HomeContributorsFundamental AnalysisOptimism Builds For US Stimulus Package

Optimism Builds For US Stimulus Package

Notes/Observations

  • Optimism that US Senate on the cusp of a deal for a massive coronavirus stimulus package after settling disagreements over relief for the airline industry, beefed-up unemployment benefits and money for hospitals; vote is expected as soon as Tuesday
  • European Mar Preliminary PMI data all slump into contraction territory (France, Germany, Euro Zone and UK); PMI Services and PMI Composite all at record lows

Asia:

  • Australia Mar Preliminary PMI Manufacturing: 50.1 v 50.2 prior (2nd month of expansion)
  • Japan Mar Preliminary PMI Manufacturing: 44.8 v 47.8 prior (11th month of contraction and lowest since April 2009)
  • Japan Govt expected to cut economic assessment in March monthly report, drop language describing the economy as “recovering”, for the first time in almost 7 years
  • International Olympic Committee (IOC) Member Pound: Tokyo 2020 Olympics would be postponed
  • Hubei Province (China): Planning to remove transport control measures in Wuhan April 8th; to remove all travel restrictions in and out of Hubei province on March 25th [excluding Wuhan]
  • New Zealand Fin Min Robertson: Banks in NZ to provide a 6-month mortgage holiday scheme

Coronavirus:

  • Global cumulative cases 381.6K (+12.5% d/d); cumulative deaths at 16.6K (+12.6% d/d)
  • Italy total coronavirus cases rise to 63,927 from 59,138 (+8.1%); death toll rises to 6,077 from 5,476 prior

Europe:

  • IMF Statement: Nearly 80 countries were requesting help, recession to be at least as bad as the 2008 global financial crisis. Prepared to deploy IMF’s entire $1T of lending capacity. Saw global economic contraction in 2020, followed by a recovery in 2021
  • G20 officials stated that Finance Ministers meeting discussed preparations for a teleconference among G20 leaders in a few days; no specific date is set yet
  • German Econ Min Altmaier said to have dismissed calls by Italy and other European countries to introduce jointly issued debt, also known as euro bonds
  • PM Johnson ordered UK citizens to stay at home during his national address and announced the closing all non-essential shops with measures to be in place for 3 weeks

Americas:

  • President Trump stated that America would be open for business sooner than 3-4 months; To decide on timing and how we would reopen after 15 day period; won’t let coronavirus turn into long lasting problem
  • US Senate: coronavirus bill failed to get enough votes to clear the hurdle again
  • Optimism that US Senate on the cusp of a deal for a massive coronavirus stimulus package after settling disagreements over relief for the airline industry, beefed-up unemployment benefits and money for hospitals; vote is expected as soon as Tuesday

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +4.27% at 292.40, FTSE +3.60% at 5,173.75, DAX +5.36% at 9,209.25, CAC-40 +4.51% at 4,091.54, IBEX-35 +3.78% at 6,466.00, FTSE MIB +6.06% at 16,502.50, SMI +4.06% at 8,492.00, S&P 500 Futures +4.79%]
  • Market Focal Points/Key Themes: European indices open higher across the board but moderate gains slightly during the session; better performance attributed to increased expectations over stimulus; financials and materials sectors among better performers; UK companies continue to postpone results at FCA request, issuing trading updates instead; continuing theme of companies withdrawing guidance and suspending dividend payments due to coronavirus; among further stimulus measures, Italy reportedly considering another €18B package; upcoming earnings expected in the US session inclue Nike and Avery Dennison

Equities

  • Consumer discretionary: JD Sports Fashion [JD.UK] +5% (update on UK lockdown), Pernod-Ricard [RI.FR] +3.5% (updates on coronavirus)
  • Healthcare: Roche [ROG.CH] +4% (responds to pandemic)
  • Industrials: Nordex [NDX1.DE] +16% (earnings; order)

Speakers

  • ECB’s Villeroy (France): To begin buying commercial paper this week as part of its package of measures to combat the coronavirus crisis
  • Germany Econ Min Altmaier: To discuss possible further stimulus measures with economists
  • France Fin Min Le Maire stated that the response to coronavirus outbreak in emergency budget to cost over €45B, number seen as a starting point; Reiterated view that France 2020 GDP now seen contracting by 1.0%
  • UK Minister Gove: Current national lockdown measures could be intensified after three weeks if necessary to tackle the coronavirus outbreak
  • Italy govt said to be in favor of using ESM bailout fund to provide financial support with no conditionality to economies impacted by the coronavirus outbreak
  • Czech Central Bank Mar Emergency Meeting Minutes: Vote was unanimous to cut by 50bps. Did seek a larger rate cut of 75bps at the emergency meeting. Some members believed that fiscal or structural policy should address the situation and that monetary policy could compliment them. Majority of members did express concern over negative side-effects of excessive FX depreciation
  • Czech Fin Min Schillerova stated that the Central bank (CNB) to buy govt bonds to help finance the planned fiscal stimulus. Govt to rush a law amendment through parliament allowing the CNB to make the purchases
  • India Fin Min Sitharaman: Close to coming up with economic package; to be announced sooner rather than later

Currencies/Fixed Income

  • USD was softer against the major pairs for a 2nd straight session. Fed’s unlimited quantitative easing plan bolstered appetite for risk assets as the program would be able to contain the mounting economic and financial-market fallout from the coronavirus. Dealers also not of growing expectations for the U.S. lawmakers to agree on an economic stimulus package
  • EUR/USD was holding above the 1.08 level as the recent Fed bazooka was seen as easing the global liquidity concerns. Major PMI data in Europe was mostly brushed aside and was expected to be horrible given the economic impact of the virus outbreak.
  • USD/JPY trying to edge its way back towards the 111 handle with 112 now viewed as key resistance

Economic Data

  • (FI) Finland Feb PPI M/M: -1.1% v -0.7% prior; Y/Y: -2.8% v -1.6% prior
  • (FI) Finland Feb Unemployment Rate: 6.9% v 7.2% prior
  • (ZA) South Africa Jan Leading Indicator: 103.5 v 101.7e
  • (FR) France Mar Preliminary PMI Manufacturing: 42.9 v 40.6e (2nd straight contraction); PMI Services: 29.0 v 40.0e; PMI Composite: 30.2 v 38.1e
  • (TW) Taiwan M2 Money Supply Y/Y: 4.4% v 4.6% prior; M1 Money Supply Y/Y: 7.0 v 7.6% prior
  • (DE) Germany Mar Preliminary PMI Manufacturing: 45.7 v 39.9e (15th straight contraction); PMI Services: 34.5 v 43.0e (1st contraction in 81 months and a record low); PMI Composite: 37.2 v 41.0e
  • (HK) Hong Kong Q4 Industrial Production Y/Y: % v 0.5% prior
  • (HK) Hong Kong Q4 PPI Y/Y: # v 1.3% prior (revised from 1.4%)
  • (EU) Euro Zone Mar Preliminary PMI Manufacturing: 44.8 v 39.0e (14th straight month and lowest since July 2012); PMI Services: 28.4 v 39.5e (1st contraction in 82months and a record low); PMI Composite: 31.4 v 38.8e (record low)
  • (PL) Poland Feb Unemployment Rate: 5.5% v 5.5%e
  • (UK) Mar Preliminary PMI Manufacturing: 48.0 v 45.0e (1st contraction in 3 months); PMI Services: 35.7 v 45.0e; PMI Composite: 37.1 v 45.0e

Fixed Income Issuance

  • (ID) Indonesia sold total IDR6.6T vs. IDR7.0T target in –month Islamic Bills and 2-year, 4-year and 25-year Islamic Bonds (Sukuk)
  • (ES) Spain Debt Agency (Tesoro) to sell EUR-denominated 7-year bond via syndicate; guidance seen +18bps to mid-swaps with order book over €13.5B
  • (SI) Slovenia to sell EUR-denominated 2023 and 2029 bonds
  • (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in 2026, 2032 and 2048 bonds
  • (IN) India sold total INR250B vs. INR250B indicated in 3-month, 6-month and 12-month bills

Looking Ahead

  • (RO) Romania Feb M3 Money Supply Y/Y: No est v 9.7% prior
  • (NG) Nigeria Central Bank Interest Rate Decision: Expected to cut Interest Rate by 50bps to 13.00%
  • 06:00 (EU) Daily Euribor Fixing
  • 06:15 (CH) Switzerland to sell 3-month bills
  • 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
  • 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
  • 06:30 (DE) Germany to sell €4.0B in 0% Mar 2022 Schatz
  • 06:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
  • 07:00 (UK) Mar CBI Industrial Trends Total Orders: -35e v -18 prior; Selling Prices: -3e v -2 prior
  • 07:00 (BR) Brazil Mar FGV Consumer Confidence: No est v 87.8 prior
  • 07:45 (US) Weekly Chain Store Sales data
  • 07:45 (US) Daily Libor Fixing
  • 08:00 (BR) Brazil Jan Retail Sales M/M: -0.6%e v -0.1%, Y/Y: 2.5%e v 2.6% prior
  • 08:00 (BR) Brazil Jan Broad Retail Sales M/M: -0.6%e v -0.8%, Y/Y: 1.7%e v 4.1% prior
  • 08:00 (CL) Chile Feb PPI M/M: No est v -0.7% prior
  • 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
  • 08:55 (US) Weekly Redbook LFL Sales data
  • 09:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%; Expected to leave Overnight Deposit Rate unchanged at -0.05%
  • 09:00 (UK) Daily Baltic Dry Bulk Index
  • 09:45 (US) Mar Preliminary Markit PMI Manufacturing: 43.5e v 50.7 prior; PMI Services: 42.0e v 49.4 prior; PMI Composite: 45.0e v 50.7prior
  • 10:00 (US) Feb New Home Sales: 750Ke v 764K prior
  • 10:00 (US) Mar Richmond Fed Manufacturing Index: -15e v -2 prior
  • 10:00 (EU) Weekly ECB Forex Reserves
  • 11:00 (MX) Mexico Weekly International Reserve data
  • 11:30 (US) Treasury to sell 52-Week Bills
  • 13:00 (US) Treasury to sell 2-Year Notes
  • 16:30 (US) Weekly API Oil Inventories
  • 17:45 (NZ) New Zealand Feb Trade Balance (NZD): +0.5Be v -0.3B prior Exports: 4.9Be v 4.7B prior; Imports: 4.3Be v 5.1B prior
  • 19:50 (JP) BOJ Jan Minutes (2-meetings ago)
  • 20:00 (AU) Australia Feb Skilled Vacancies M/M: No est v 0.7% prior
  • 23:30 (TH) Thailand Feb ISIC Manufacturing Production Index Y/Y: -6.3%e v -4.6%% prior; Capacity Utilization: No est v 66.5% prior
  • (US) Georgia Primaries
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