Risk-On Finds Its Groove Again

Notes/Observations

• US Senate reached a bipartisan agreement on virus stimulus plan
• Coronavirus and fiscal stimulus-related headlines remain in focus

Asia:

• China PBOC said to be in talks to cut rate that banks pay on savings accounts, might even cut the key one-year Deposit Rate in coming days
• BOJ Summary of Opinions from March 16th emergency policy meeting: Appropriate for the Bank to enhance monetary easing, with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms’ and households’ sentiment from deteriorating
• Reserve Bank of New Zealand (RBNZ) purchases NZ$250M in bonds v NZ$250M sought (1st QE operations)
• Reserve Bank of Australia (RBA) offers to buy total of A$2.0B in bonds (target of A$2.0B) v A$4.0B prior

Coronavirus:

• Global cumulative 423.0K (+10.8% vs y’day); cumulative deaths 18.9K (+14.2% vs y’day)

Europe:

• EU official stated that EU finance ministers had broad supported the use of ESM bailout fund but more work was needed on details. ECB President Lagarde strongly supported coronabonds during call with Eurogroup
• Eurogroup Chief Centeno stated that there was broad support for using the ECCL credit line (existing ESM precautionary instrument) from the ESM bailout in response to the Covid-19 outbreak on condition the credit line was focused on the crisis. Size of the available instrument could be in the range of 2 percent of members’ GDP, as a benchmark
• ESM’s Regling: Precautionary credit line was the best was to respond to the outbreak and would be available to all Euro Zone countries and up to them if they wished to apply. Size of the credit line could be 2% of each countries’ GDP and could be adjusted depending on how the crisis develops;

Americas:

• US Senate Majority Leader McConnell (R-KY) confirmed a bipartisan agreement on the coronavirus stimulus bill and included a measure to send checks to US households.
• Main Points of US virus stimulus package said to include $130B in funding for healthcare and unemployment compensation on steroids with the govt to cover any laid off employees salary. Strict oversight on all loans made to corporations; to track where money was going and what terms were. $150B to state and local govts that needed resources. Small business support, Fed govt to pay employees while they are closed
• Mid-East/ Energy: Weekly API Crude Oil Inventories: -1.2M v -0.4M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +5.82% at 317.76, FTSE +4.83% at 5,702.60, DAX +3.80% at 10,115.75, CAC-40 +4.82% at 4,447.14, IBEX-35 +4.50% at 7,046.65, FTSE MIB +5.07% at 17,770.00, SMI +4.07% at 9,088.50, S&P 500 Futures +2.35%]
• Market Focal Points/Key Themes: European indices opened higher across the board and continued positive as the session progressed; Risk-on sentiment supported after
• US Congress reaches agreement on stimulus bill; Healthcare and Telecom among the sectors that are performing; upcoming earnings expected in the US session include Micron, GNC and Winnebago

Equities

• Consumer discretionary: Sixt [SIX2.DE] +20% (final earnings), Zooplus [ZO1.DE] -17% (earnings) [
• Energy: E.ON [EOAN.DE] +10% (earnings) – Financials:
• Healthcare: Curetis [CURE.NL] -9% (business update)
• Industrials: Thyssenkrupp [TKA.DE] +22% (agreement with union)

Speakers

• Eurogroup chief Centeno reiterated stance of have broad support to use ESM when needed, details on credit lines are still being fine tuned
• Germany Fin Min Scholz stated in Parliament that the govt was doing everything to address the fallout from the virus outbreak. There was no blueprint for addressing a crisis like this but was focusing on targeted measures that worked quickly (**Note: making the case for German Parliament open up debt limits to combat a crisis and vote on unprecedented €750B plan)
• Germany CSU Lawmaker Dobrindt: Govt crisis measures seen worth at €1.4T
• UK Parliament said to likely to vote on closing a day earlier for Easter recess in effort to slow the virus outbreak. Expected to close on Wednesday evening (Mar 25th) for Easter recess and reopen in April
• Spain Foreign Min Gonzalez stated that Europe still needed to calibrate its fiscal response and believed that coronabonds were a good idea
• German IFO economists domestic economy was in a shock as the Business Climate registered its largest MoM decline in the survey’s history
• Poland Central Bank Hardt stated that a large PLN currency (Zloty) depreciation was the last thing the country needed. Believed the central bank should focus on providing liquidity to the financial system and protecting the value of the currency. Reiterated stance that MPC’s last rate cut went too far and reduced the scope for non-standard policy tools
• South Africa Central Bank (SARB): To buy government securities in secondary market
• Russia said to be preparing second economy aid package
• OECD chief economist Boone: The sut downs of global factories and companies accounts for approx 30% of global GDP
• Thailand Central Bank (BoT) Policy Statement noted that the vote to keep policy steady was 4-2 (dissenters sought 25bps cut) and was prepared to use all tools as appropriate. Fiscal policies to play a major role. Economy to contract significantly in 20202 and inflation could turn negative
• Thailand PM Prayuth Chan-Ocha declared a state of emergency; effective from Thursday, Mar 26th noting that the coronavirus outbreak would get worse. Some borders to be closed and access curbed
• Japan govt said to consider tax extensions for SMEs impacted by the coronavirus outbreak

Currencies/ Fixed Income

• Risk appetite maintained its recent legs after a sizeable fiscal package from the US coupled with major Fed action

Economic Data

• (NL) Netherland Q4 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.6% v 1.5%e
• (UK) Feb CPI M/M: 0.4% v 0.3%e; Y/Y: 1.7% v 1.7%e; CPI Core Y/Y: 1.7% v 1.5%e; CPIH Y/Y: 1.7% v 1.7%e
• (UK) Feb RPI M/M: 0.5% v 0.6%e; Y/Y: 2.5% v 2.6%e; RPI-X (ex-mortgage Interest Payment) Y/Y: 2.5% v 2.7%e; Retail Price Index: 292.0 v 292.3e
• (UK) Feb PPI Input M/M: -1.2% v -2.0%e; Y/Y: -0.5% v -0.9%e
• (UK) Feb PPI Output M/M: -0.3% v 0.0%e; Y/Y: 0.4% v 0.9%e
• (UK) Feb PPI Output Core M/M: -0.1% v 0.0%e; Y/Y: 0.4% v 0.5%e
• (NO) Norway Jan AKU Unemployment Rate: 3.8% v 3.9%e
• (TR) Turkey Mar Real Sector Confidence (Seasonally adj): 98.6 v 106.7 prior; Real Sector Confidence NSA (unadj): 99.7 v 106.9 prior
• (TR) Turkey Mar Capacity Utilization : 75.3% v 76.0% prior
• (TH) Thailand Central Bank (BoT) left Benchmark Interest Rate unchanged at 0.75% (not expected)
• (AT) Austria Jan Industrial Production M/M: +5.3% v -2.0% prior; Y/Y: +1.2% v -5.3% prior
• (ES) Spain Feb PPI M/M: -1.2% v +1.0% prior; Y/Y: -2.2% v -0.9% prior
• (SE) Sweden Feb PPI M/M: -0.6% v -1.0% prior; Y/Y: -1.2% v -0.4% prior
• (DE) Germany Mar Final IFO Business Climate: 86.1 v 87.7 prelim (lowest since July 2009); Current Assessment: 93.0 v 93.8 prelim; Expectations Survey: 79.7 v 82.0 prelim
• (CH) Swiss Mar Credit Suisse Expectations Survey: -45.8 v +7.7 prior
• (UK) Jan ONS House Price Index Y/Y: 1.3% v 2.7%e

Fixed Income Issuance

• None seen

Looking Ahead

• 06:00 (EU) Daily Euribor Fixing
• 06:00 (SE) Sweden to sell SEK2.0B in 0.125% 2031 Bonds
• 06:00 (NO) Norway to sell Bonds
• 06:00 (UK) BOE 3-month USD Repo Operation
• 06:30 (EU) ECB allotment in 3-month LTRO Tender
• 07:00 (US) MBA Mortgage Applications w/e Mar 20th: No est v -8.4% prior
• 07:00 (UK) Mar CBI Retailing Reported Sales : -15e v +1 prior; Total Distribution: -10e v +7 prior
• 07:00 (CZ) Czech Republic to sell combined CZK10B in 2025 and 2031 bonds.
• 07:45 (US) Daily Libor Fixing
• 08:00 (MX) Mexico Jan Retail Sales M/M: +0.4%e v -0.4% prior; Y/Y: 2.8%e v 3.2% prior
• 08:00 (BR) Brazil Jan IBGE Services Sector Volume Y/Y: 1.5%e v 1.6% prior
• 08:00 (BR) Brazil Mid-Mar IBGE Inflation IPCA-15 M/M: 0.1%e v 0.2% prior; Y/Y: 3.7%e v 4.2% prior
• 08:00 (UK) Weekly PM question time in House of Commons
• 08:30 (US) Jan Preliminary Durable Goods Orders: -1.0%e v -0.2% prior; Durables (ex-transportation): -0.4%e v +0.8% prior; Capital Goods Orders (non-defense/ex-aircraft): -0.4%e v +1.1% prior; Capital Goods Shipments (non-defense/ex-aircraft): -0.2%e v +1.0% prior
• 08:30 (BR) Brazil Feb Current Account Balance: -$3.4Be v -$11.9B prior; Foreign Direct Investment (FDI): $6.2Be v $5.6B prior
• 08:45 (UK) BOE to buy £1.0B in APF Gilt purchase operation (3-7 years)
• 09:00 (US) Jan FHFA House Price Index M/M: 0.4%e v 0.6% prior
• 09:00 (UK) Daily Baltic Dry Bulk Index
• 09:45 (UK) BOE to buy £1.0B in APF Gilt purchase operation (7-20 years)
• 10:00 (BE) Belgium Mar Business Confidence: -11.0e v -2.7 prior
• 10:30 (US) DOE Weekly Crude Oil Inventories
• 10:45 (UK) BOE to buy £1.0B in APF Gilt purchase operation (20+ years)
• 11:30 (US) Treasury to sell 2-Year FRNs Reopening
• 12:00 (CA) Canada to sell 30 Year Bonds
• 13:00 (US) Treasury to sell 5-Year Notes
• 15:00 (AR) Argentina Q4 GDP Q/Q: -0.8%e v +0.9% prior; Y/Y: -1.0%e v -1.7% prior
• 19:50 (JP) Japan Feb PPI Services Y/Y: 2.2%e v 2.3% prior
• 20:00 (SG) Singapore Q1 Advance GDP Q/Q: -8.1%e v +0.6% prior; Y/Y: -1.5%e v +1.0% prior
• 21:05 (NZ) New Zealand to sell NZD250M in 2.75% 2025 Bonds;
• 23:35 (JP) Japan to sell 40-Year JGB Bonds