Market movers today
Focus continues to be on the development of the coronavirus and policy responses. This week attention will also turn to more data on the economic impact of the virus.
On Tuesday PMIs are due for release for the euro area and the US for March. Both are likely to show a very significant drop.
On Thursday the US weekly jobless claims will give us more clues about how much unemployment is going to rise.
On Tuesday the Eurogroup will have a call to further discuss EU measures to support the member states. Activating the European Stability Mechanism (ESM) or issuance of so-called corona bonds have been mentioned as options.
Euro area consumer confidence for March will give the first impression of how severe household sentiment is being hit.
In the US, the politicians have started the negotiations on a third emergency spending package, which may be approved as early as this week. The size of the package has only been increasing in recent days and they are now discussing an amount of around USD1,500-2,000bn (or 7-9% of GDP). The sooner the better for the chances of an economic rebound in H2. That is not the same as there are no disagreements between Republicans and Democrats that need to be resolved and hence further negotiations are needed. Yesterday, the Republicans lost a key procedural vote in the Senate.
Selected market news
Friday morning Norges Bank made an emergency cut in policy rates of 75bp. The emergency cut in itself was not a big surprise amid soaring temporary unemployment benefit applications but markets had priced in closer to a 50bp reduction for the coming weeks. Norges Bank’ statement (see here ) did not rule out an additional cut to 0% but we think the bar for cutting rates further is high and the probability of negative rates is miniscule.
Also on Friday, Ohio jobless claims ticked in at 139,468 from Sunday-Thursday. Applying this on a country-wide scale, it adds up to 6 million. That is an overestimate, as not all states are hit severely and not all are closed down, but still scary numbers.
On Sunday, Chancellor Angela Merkel banned public meetings of more than two people, closed down restaurants, hairdressers etc., attempting to buy time to fight the virus. Shortly after, she went into quarantine after coming into contact with a coronavirus-infected doctor.
This morning, for the first time, Japan’s PM Shinzo Abe opened up for the possibility of postponing the Tokyo 2020 Olympics. So far the alternative seems to be postponing only and not cancelling. Canada stated it will not send teams to the Olympics this summer. Early trade data out of South Korea today show that in the first 20 days of March exports were up 10% y/y as lockdowns across the world have increased demand for teleconferencing equipment. Adjusting for the number of workdays, the year-on-year change was largely zero, though. The stock market is turning increasingly sour today with Asia Pacific shares outside Japan and S&P500 futures down around 5%. Nikkei 225 is up 2% after markets were closed on Friday in Japan, where stocks were up in the rest of Asia.
