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[PODCAST] US Open Rundown 24th March 2020

  • Sentiment remains bolstered as more stimulus measures are touted, with US futures hitting limit-up
  • US President Trump said we will have an announcement soon as to timing of measures to ease coronavirus guidance
  • US Treasury Secretary Mnuchin and Senate Democrat leader Schumer were optimistic for a deal on Tuesday; while Democrats introduced a USD 2.5bln stimulus bill
  • Germany is reportedly mulling a stimulus package to boost the economy post-virus
  • FX sees the DXY softer, to the benefit of G10 counterparts in particular GBP, EUR and JPY
  • Looking ahead, highlights include US Flash PMIs, New Home Sales, Fed’s Bullard & US Supply


WHO Spokesperson expects the virus death toll to increase significantly, as further cases are reproted to the WHO; 85% of cases in EU or US over past 24 hours are seeing a very large acceleration in cases in the US, has the potential to be the virus epicentre. (Newswires)

US President Trump said we will have an announcement soon as to timing of measures to ease coronavirus guidance, while he added that the US will open up for business sooner than 3-4 months and that the stimulus bill is still needed because coronavirus has had a big impact on US economy even if the US reopens. Furthermore, President Trump commented that the Fed have done a good job and suggested that Fed Chair Powell has plenty of arrows. (Newswires)

US Treasury Secretary Mnuchin and Senate Democrat leader Schumer were optimistic for a deal on Tuesday and negotiators noted progress although some issues were still under review in talks, while US Senate Schumer said the Senate could vote on a potential coronavirus stimulus deal as early as Tuesday. (Newswires)

US House Democrats introduced a USD 2.5tln stimulus bill which was said to include USD 1,500 direct payment to citizens, USD 150bln health care appropriations (plus USD 80bln loans), USD 600/week unemployment benefit for virus-affected, as well as USD 215bln of state and local funds. (Newswires)

Washington state announced to close all businesses within 48 hours, while there were separate reports of comments from the California state Governor that the stay at home order could last 8-12 weeks. (Newswires)

Germany is reportedly mulling a stimulus package to boost the economy post-virus, sources state, the measure would be targeted for immediate impact but a broad distribution of funds isn't on the table. On this, German Finance Minister Scholz says Germany is ready to mull a post-virus stimulus package for the country, but talks are at "a very early stage". (Newswires)

French Finance Minister Le Maire says there is no Eurogroup consensus on the use of coronabonds, adding that the ESM should be able to be used in the coming weeks, it is the time to use it. (Newswires)

Italian COVID-19 cases are 10x higher than reported. (La Repubblica) Italy are reportedly considering a new EUR 18bln stimulus package for the coronavirus. (Il Sole)

South Korea reported 76 new coronavirus cases for a total of 9037 and deaths rose by 9 to a total 120, while there were 341 fully recovered to bring the total to 3507. There were also reports that South Korean President Moon unveiled plans to double the size of the emegrency-financing aid package to KRW 100tln, while they will set up KRW 10.7tln equity market stabilization fund and KRW 20tln bond stabilization fund. (Newswires)

Mainland China reported 78 additional coronavirus cases and 7 additional deaths on March 23rd vs. Prev. 39 additional cases and 9 additional deaths on March 22nd, which brings the total number of cases in mainland China to 81171 and total death toll to 3277. In related news, China's Hubei province said it is to remove travel restrictions on leaving Wuhan on April 8th. (Newswires)

New Zealand Finance Minister Robertson said New Zealand banks are to offer 6-month mortgage holidays and RBNZ are to lower banks' core funding ratios, while he added the government will set up NZD 6.25bln business financing guarantee scheme and that the RBNZ agreed to lower banks' core funding ratios from 75% to 50% to help make credit available. (Newswires)


Asian equity markets were higher across the board as the region received much-needed reprieve from the recent sell-off and reacted to the Fed’s announcement for open-ended Treasury and MBS purchases, despite Wall St failing to sustain the gains amid the ongoing stalemate at the Senate on the coronavirus relief bill. Nonetheless, US equity futures have performed better after-hours with the Emini S&P and DJIA back above the 3k and 19k levels respectively following recent comments by President Trump who suggested that America will be open for business sooner than 3-4 months and as negotiators were said to be near a deal on the coronavirus stimulus bill. ASX 200 (+4.2%) and Nikkei 225 (+7.1%) rallied from the open with Australia led higher by gold miners after the precious metal surged above USD 1500/oz in the wake of the Fed’s QE bazooka, while SoftBank shares extended on the prior day’s outperformance and posted its largest intraday gain of more than 21% amid plans to offload USD 14bln of Alibaba shares. Elsewhere, Hang Seng (+4.5%) and Shanghai Comp. (+2.3%) joined in on the broad rebound with Hong Kong outperforming the mainland as participants also digested earnings releases which was the main catalyst for the biggest moving stocks. Finally, 10yr JGBs are higher and attempted to reclaim the 152.00 level after the bull flattening seen in USTs in the aftermath of the Fed’s asset purchase announcement, while the enhanced liquidity auction for 2-20yr JGBs also attracted greater demand.

PBoC skipped open market operations and are net nuetral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0999 vs. Exp. 7.1041 (Prev. 7.0940)

Japan is in agreement with the IOC to postpone the Tokyo Olympics for a maximum of 1 year. (Newswires)


UK Flash Composite PMI (Mar) 37.1 vs. Exp. 45.1 (Prev. 53.0)

-        Services PMI (Mar) 35.7 vs. Exp. 45.0 (Prev. 53.2)

-        Manufacturing PMI (Mar) 48.0 vs. Exp. 45.0 (Prev. 51.7)


EU Markit Comp Flash PMI (Mar) 31.4 vs. Exp. 38.8 (Prev. 51.6)

-        Services Flash PMI (Mar) 28.4 vs. Exp. 39.0 (Prev. 52.6)

-        Manufacturing Flash PMI (Mar) 44.8 vs. Exp. 39.0 (Prev. 49.2)


German Markit Comp Flash PMI (Mar) 37.2 vs. Exp. 40.6 (Prev. 50.7)

-        Services Flash PMI (Mar) 34.5 vs. Exp. 42.3 (Prev. 52.5)

-        Manufacturing Flash PMI (Mar) 45.7 vs. Exp. 39.6 (Prev. 48.0)


French Markit Comp Flash PMI (Mar) 30.2 vs. Exp. 39.8 (Prev. 52.0)

-        Services Flash PMI (Mar) 29.0 vs. Exp. 42.0 (Prev. 52.5)

-        Manufacturing Flash PMI (Mar) 42.9 vs. Exp. 40.0 (Prev. 49.8)


ECB's Villeroy says the ECB are to enter the commercial paper market this week, possibly as soon as Wednesday; ECB intends to be 'operational fair and significant' actor in such interaction. (Newswires)


European stocks mimic the stellar performance seen in APAC as stocks feel some reprieve from the global market rout. Participants point to the barrage of global fiscal and monetary efforts in response to the virus outbreak as the catalyst for the gains in the equity complex, although it is too soon to say we are out of the woods. US equity futures overnight extended on gains but stopped short of hitting their respective limit ups at the time, although ES June futures managed to reach the 5% limit to the upside in early European trade. Back to Europe, cash markets are posting broad-based gains, back around its intrday best levels (Euro Stoxx 50 +5.9%) with no clear standout performers. Sectors are higher across the board with some mild underperformance seen in defensives vs. cyclicals – reflecting a “risk-on” mood, whilst the energy sector leads the gains amid the rebound in the oil complex.  Zooming in on the sector breakdowns, basic resources outperform whilst performance across the much-watched Travel & Leisure sector remains somewhat muted as opposed to significant rebound. Individual movers are largely driven by the macro themes – BHP (+11.4%), BP (+13.1%) Shell (+11.8%) are amongst the large-cap movers to the upside. On the flip side, WH Smith (-6.2%) and Marks & Spencer (-0.8%) bare the brunt of non-essential shop closures in the UK.

Chevron (CVX) are reducing Capex guidance by 20% (USD 4bln), are suspending their USD 5bln annual share buyback. (Newswires)


USD - The Greenback has faded again amidst a broad recovery in risk sentiment and dissipating demand for liquidity as new, enhanced Fed swap lines are tapped on a daily basis and the unlimited QE backstop provides more stimulus awaiting a bumper fiscal boost from the US. As a result, the DXY has pulled back from another test of resistance around the 103.00 level to the benefit of G10 peers and other currencies that depreciated markedly when credit conditions were ultra-tight and assets were being dumped in the dash for cash. Even extremely weak preliminary PMIs have not hampered the recovery against the Buck ahead of the looming US Markit surveys, housing data and a speech from Fed’s Bullard.

AUD/GBP/NZD/EUR/CHF/CAD/JPY - As noted above, the receding Usd has helped rival majors nurse losses as the Aussie reclaims 0.5900+ status with an independent impetus from more RBA funding for the banking sector overnight, while Cable is back within striking distance of 1.1800 irrespective of deep sub-50 UK PMIs and Britain now in a virtual 3 week COVID-19 lockdown. Back down under, the Kiwi has rebounded from just shy of 0.5700 towards 0.5850 following NZ Government and RBNZ business finance guarantees and reduced core bank funding ratios. The Euro is hovering close to decent 1.1 bn option expiry interest at 1.0860, and again not unduly unsettled by worrying French, German and pan Eurozone PMIs even though the periphery is almost certain to lead to downgrades in the final reckoning, with the Franc pivoting 0.9750, Loonie back above 1.4400 amidst firmer crude prices and Yen straddling 110.50, but sharply lagging Gold that has breached the Usd1600/oz mark.

EM - Broad revivals courtesy of the aforementioned Dollar downturn and associated commodity comeback, as the Forint waits to see if the NBH cuts rates to make it a complete set of CE3 easing this month – March policy call due at 13.00GMT


Only a minor dip to new Liffe lows for Gilts at 134.88 and little response to the CBI industrial trends survey that was a bit better than expected, though again could well be heading for a bigger fall when more of the coronavirus fallout feeds through. However, Italian BTPs are the notable outperformer on more aid to fight the pandemic and tentative signs that the outbreak might be peaking, assuming alarming reports about the situation being far worse than is being reported are wide of the mark. Meanwhile, Bunds and USTs holding within ranges after 2 year German supply that was not that well received and ahead of the Usd40 bn auction in the same maturity.


A relief rally across the energy complex as prices piggy-back on the overall current market sentiment, with WTI and Brent front-month futures both posting gains in excess of 5%, with the former inching closer to USD 25/bbl and the latter gaining ground north of USD 28/bbl. That being said, fundamentals remain relatively unchanged, with the demand prospect still looking bleak amidst economic activities coming to a halt and airlines indefinitely grounding flights. Meanwhile, the supply side fares no better as Russia and Saudi still remain poised to hike production next month and with Moscow’s meeting with oil executives seemingly bearing no fruits. On that front, Energyintel understands that the Russian Energy Ministry will be convening with energy CEOs on a weekly basis, although no production curtailments were discussed at yesterday’s confab. Similarly, spot gold caught a bid yesterday following the Fed announcement and the yellow metal continues on its upwards trajectory as USD eases and liquidity concerns fade. The metal extends its gains above USD 1550/oz, having briefly topped its 21DMA (USD 1591.46/oz) to print a current peak above 1600/oz, ahead of a Fib level at 1607.19/oz. Finally, copper prices were uplifted during APAC trade on the broader risk appetite, aiding the red metal to gain a firmer footing above USD 2/lb – but supply/demand issues for the base metal haven’t subsided.

US Department of Energy confirmed it will send special energy envoy Coates to Saudi Arabia to help stabilize oil markets, but added it is unclear when Coates will begin work there due to the coronavirus. (Newswires)

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