Market movers today

Today Fed minutes are due for release, but US oil inventories will also be in focus as markets gear up for the OPEC + meeting tomorrow. We warn against expecting too much in the way of output cuts. However, G20 energy ministers are now set to discuss on Friday how/whether to curtail global oil production in face of the faltering demand due to coronavirus crackdowns. A key issue remains how to reconcile free-market principles with a cartel’s call for production curbs to stabilise the market. We expect Brent crude to settle sub-USD40/bbl.

Norwegian inflation figures for March are released today (see page two for more details).

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Selected market news

Global equity markets struggled to continue the rally despite signs of a peak in new cases in the US with the growth in new infections now below 10%. It is validated by a lower growth in deaths and a peak in new hospitalisations in New York, the epicentre of the US outbreak. US equity markets ended with a small loss as the daily death toll in New York and the US is still high. Asian equity markets are also mixed this morning.

Yesterday and overnight, Eurozone finance ministers struggled to reach an agreement on how to assist ailing member states hit by the coronavirus. As a result, the press conference, which was scheduled for 20:00 CEST last night, was pushed back until 10:00 CEST this morning. The sticking point appears to be the issuance of common debt instruments to finance the coronavirus-related spending, which especially France, Italy and Spain are pushing for, while Germany, the Netherlands and Finland are against it. If the finance ministers cannot agree on a proposal, they might defer the decision to the heads of states who are due to have a conference call tomorrow. However, the finance ministers may give it another try and hence negotiations may continue over the weekend.

Meanwhile, the ECB adopted an unprecedented set of collateral measures yesterday to mitigate the tightening of financial conditions across the euro area. The easing of the collateral requirements means that it can accept junk-rated government debt from countries like Greece. The ECB also reduced the haircuts applied to collateral valuation, making it easier for banks to obtain credit from the central bank. The easing of the rules is temporary and will remain during the pandemic crisis and will be linked to the duration of its new pandemic emergency buying programme, PEPP, scheduled to run until at least the end of the year.

Yesterday, the Reserve Bank of Australia kept the official interest rate on hold at 0.25%, while warning the country is in for a ‘very large’ economic contraction in the June quarter. The signals from the RBA managed to lift AUD and a range of cyclical currencies, as it hinted that its newly launched bond-purchase scheme could be tapered if economic conditions improve. A sign that markets are sensitive to central banks having second thoughts about recent unprecedented measures. However, the AUD fell back again after S&P Global Ratings cut Australia’s credit-rating outlook to negative from stable.

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