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[PODCAST] EU Open Rundown 10th March 2020

  • Asian equity markets eventually traded mostly higher as markets began to pick up the pieces from the recent oil-triggered devastation
  • DXY traded higher and rose back above the 95.00 level after rebounding from 18-month lows
  • Italy has extended its emergency coronavirus measures to the entire country; includes restrictions on travel and public gatherings
  • Commodities were mostly underpinned as risk assets recovered from the prior day’s sell-off, with WTI crude futures higher by nearly 8%
  • President Trump announced he is to hold a press conference today on economic measures to respond to the coronavirus
  • Looking ahead, highlights include Norges Bank Regional Network Report, Eurozone GDP, APIs, supply from the UK, and US

CORONAVIRUS UPDATE 

Mainland China reported 19 additional coronavirus cases and 17 additional deaths on March 9th vs. Prev. 40 additional cases and 22 additional deaths on March 8th, to bring the total number of cases in China to 80754 and death toll to 3136. (Newswires) Chinese President Xi arrived in Wuhan for the first time following the outbreak, while there were also reports that China’s Hubei province is to implement a health code system to start permitting people to travel within the province. (Newswires)

South Korea coronavirus cases increased by 131 to a total of 7513 and its death toll increased by 3 to a total of 54. (Newswires)

Italy’s total coronavirus cases rose to 9172 from 7375 and the death toll rose to 463 from 366, according to an official. Italian PM Conte announced they are adopting tougher measures to tackle coronavirus and that there will no longer be a red zone but instead the whole country will be under same condition in which movement will be restricted all over Italy. PM Conte also said all public gatherings are to be banned and the nationwide closure of schools and universities country was extended to April 3rd. (Newswires)

US President Trump said he will speak about possible payroll tax relief with Congress and is working with industries including airline and cruise ship industries. President Trump also announced he is to hold a press conference today on economic measures to respond to the coronavirus and suggested that economic steps will be major, while reports later suggested that the coronavirus aid package will leave out the travel industry for now but will include payroll tax cut and short-term paid sick leave. (Newswires)

Japanese Finance Minister Aso said the government is to announce a 2nd package of steps on coronavirus on Tuesday and that G7 agreed to take fiscal and monetary steps as appropriate. There were also later comments from PM Abe who confirmed he will submit an emergency measure package to parliament today and will implement what is needed without hesitation to respond to coronavirus situation, while the second emergency package will include steps related to jobs and small firms. (Newswires) 

ASIA-PAC

Asian equity markets eventually traded mostly higher as markets began to pick up the pieces from the recent oil-triggered devastation, which resulted in losses of over 7% among most major US indices for the worst performance on Wall St. since 2008. Nonetheless, US equity futures found some reprieve overnight despite briefly dipping into bear market territory with the rebound helped by hopes of policy action with President Trump set to discuss payroll tax relief with congress and to hold a press conference on economic measures to respond to the coronavirus which he suggested will be major steps, while Japanese is to submit a 2nd package of steps on coronavirus to parliament. ASX 200 (+3.1%) and Nikkei 225 (+0.9%) gained in which the former shrugged off opening losses of around 4% led by the recovery in the energy and financials sectors, while the Japanese benchmark also nursed losses helped by favourable currency moves. Hang Seng (+1.7%) and Shanghai Comp. (+1.4%) were initially indecisive after continued PBoC liquidity inaction but eventually surged following a further reduction in China’s additional coronavirus cases and President Xi’s visit to the Wuhan coronavirus epicentre for the first time since the outbreak which was seen to be symbolic of China’s progress in its battle against the epidemic. Finally, 10yr JGBs slipped below 155.00 as it tracked the pullback in USTs after the recent safe-haven surge and as equity markets stabilized, while prices were also pressured after weaker results at the 5yr JGB auction.

PBoC set USD/CNY mid-point at 6.9389 vs. Exp. 6.9562 (Prev. 6.9260). (Newswires)

PBoC skipped open market operations for a daily net neutral position

Chinese CPI (Feb) Y/Y 5.2% vs. Exp. 5.2% (Prev. 5.4%). (Newswires)

Chinese PPI YY (Feb) -0.4% vs. Exp. -0.3% (Prev. 0.1%)

UK/EU

UK PM Johnson reiterated the UK remains in a contain phase, but added scientists think containment is extremely unlikely to work on its own and are making extensive preparation for a move to the delay phase. (Newswires)

Britain is set to table its plans for a Canada-style free trade agreement with the EU ahead of the next round of negotiations, according to the government. (Times)

Senior Conservative MPs are to back an amendment to end Huawei’s role in the UK’s 5G network; via an amendment to the Telecommunication Infrastructure bill, up to 30 Tory MPs are seen backing the bill. (BBC)

UK BRC Sales Like-For-Like (Feb) Y/Y -0.4% (Prev. 0.0%). (Newswires)

Barclaycard said UK consumer spending rose 2.2% Y/Y in Feb. vs. 3.9% Y/Y increase in January, while it added that coronavirus fears led to 28% of respondents avoiding the high street and other busy places. (Newswires)

Italy is reportedly planning to increase its 2020 budget deficit above 2.5% of GDP (Prev. 2.2%) to help against the coronavirus according to a government source, while it later announced it is mulling setting its deficit goal at 2.8% of its GDP. (Newswires)

Discussions between Turkish President Erdogan and the EU regarding a resolution to the ongoing refugee crisis ended without an agreement on Monday. (Newswires)

FX

DXY traded higher and rose back above the 95.00 level after rebounding from 18-month lows. This resurgence in the greenback translated to a further pullback in its transatlantic counterparts in which GBP/USD retreated to test support at 1.3050 and with EUR/USD dispirited after several failed attempts to break through resistance ahead of 1.1500 which later saw the single currency give up the 1.1400 handle. In terms of the latest coronavirus-related news from the continent, Italian PM Conte declared a nationwide lockdown and announced all public gatherings are to be banned, while the closure of schools and universities was extended to April 3rd. Elsewhere, USD/JPY nursed losses and approached the 105.00 handle on the improved risk tone and as BoJ officials reiterated they will not hesitate to take additional steps although the pair still has far to go after a 3-week slide brought on by the recent safe-haven currency flows, while antipodeans were uneventful with only mild pressure seen amid soft Australian Business Survey data, mixed Chinese inflation figures and a weaker CNY reference rate.

Australian NAB Business Confidence (Feb) -4 (Prev. -1). (Newswires) Australian NAB Business Conditions (Feb) 0 (Prev. 3)

RBNZ Governor Orr said they have not and still do not need to use alternative monetary policy instruments and they are fortunate to have time to prepare for alternative steps unlike other OECD countries, while he also commented that zero bound for rates is far from most likely outcome but cannot be ruled out and that steps being considered include forward guidance, negative rates and rate swaps. Furthermore, Orr suggested need to be considered and realistic as to how effective rate changes will be in buffering the economy and that they will continue to use conventional policy until it is exhausted such as when OCR reaches 0%. (Newswires)

COMMODITIES

Commodities were mostly underpinned as risk assets recovered from the prior day’s sell-off, with WTI crude futures higher by nearly 8% to trade above the USD 33/bbl after prices found a platform at USD 30/bbl and with momentum spurred by the stabilization across global markets. In addition, there was some optimism from a delegate who suggested it was too early to give up hopes for an OPEC-Russia alliance, while focus for the complex shifts to the upcoming inventory reports and delayed EIA STEO. Elsewhere, gold prices were only marginally pressured despite the resurgence of the greenback and firm rebound in stock markets, while copper rallied in tandem with the improved risk appetite and firm gains in Chinese commodity prices including Dalian iron ore future which rallied over 5%.

US DOE delayed the release of its monthly Short-Term Energy Outlook by one day to Wednesday to incorporate the recent global oil market events. (Newswires)

It's still too early to "throw in the towel" on an OPEC-Russia alliance, according to a Delegate cited by S&P Global Platts. (Newswires)

CME raised crude oil NYMEX futures margins by 17.1% to USD 4100/contract from USD 3500/contract and raised RBOB gasoline futures margins by 12.2% to USD 4600/contract from USD 4100/contract. (Newswires)

GEOPOLITICS 

US official said Trump administration will soon issue an advisory warning anyone holding Iranian oil in violation of US sanctions and will soon also issue maritime advisory to target ships that turn off transponders to avoid sanctions. (Newswires)

US reportedly began withdrawal of troops in Afghanistan as part of a peace deal with the Taliban and is to cut the number of forces in the country to about 8.6k from around 13.0k. (Newswires)

US 

The chunky bid extended on Monday amid the risk aversion and oil price collapse. The curve exhibited further bull flattening alongside weaker inflation expectations and corporate credit concerns as oil prices tumbled further towards their all-time lows, equities were also hit strongly. In the overnight session the 30-year bond was bid as much as six points, with desks noting nobody on the other side of the trade. The rally saw all yields move beneath the 1% figure for the first time in history, and participants now move to the question of when the Fed will cut again rather than if. By settlement, 2-year yield had fallen 21bps while the 30-year had fallen by 38bps to 0.840%, but above its lows of 0.702%. US T-note futures (H0) settled 1 point 8 ticks higher at 139.09+.

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