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US Politicians Agree On USD2,000Bn Emergency Package

Market movers today

Focus continues to be on the virus numbers, where we may see a peak in new cases in Italy and hence a slowdown in contagion. Markets may be eyeing a peak in the bad news soon if we see confirmation of improvement in Italy and gradually in the rest of Europe. This would be expected in the US as well with a lag of maybe a week. We will publish a research paper on this issue later today.

On the data front we will get US durable goods orders for February. It is the month when COVID-19 spread a lot in China and caused more uncertainty, so we might see an impact. However, the markets will probably disregard it as it is from before the significant spread outside China took hold.

We also get the final German IFO business survey for March. We got a preliminary reading last week, which showed a big decline. The revised number could very well show a further drop.

Selected market news

Yesterday, US stocks had a very good day. The S&P 500 index rose the most since October 2008 and the Dow Jones index rose more than 11%, the biggest one-day increase since 1933. The improved risk sentiment is likely driven by a combination of early signs of improvement in Italy when looking at the number of new cases and expectations that the US would soon approve a third and big emergency spending package. Speaking of which, the White House, the Senate Democrats and Republicans agreed to an emergency package of USD2,000bn overnight. Details have not been released yet but it is set to include aid to employees, companies and state and local governments. The Senate may vote on this already later today. House Speaker Nancy Pelosi has been part of the negotiations and the House is expected to sign off as well. That soon, it is too soon to say that this is really the bottom in risk. US futures are trading slightly down this morning.

PMIs for Japan, Europe and the US declined significantly in March indicating a sharp GDP contraction, even worse than during the financial crisis. This is not a surprise given the measures implemented by the governments. We are in the middle of a deep recession, the question is just whether we are going to see a rebound in the second half of the year or not. This is still our expectation but uncertainty is high given the current circumstances. You can read about our euro area macro and US macro outlook in the two following pages: Flash Comment Euro Area: Europe’s economy in free fall and Macro US: Sharp GDP contraction but we still expect a rebound in H2 , 23 March.

We have updated our overview of the fiscal, monetary, liquidity, regulatory and credit measures that have been taken in the Nordic countries to fight the COVID-19 crisis. This time we take a closer look at regulatory changes. For more details see Nordic Research: Update no 2: Policy measures in the Nordic countries, 23 March.

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