Market movers today
News about COVID-19 drug trials and governments’ gradual easing of lockdown restrictions will remain high on markets watch list as we start the week in a fairly quiet fashion on the data front. We get retail sales out of Denmark this morning.
From Tuesday on, however, we are in for an eventful week. On data releases we get various Q1 GDP releases and leading indicators in Chinese PMIs, US ISM and Norges Bank’s Regional Network Phone Survey, to name a few. These will all shed light on the economic damage done by the virus even if their predictive powers importantly remain a function of reopening plans, which are still unclear. We look for a Q1 GDP contraction of around -4% q/q AR and -2% q/q for the US and euro area, respectively.
We do not expect new policy initiatives to be announced by either the Fed (Wednesday) or the ECB (Thursday), but look for any possible changes to the Fed’s existing credit facilities and ECB concerns about Italian yields, FRA/OIS spreads and hints about its next policy steps. The Riksbank is meeting tomorrow and we argue for a 25bp rate cut to complement the toolbox (see What to expect from the Riksbank, 21 April).
Selected market news
This morning, Bank of Japan (BoJ) opened for unlimited Japanese government bond buying, while raising its ceilings on corporate bonds and commercial paper to JPY20tn. Guidance on rates was left unchanged whilst the central bank removed price momentum from its forward guidance. 10Y Japanese government bond yields moved c. 3bp lower and JPY FX was little changed upon announcement.
Over the weekend global virus numbers continued to paint an encouraging picture with new infection numbers, deaths and hospitalisation figures all moving lower. Focus will now increasingly turn to the reopening phase. Yesterday, Italian Prime minister Conte added details on the easing of the nationwide lockdown on 4 May. Construction and manufacturing sectors will be the first sectors allowed to open. Retail and museums can open from 18 May, while restaurants will remain closed until at least 1 June. In the US, New York Governor Cuomo stated businesses in Upstate New York could open already on 15 May, while more densely populated New York City is likely to stay closed longer.
In markets, most Asian equity indices are trading in green following a US rally late Friday but also US futures are trading modestly in green this morning. 10Y US treasury yields are a couple of bp higher, while front Brent and WTI both are trading a few USD/bbl lower.
An FT Analysis points to the COVID-19 death toll potentially being 60% larger than what official data indicate. The comparison of mortality statistics for 14 countries to historical averages show a big gap to reported COVID-19 deaths. This highlights the problems with differences in testing strategies and reporting. According to FT the mortality statistics show 122,000 excess deaths, which is significantly more than the 77,000 reported for the 14 countries.
On Friday, SSB (Norway Statistics) released preliminary national account figures showing a March mainland GDP drop of 6.4% m/m. SSB estimates household consumption fell 12% m/m in March. If the final release (due 12 May), which includes better information on not least investments, confirms this, it will result in a Q1 GDP drop of 1.9% q/q. A few weeks ago SSB estimated economic activity had fallen 14% from 1 March to 31 March.
