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[PODCAST] EU Open Rundown 17th March 2020

  • Asia-Pac equity markets traded mixed and US equity futures hit limit up overnight as stock markets attempted to nurse the recent heavy losses
  • US President Trump suggested the worst of the virus outbreak could be over by July/August, perhaps later
  • US Treasury Secretary Mnuchin met with GOP Senators and said he is seeking a large number for additional coronavirus stimulus legislation
  • In FX, the greenback was lacklustre around the 98.00 level. EUR/USD was contained below resistance ahead of 1.1200
  • Looking ahead, highlights include UK labour market report, German ZEW, US retail sales, industrial production, business inventories, APIs, EZ finance ministers meet, supply from the UK

17th March 2020

CORONAVIRUS UPDATE

Mainland China reported 21 additional cases of coronavirus and 13 additional deaths on March 16th vs. Prev. 16 additional cases and 14 additional deaths on March 15th, bringing the number of total cases in mainland China to 80881 and death toll to 3226. (Newswires)

South Korea reported 84 additional coronavirus cases for a total of 8320 and the death toll increased by 6 to a total 81, number of cured increased by 264 to a total of 1401. (Yonhap)

G7 leaders said that stepping up the COVID-19 response is the foremost priority and will make efforts to increase the availability of medical equipment where it is most needed. Furthermore, they are mobilising the full range of instruments, including monetary and fiscal measures, while they ask central banks to continue to coordinate necessary monetary measures and finance ministers will coordinate on a weekly basis on the implementation of stimulus measures and other steps that could be taken. (Newswires)

US President Trump said the administration is not currently considering nationwide lockdown but looking at certain regions and suggested the worst of the virus outbreak could be over by July/August, perhaps later. Furthermore, Trump said the US may extend sick leave to companies with more than 500 people and that the US will back the airlines in which they told airlines they will help them and will backstop the airlines. (Newswires)

US Treasury Secretary Mnuchin met with GOP Senators and said he is seeking a large number for additional coronavirus stimulus legislation but did not elaborate on the size of the additional stimulus package, while he will discuss it with GOP Senators on Tuesday. There were also comments by US Republican Senator Rubio that Mnuchin asked Senate Republicans to move on additional coronavirus measure targeting airlines and small businesses this week. (Newswires)

US House passed a revised coronavirus bill which was sent to the Senate and there were comments from US Senate Majority Leader McConnell that aims to win Senate passage of the House-passed coronavirus legislation. (Newswires)

White House recommended 15-day nationwide guidelines to slow spread of virus and avoiding social gatherings, while the affected states should close schools and surrounding areas. (Newswires) San Francisco Mayor put the city on lock-down (shelter in place directive) until 7th April 2020 which forbids people to leave their homes without permission, while Washington DC Mayor ordered a 2-week shutdown of restaurants, bars, nightclubs, theatres and health clubs due to the coronavirus. (Newswires)

Canadian PM Trudeau announced that Canada will close its borders to non-citizens and non-residents although it won't apply to commerce or trade, while he will not rule out any measure to keep Canadians safe. (Newswires)

French President Macron said Schengen area borders in France will be shut from midday Tuesday in coordination with EU nations. Macron commented that citizens should work form and only leave for essential duties, while they will step up measures to limit peoples' movements and have called off second round municipal elections. (Newswires)

New Zealand announces NZD 12.1bln economic package accounting for 4% of GDP. There were also comments from Finance Minister Robertson that a recession is almost certain and that many will lose jobs, while he added that with businesses to fail and that this year’s budget will be the 2nd phase of broader recovery package. (Newswires)

Riksbank to boost asset purchases and take measures to facilitate credit supply, while it will support economic developments and avoid credit supply issues and increase loans to banks on favourable terms and will buy SEK 300bln of bonds. (Newswires)

ASIA

Asia-Pac equity markets traded mixed and US equity futures hit limit up overnight as stock markets attempted to nurse the recent heavy losses that resulted to the worst day on Wall St. since 1987 and a near 3000-point decline in the DJIA for its largest point drop on record, despite the Fed’s recent emergency measures. The tone in Asia improved from the open spurring mixed views regarding a potential capitulation after the recent sell-off and some murmurs of a dead-cat bounce, although there were further supportive measures including a NZD 12.1bln economic package from New Zealand and the US House passing a revised coronavirus bill, as well as efforts from the Trump administration for an additional measure targeting airlines and small businesses. ASX 200 (+5.8%) outperformed after a rebound from support at the 5000 level to recoup some of the prior day’s record losses of 9.7% and eventually post its largest intraday gain since 2008 with miners and financials front running the recovery, while Nikkei 225 (+0.2%) fluctuated between gains and losses with sentiment flimsy alongside an indecisive currency. Hang Seng (-0.4%) and Shanghai Comp. (-1.0%) were both positive in early trade but then reversed course as early optimism across the region slightly faded and following further liquidity inaction by the PBoC, although reports have suggested the central bank may still reduce the Loan Prime Rate this week even though it opted to maintain rates in yesterday’s Medium-term Lending Facility. Finally, 10yr JGBs were initially lower as they tracked the recent selling in USTs but with some of the downside later reversed after prices found a platform around 152.50 and with the BoJ also in the market today under a special operation for JPY 200bln of JGBs with 3yr-10yr maturities.

PBoC skipped open market operations for a daily net neutral position. (Newswires) PBoC set USD/CNY mid-point at 7.0094 vs. Exp. 7.0141 (Prev. 7.0018)

UK/EU

UK Chancellor Sunak will be at PM Johnson's press conference tomorrow and is to unveil significant financial package on Tuesday to assist firms impacted by the coronavirus outbreak. (Newswires/Daily Mail) British Chambers of Commerce said the UK

 

economy looks to be on course for its weakest growth since the global financial crisis in which it lowered its growth forecast to 0.8% from 1.0% for 2020. (Newswires)

FX

The greenback was lacklustre around the 98.00 level but off the lows seen in the aftermath of the Fed’s recent emergency measures. The greenback’s major counterparts were also uneventful with EUR/USD contained below resistance ahead of the 1.1200 handle, while GBP/USD was relatively unchanged around 1.2250 with price action stuck near its 5-, 10- and 20-Hourly moving averages. Elsewhere, USD/JPY briefly attempted a reclaim of the 107.00 handle but then faltered amid the indecisive risk tone, while antipodeans were range bound as New Zealand’s economic measures only spurred marginal gains for NZD/USD and after the RBA minutes from the March meeting proved to be a non-event in which it reiterated that the board was prepared to ease further to support the economy.

RBA Minutes from the March meeting stated that board is prepared to ease further to support the economy and it is to ensure financial system has sufficient liquidity. The minutes also noted that an extended period of low rates is required and that the board agreed coronavirus is to have significant impact on economy. Furthermore, RBA stated that Q1 growth is to be noticeably weaker than expected and that it is a hard to predict the length of slowdown, while it is very unlikely the virus would be contained in near future. (Newswires)

COMMODITIES

Commodities were mixed in which WTI crude futures partially recovered some of the prior day’s hefty losses in which prices slumped over 8% to briefly below the USD 29.00/bbl level amid the worst day on Wall St. since 1987 and bearish comments by Saudi Aramco’s CEO. Nonetheless, oil prices have since rebounded and briefly tested USD 30/bbl to the upside alongside the improved risk appetite and with focus now shifting to the latest stockpile reports beginning with private inventories due later today. Gold prices declined back below the psychological key USD 1500/oz level with the precious metal pressured despite the lacklustre greenback, while copper was choppy alongside sentiment in its largest buyer China. 

Venezuela President Maduro announced nationwide quarantine beginning March 17th and noted the price of Venezuelan oil has declined to below the cost of production. (Newswires)

US

The NY Fed’s Desk’s USD 500bln 30-day term operation and USD 175bln o/n op were both undersubscribed, the former seeing all USD 18.45bln bids accepted (500bln offered) and the latter seeing all USD 129.60bln bids accepted (175bln offered). However, despite more liquidity offered by the Fed, signs of stress remained in funding markets, as evidenced by FRA-OIS widening on the day, as well as the overnight GC rate spiking to 2.0%. The further tightening led the Fed to announce an additional overnight repo operation later on Monday, offering USD 500bln, seeing the rate move lower again on announcement, although still elevated significantly above the Fed’s new 0-0.25% target range. However, the later operation saw all USD 19.40bln bids accepted while the GC rate came back close to the FFR. Meanwhile, the Desk also carried out its ramped-up Treasury and MBS purchases across the curve – USD 40bln in Treasuries and USD 7.6bln in MBS on Monday. T-Notes (H0) settled 2 points and 8+ ticks higher at 138-02.

Ohio will order polls to close for Tuesday's Primary citing a public health emergency despite an earlier refusal by the judge to deny the request to postpone the state primary. (Newswires)

8 largest US banks announced plans to access US Federal Reserve's Discount Window, while they noted they are strong and well capitalized but are accessing it to reassure all banks they can use it. (Newswires)

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