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[PODCAST] US Open Rundown 17th March 2020

  • European equities found mild reprieve following touted US stimulus measures; Spain’s IBEX outperforms on short-selling ban
  • US Treasury Secretary Mnuchin is said to be seeking USD 850bln package or more of stimulus, according to Politico citing sources
  • In FX, the Greenback gains more ground above 99.00 vs. a sub-98 low, as such G10 pairs are pressured
  • Looking ahead, highlights include US retail sales, industrial production, business inventories, APIs, EZ finance ministers meet

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)

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)

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)

German Finance Minister Scholz says it is too early to talk about ESM to provide aid to other EZ countries. (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 (+0.1%) fluctuated between gains and losses with sentiment flimsy alongside an indecisive currency. Hang Seng (+0.9%) and Shanghai Comp. (-0.3%) were both positive in early trade but then reversed course/trimmed gains 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)

Japan is reportedly mulling reducing I/L bond sales to JPY 300bln (Prev. JPY 400) amid the virus outbreak, sources state. (Newswires)

BoJ bought a total of JPY 121.6bln (Prev. 101.4bln) ETFs on March 17th. (Newswires)

US

US Treasury Secretary Mnuchin is said to be seeking USD 850bln package or more of stimulus, according to Politico citing sources. (Politico)

CFTC is preparing for the likelihood that trillions of USD of financial market activity may be moved from exchanges and corporate office to homes. (WSJ)

Fed’s Kashkari (Dove, Voter) says Fed hasn’t used all its ammunition. (CNBC)

EU/UK

UK and EU can't decide how to hold this week's trade talks, but continue to explore alternatives, will be guided by scientific advice, according to Express’ Barnes. (Newswires)

UK Employment Change (Jan) 184k vs. Exp. 143k (Prev. 180k) (Newswires) UK Average Earnings (Ex-Bonus) (Jan) 3.1% vs. Exp. 3.2% (Prev. 3.2%)

German ZEW Economic Sentiment (Mar) -49.5 vs. Exp. -26.4 (Prev. 8.7); ZEW says the economy is on red alert. (Newswires) EU ZEW Survey Expectations (Mar) -49.5 (Prev. 10.4)

London TFL will be running at reduced services, according to Sky News. (Sky News)

EQUITIES

Choppy trade in the equity sphere [Euro Stoxx 50 +1.0%] following on from a mixed APAC session, as what seemed like a sentiment turnaround subsided in early EU trade - although reports that US Treasury Secretary Mnuchin is seeing a USD 850bln package later induced a modest bounce off lows. Major bourses are mixed with Spain’s IBEX (+2.4%) the standout outperformer amid after Spain banned short-selling for a month amid the virus-induced selloff. DAX 30 cash briefly dipped below 8500 before trimming some losses, albeit remain some way off its 9145 session high. CAC (-0.6%) failed to glean much support after AMF regulator’s announcement of a 24hr short-selling ban on 92 stocks vs. Spain’s carpet ban, although France’s measure seems more of a cushion against losses as opposed to a deterrent. Sectors are mixed with no clear reflection of the risk tone, with energy and material benefitting from the

overnight rebound in respective complexes. In terms of individual movers. Iliad (+18.0%) tops the gains in the Stoxx 600 post-earnings in which anticipated coronavirus losses are expected to be less severe than feared. Elsewhere, Pandora (-2.9%) withdrew guidance amid the outbreak and noted that China since Jan LFL sales fell 70-80% on a YY basis.

COMMODITIES

USD - The Dollar is firmer across the board after losing momentum during Monday’s global stock market swoon, with the DXY firmly back on the 98.000 handle and breaching resistance ahead of the next big figure (like February 13’s 98.810 high) amidst more reports of the White House mulling a big aid package (Usd850 bn or perhaps more). However, safer-havens are clawing back some lost ground as the mood remains extremely fragile on COVID-19 factors and ahead of US data (retail sales and ip) that could highlight more of the economic contagion like yesterday’s NY Fed manufacturing survey.

AUD/NZD - Minutes from the RBA’s March policy meeting did not offer anything new in terms of forward guidance overnight, but the Aussie is on the defensive in advance of Thursday’s new measures from the Central Bank that could include QE. Aud/Usd is slipping back towards 0.6000 and Aud/Nzd remains south of 1.0100 even though Nzd/Usd has retreated through 0.6000 and the Kiwi only got a fleeting fillip from Nzd12.1 bn fiscal stimulus in similar vein to the Aussie after Government and RBA cash/liquidity injections.

GBP/EUR - A relatively upbeat UK labour and wage report has been dismissed as too old or irrelevant in the context of nCoV, as the Pound weakens across the board towards 1.2100 in Cable terms and sub-0.9100 on the Eur/Gbp cross. Indeed, Sterling is marginally underperforming vs the single currency despite a dire ZEW survey that has pushed Eur/Usd below 1.1100 (close to the 200 DMA) and eyeing Monday’s session trough just under 1.1050.

CHF/JPY - The Franc and Yen are both off best levels vs the Greenback, but retaining an underlying bid within 0.9458-0.9554 and 105.88-107.18 respective ranges in advance of the SNB quarterly review and following ramped ETF purchases from the BoJ today.

CAD/SEK/NOK - The Loonie is trying to stop the rot after losing 1.4000+ status against its US counterpart and tumbling to new multi-year lows not far from 1.4100, while the Swedish Crown is weaker vs the Euro inches from 11.0000 in wake of the Riskbank unleashing QE, finally and lagging its Scandi peer the is benefiting from a degree of consolidation and comparative stabilisation in crude prices, albeit choppy and still trending lower.

CBRT lowered its one-week repo rate by 100bps in an emergency move,

FIXED INCOME

It’s akin to sell everything bar the Dollar again as debt futures remain depressed regardless of yet another tame/temporary revival in equites and other risk assets. Eurozone bonds are still underperfrming after the ECB’s relatively modest and ‘surgical’ policy stimulus, leaving Governments to take up the strain, but Gilts are also on the backfoot alongside US Treasuries in wake of a solid, but not spectacular 2049 DMO placement given natural sponsorship from funds at the longer end of the maturity spectrum. Ahead, some top tier US data and API inventories, the Eurogroup meeting, further UK and possible US anti-nCoV aid announcements.

COMMODITIES

WTI and Brent front-month futures have trimmed overnight gains during early EU trade, with the latter dipping into negative territory as the sentiment/consolidation seen in the APAC session abated as the underlying themes persist.  WTI Apr’20 futures have extended losses below the USD 30/bbl mark, having earlier briefly breached the level to the upside, with the next pertinent support level at the YTD low around USD 27.40/bbl. Meanwhile, Brent May’20 underperforms its WTI counterpart given the OPEC rhetoric surrounding the global benchmark, with the front-

month contract back below USD 30/bbl and just off its YTD lows at ~USD 29.50/bbl vs. intraday high of USD 31.20/bbl. Meanwhile, the spread between the two contracts continue to narrow and currently stands at under USD 1/bbl vs. ~USD 1.30/bbl at yesterday’s close. Elsewhere, spot gold continues to bear the brunt of liquidating positions as investors convert to cash and remain on the sidelines. The yellow metal trades firmly below 1500/oz (200 DMA ~1498/oz) ahead of the 50WMA (1462/oz) and yesterday’s 1450/oz low. Similar losses are seen across other precious metals with Silver approaching 12/oz after fleetingly dipping below the figure during yesterday’s trade. Copper prices unsurprisingly conform to the risk-turnaround as prices slide further below 2.5/lb and eyes USD 2.0/lb for barriers.

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