Awaiting US measures to combat the impact of the coronavirus; more countries imposing lockdowns to contain spread

Notes/Observations

- Risk aversion sentiment picked up in Asia after US Senate coronavirus bill did not get enough votes to clear first procedural hurdle

- Central Bank continued to dust off many non-conventional tools developed since the last crisis but the magnitude of the today’s situation appears greater than in past crises

- Lockdown measures by governments continue; AU and NZ announced lockdown measures; State governments in India announce lockdown of various cities across the country; NYC’s lockdown measures took effect on Sunday night at 8 PM

 

Asia:

- Japan PM Abe confirms Japan will quarantine visitors from US for 14-days; effective March 23rd

- Japan PM Abe said to believe that the Tokyo Olympics could need to be postponed under certain circumstances

- Japan Olympics Min Hashimoto stated that would follow IOC's decision [related to Olympics], for now we were going forward as planned but that will be re-discussed (Note: Canada's Olympic Committee has recommended delaying the Olympic games to 2021)

- Australia PM Morrison announced that it would close its boarders for up to 6-months or more, restriction would not be lifted until it is safe to do so; only Australia citizens or permanent residents would be allowed in

- China PBOC Vice Gov Chen: policy measures to address coronavirus had achieved significant results; expect China CPI rises to gradually ease, there is no basis for long; China's financial system remains stable we had ample policy tools, saw no bid rise in defaults

- New Zealand Central Bank (RBNZ) announced NZ$30B Asset Purchase Program (QE) targeted at govt bonds across all range of maturities; Planned to buy NZ$500M in bonds this week and NZ$750M bonds each week

 

Coronavirus:

- Global cumulative cases 339.3K (+42.2% vs Friday); cumulative deaths 14.7K (+46.6% vs Friday)

- China cumulative cases: 81.6K (+0.4% vs Friday); cumulative deaths 3,276 (+0.7% vs Friday)

- Italy: cumulative cases at 59.1K, cumulative deaths 5476

- Spain cumulative cases at 28.6K, cumulative deaths 1720

- Germany cumulative cases at 18.6K, cumulative deaths 55

- France: cumulative cases at 16.0K, cumulative deaths 674

- UK cumulative cases at 5.7K, cumulative deaths 281

- NY cumulative cases at 15.2K with death toll total of 114

 

Europe:

- ECB De Guindos (Spain): Virus outbreak to place Europe into a recession but it should be transitory and the region should be back in positive GDP growth in the second semester. EU should consider using Eurobonds to deal with coronavirus

- EU's Dombrovskis: EU Commission likely to present a tool for the euro zone's ESM bailout fund to fight the effects of the coronavirus epidemic that could unlock unlimited ECB sovereign bond purchases. Euro Zone finance ministers, the European Stability Mechanism (ESM) and the ECB to come up with a instrument to involve the fund in supporting economies hit by the coronavirus

- Germany expected to authorize issuance of €350B in new debt (~10% of its GDP) to fight coronavirus; Fin Min Scholz also expected to present a €600B bailout fund for companies impacted by the virus. Germany said to be readying stimulus measures requiring about €156B in net new borrowing and additional debt authorization of up to €200B to fight the economic impact of the coronavirus outbreak

- UK Govt preparing plans to buy equity stakes in UK airlines and other companies most impacted by the coronavirus

 

Americas:

- Senate coronavirus bill did not get enough votes to clear first procedural hurdle; The vote on the bill was 47 to 47 [60 votes were needed to advance the measure. Democrats in the Senate said to be sending the signal to Republicans that the bill needed to be revised. (Note: 5 Republican Senators were currently quarantined and did not vote on the bill)

- Senate Majority Leader McConnell (R-KY): Senate to re-vote on Republican bill at 09:45 ET (13:45 GMT) on Monday (March 23rd) unless deal is made

- Senate Minority Leader Schumer (D-NY): Believed disagreements over coronavirus bill can be overcome in the next 24 hours. Democrats opposed the coronavirus stimulus bill because it contained a 'large corporate bailout' and did not have protections for workers. Additionally the measure did not have enough oversight.

- Fed's Bullard (dove, non-voter): US unemployment rate may reach 30% in Q2 due to coronavirus shutdowns and GDP could fall upwards of 50%; everything is on the table for Fed to provide support

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -4.08% at 281.08, FTSE -4.64% at 4,949.75, DAX -3.97% at 8,581.00, CAC-40 -3.81% at 3,894.67, IBEX-35 -2.84% at 6,260.00, FTSE MIB -3.51% at 15,180.00, SMI -3.04% at 8,361.50, S&P 500 Futures -3.19%]

Market Focal Points/Key Themes: European indices open down across the board but retraced slightly as the session moved forward; consumer discretionary, particularly travel, lead to the downside; energy stocks supported with crude gaining marginally; FCA requests UK companies suspend reports over next two weeks; reportedly Spain could extend current short selling ban; plethora of companies suspend dividend payments, withdraw guidance over coronavirus impact; upcoming releases expected in the US session include Atlantia and Altice.

 

Equities

- Consumer discretionary: Airbus [AIR.FR] -6% (withdraws outlook; secures credit line)

- Energy: Innogy [IGY.DE] -1% (earnings), Royal Dutch Shell [RDS.A] -4% (suspends buyback, cuts Capex)

- Healthcare: Novacyt [ALNOV.FR] +35% (test approved in US), Bayer [BAYN/DE] -3% (research and licence agreement)

- Industrials: Leoni [LEO.DE] -13% (to apply for financial aid from German govt)

 

Speakers

- ECB's Visco stated that he believed that adopted measures were sufficient but prepared to do more. Ready to increase size of bond purchases and the composition and length in time

- ECB's Villeroy (France) stated that he supported using ESM in virus crisis

- ECB's Costa (Portugal): Euro area governments should consider issuing common coronabonds in order to fight outbreak

- ECB Vasle (Slovenia): Monitoring the situation and reiterates ECB stance ready for more measures if necessary

- Iceland Central Bank (Sedibanki): To begin buying treasury bonds in secondary market - intra-policy meeting

- Italy PM Conte: EU to face recessions, euro itself not at risk

- France Budget Min Darmanin: No limit to 2020 budget spending

- Germany Bavaria Premier Soeder (Merkel ally): Country has reacted in time to the coronavirus outbreak but a lockdown cannot be ruled out

- UK Health Sec Hancock: Prepared to take further actions if necessary

- Spain Market Regulator CNVM could extend the ban on short-selling (**Note: currently through mid-Apr)

- Poland Dep Fin Min Skiba stated that could not rule out Q2 GDP contracting

- Poland Central Bank member Zyzynski stated that he saw very limited room for rate cuts. Should defend the PLN currency (Zloty)and refrain from another rate cut

- Poland Central Bank's Zubelewicz: Must shore up support for the PLN currency (Zloty) instead of focusing mainly on propping up short-term economic growth

- Hong Kong Chief Exec Lam: To bar non-residents from overseas, effective Wed, Mar 25th (in-line with press speculation). To impose a 14-day ban on all non-resident arrivals and added that Hong Kong airport would stop all transit services

- Monetary Authority of Singapore (MAS) bring forward its bi-annual policy statement to Monday, Mar 30th (NNote: bi-annual statement usually occurs in April and Oct)

- Bank of Korea (BOK) Statement noted that purchasing commercial paper or corporate bonds would be against central bank law

- Iran President Rouhani: US sanctions have hampered efforts to control the coronavirus outbreak

 

Currencies/ Fixed Income

- Risk aversion sentiment picked up in Asia after US Senate coronavirus bill did not get enough votes to clear first procedural hurdle. The US 10-year yield fell to 0.54% before settling down while the USD continued its strength.

- Central Bank continued to dust off many non-conventional tools developed since the last crisis but the magnitude of the today’s situation appears greater than in past crises. EU Commission likely to present a tool for the euro zone's ESM bailout fund to fight the effects of the coronavirus epidemic that could unlock unlimited ECB sovereign bond purchases. More central banks announced QE measures (RBNZ, Denmark).

- EUR/USD at 1.0685, USD/JPY at 110.60 just ahead of the US morning

 

Economic Data

- (TR) Turkey Mar Consumer Confidence: 58.2 v 57.3 prior

- (DK) Denmark Mar Consumer Confidence Indicator: 0.4 v 3.3 prior

- (HU) Hungary Q4 Current Account Balance: -€0.8 v -€0.5B prior

- (CH) Swiss Feb M3 Money Supply Y/Y: 0.0% v 0.3% prior

- (TW) Taiwan Feb Industrial Production Y/Y: +3.7%e

- (TW) Taiwan Feb Unemployment Rate: 3.7% v 3.7%e

- (HK) Hong Kong Feb CPI Composite Y/Y: 2.2% v 1.4%e

- (IS) Iceland Feb Wage Index M/M: 0.1% v 0.7% prior; Y/Y: 4.8% v 4.9% prior

- (CH) Swiss weekly Total Sight Deposits (CHF): 608.8B v 603.0B prior; Domestic Sight Deposits: 512.4B v 505.9B prior

 

Fixed Income Issuance

- None seen

 

Looking Ahead

- (UR) Ukraine Central Bank Mar Minutes

- (IL) Israel Feb Leading 'S' Indicator M/M: No est v 0.3% prior

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (SK) Slovakia Debt Agency (Ardal) to sell 9-month bills

- 06:30 (BE) Belgium Debt Agency (BDA) to sell €1.5-3.0B in 2020, 2030 and 2050 OLO Bonds

- 06:30 (DE) Germany to sell €1.5B in 6-month BuBills

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 07:45 (US) Daily Libor Fixing

- 08:30 (US) Feb Chicago Fed National Activity Index: -0.29e v -0.25 prior

- 08:30 (CA) Canada Jan Wholesale Trade Sales M/M: No est v 0.9% prior

- 09:00 (PL) Poland Feb M3 Money Supply M/M: +0.6%e v -0.5% prior; Y/Y: 8.7%e v 9.3% prior

- 09:00 (UK) Daily Baltic Dry Bulk Index

- 09:50 (FR) France Debt Agency (AFT) to sell €4.9-6.1B in 3-month, 6-month, 9-month and 12-month bills

- 10:45 (EU) ECB weekly QE bond buying update

- 11:00 (EU) Euro Zone Mar Advance Consumer Confidence: -13.0e v -6.6 prior

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills

- 18:00 (AU) Australia Mar Preliminary PMI Manufacturing: No est v 50.2 prior; PMI Services: No est v 49.0 prior; PMI Composite: No est v 49.0 prior

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: N est v 100.0 prior

- 20:30 (JP) Japan Mar Preliminary PMI Manufacturing: No est v 47.8 prior; PMI Services: No est v 46.8 prior; PMI Composite: No est v 47.0 prior

- 23:30 (HK) Hong Kong to sell 3-month and 6-month bills