Fixed Income

  • FX saw a week of heightened volatility with various govt and central banks announcing steps to help contain the economic fallout from the coronavirus.
  • USD was broadly weaker on Friday in the aftermath that State of California issued a ‘Stay at Home’ order which prompted lockdown concerns that other states mighty follow suit and push the world’s largest economy into recession.
  • Other dealers believed the raft of monetary and fiscal stimulus in numerous regions helped to finally calm market nerves and helped to unwind USD long positions.

Economic Data

  • (NL) Netherlands Mar Consumer Confidence Index: -2 v -2 prior
  • (NL) Netherlands Jan Consumer Spending Y/Y: 1.0% v 2.9% prior
  • (DE) Germany Feb PPI M/M: -0.2%e v +0.8% prior; Y/Y: 0.2%e v 0.2% prior
  • (NL) Netherlands Feb House Price Index M/M: 0.2% v 1.5% prior; Y/Y: 6.6% v 6.3% prior
  • (MY) Malaysia Mid-Mar Foreign Reserves: $103.0B v $103.4B prior
  • (CN) Weekly Shanghai copper inventories (SHFE): 377.3K v 3801K prior
  • (FR) France Q4 Final Wages Q/Q: 0.2% v 0.2%e
  • (TW) Taiwan Feb Export Orders Y/Y: -0.8% v +0.7%e
  • (CZ) Czech Mar Consumer Confidence: -6.3 v -3.0 prior; Business Confidence: 5.8 v 9.4 prior; Composite Confidence: 3.4 v 6.9 prior
  • (RU) Russia Narrow Money Supply w/e Mar 13th (RUB): 11.12T v 10.99T prior
  • (EU) Euro Zone Jan Current Account Balance: €34.7B v €32.6B prior
  • (GR) Greece Jan Current Account Balance: -€1.3B v -€0.5B prior
  • (PL) Poland Feb Retail Sales M/M: +0.5% v -2.7%e; Y/Y: 9.6% v 6.3%e; Real Retail Sales Y/Y: 7.3% v 4.4%e
  • (PL) Poland Feb Construction Output Y/Y: 5.5% v 6.5% prior
  • (IT) Italy Jan Current Account: -€0.2B v +€4.8B prior
  • (UK) Feb Public Finances (PSNCR): +1.4B v -£19.1B prior; Public Sector Net Borrowing: -£0.4B +£0.7Be; Central Government NCR: -£2.5B v -£20.5B prior; PSNB ex Banking Groups: £0.3B v £0.8Be
  • (UK) BoE/TNS Quarterly Inflation Expectation Survey Next 12-months: 3.0% v 3.1% prior

Fixed Income Issuance

  • (ZA) South Africa sold total ZAR745M vs. ZAR1.04B indicated in 2029, 2038 and 2046 I/L Bonds

Looking Ahead

  • (EU) European Finance Ministers (EcoFin) video-conference call (with ECB’s De Guindos)
  • (UR) Ukraine Q4 Final GDP Q/Q: No est v 0.1% prelim; Y/Y: 1.5%e v 1.5% prior
  • (ES) Spain Jan Trade Balance: No est v -€2.1B prior – 06:00 (EU) Daily Euribor Fixing
  • 06:00 (FR) France Debt Agency (AFT) announcements on upcoming issuance (bills, Oats)
  • 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week Auction Rate unchanged at 6.00%
  • 07:00 (IE) Ireland Feb PPI M/M: No est v -1.0% prior; Y/Y: No est v -4.3% prior
  • 07:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.5B, £2.0B and £3.0B respectively)
  • 07:30 (IN) India weekly Forex reserve data – 08:00 (MX) Mexico Q4 Aggregate Supply and Demand: -0.9%e v -0.3% prior
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 08:30 (CA) Canada Jan Retail Sales M/M: 0.3%e v 0.0% prior-Retail Sales (ex-auto) M/M: 0.2%e v 0.5% prior
  • 09:00 (RU) Russia Feb Unemployment Rate: 4.7%e v 4.7% prior; Real Wages Y/Y: 5.2%e v 6.9% prior
  • 09:00 (RU) Russia Feb Real Retail Sales Y/Y: 3.0%e v 2.7% prior
  • 09:00 (UK) Daily Baltic Dry Bulk Index
  • 10:00 (US) Feb Existing Home Sales: 551Me v 5.46M prior
  • 10:00 (BE) Belgium Mar Consumer Confidence Index: No est v -4 prior
  • 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Spain sovereign debt; S&P on Spain and Belgium sovereign debt; Fitch on Denmark sovereign debt; Canadian rating agency DBRS on Portugal sovereign debt)
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 15:00 (CO) Colombia Jan Economic Activity Index (Monthly GDP) Y/Y: 3.4%e v 3.6% prior
  • (MX) Citibanamex Survey of Economists
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