Growing hope for a global policy response to contain economic impact of virus outbreak

Notes/Observations

- Growing hope for a global policy response to counteract the economic impact of the coronavirus epidemic

- Risk appetite finds some legs on speculation the Fed will ease policy to prop up financial markets pummeled by the spread of the coronavirus.

- Other central bankers note of communication between to gauge the markets

- Asian stocks halted a seven-day losing streak

 

Asia:

- China Feb Manufacturing PMI (Govt official): 35.7 v 45.0e (1st contraction in 6 months and record low). Non-Manufacturing PMI: 29.6 v 51.0e (record low)

- China Feb Caixin PMI Manufacturing : 40.3 v 46.0e (record low)

- BOJ Gov Kuroda stated that was seeing unstable moves in financial markets and would strive to provide ample liquidity. Markets making unstable movements due to uncertainty over coronavirus impact on economy . To ensure liquidity through operations and asset purchases, appropriate market operations. To closely monitor future developments .

- BoJ announced that it would purchase ¥500B in JGBs via repos (Note: first time since March 2016)

- Numerous analysts see RBA cutting rates as soon as tomorrow and again in April to bring key rate to 0.25%

 

Coronavirus:

- Global cumulative cases 89.1K; Cumulative deaths 3, 048

- Chinese cumulative cases 80.2K (+1.2K from Friday); Cumulative death toll 2,915 (+124 from Friday)

- US reports its reports 1st death from virus, patient was in Washington state

 

Europe:

- Italy govt to announce €3.6B stimulus package to deal with coronavirus and ask its parliament to authorize lifting 2020 deficit to help address coronavirus crisis. The new measure would be approved by Fri (Mar 6th). Italy believed the EU would not oppose a consequent hike in 2020 budget deficit

- German Fin Min Scholz confirmed it is looking for ways of loosening debt brake. Govt would be in position to start a fiscal stimulus package if coronavirus (Covid-19 set off a global crisis. Reiterated German stance that domestic fiscal policy was built on solid footing

 

Brexit:

- Un-named officials said to warn that UK, EU trade talks could break down within "weeks (Reminder: Trade negotiations between UK and EU are set to begin this week)

 

Americas:

- Fed Chair Powell stated on Friday (after the close) that the coronavirus posed ‘evolving risks’ to economic activity '; Fed to act as appropriate to sustain the economy

- Goldman analyst: Sees Fed cutting rate by 50bps by March 18th. Believed that Fed Chair Powell's statement on Friday (Feb 28th) strongly hints at a rate cut at or even before the March 17-18 FOMC meeting.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.4% at 377, FTSE +1.1% at 6652, DAX 0% at 11894, CAC-40 +0.3% at 5328, IBEX-35 +0.2% at 8737, FTSE MIB -2.2% at 21500, SMI +1.4% at 9964, S&P 500 Futures +0.7%]

 

Market Focal Points/Key Themes:

European indices mostly in the green following Asia indices mostly higher and higher US futures. SES plunges as the company reported FY19 earnings and cut FY20 revenue and EBITDA guidance. Senior jumps on earnings and slight dividend hike. Other risers on earnings include Hiscox and Emmi. Rheinmetall down slightly following FY19 earnings results. German-listed Merck up on Erbitux being approved in China for recurrent and/or metastatic squamous cell carcinoma. Morphosys up on receiving FDA priority review and being granted license application for Tafasitamab and Lenalidomide. Nokia trading higher as the company announced new CEO appointment effective in August. Notable earners today include Core-Mark Holding.

 

Equities

- Consumer discretionary: Emmi [EMMN.CH] +3.5% (results), Just Eat Takeaway [JET.UK] +2.2% (arbitration with Delivery Hero), Anheuser-Busch InBev [ABI.BE] +4.6% (Russia allows malt replacement)

- Financials: Senior [SNR.UK] +11.8% (results)

- Healthcare: Morphosys [MOR.DE] +2.8% (FDA grants priority review), Qiagen [QIA.DE] +4.3% (Shipments of COVID-19 test kits), Redx Pharma [REDX.UK] 25.8% (equity financing), Mithra Pharma [MITRA.BE] +7.8% (analyst action)

- Industrials: Gaztransport Et Technigaz [GTT.FR] +2.5% (results), ThyssenKrupp [TKA.DE] +5.5% (analyst action), Bobst [BOBNB.CH] -1.1% (results)

- Technology: Schneider Electric [SU.FR] +4.2% (New CFO)

- Telecom: SES [SESG.FR] -12.0% (results), QSC [QSC.DE] +14.0% (results), Nokia [NOKIA.FI] +3.1% (new CEO)

 

Speakers

- ECB's Villeroy (France) stated that ECB was vigilant and mobilized on coronavirus. Reiterated stance that current ECB policy was very accommodatove and could act if necessary but not there yet. G7 to hold a conference call this week

- Italy Dep Fin Min Misiani stated that saw govt 2020 budget deficit to GDP ratio of 2.4% due to virus response to foster growth

- EU official Breton: Coronavirus had impacted EU tourism by €1.0B/month since the outbreak began

- South Africa President Ramaphosa: Debt situation remained precarious and unsustainable. Budget to contain spending to increase growth. Had made a deliberate decision not to pursue a path of austerity

- Hong Kong Financial Sec Chan: Current economic situation remained very difficult. Rebound after current downturn should be forceful as cash handout should start helping economy by summer

- Indonesia Central Bank (BI) cut itss Reserve Requirement ratio (RRR) for FX to 4.00%. RRR cut meant to ease export-import financing as global uncertainty was triggering capital outflows in emerging markets

 

Currencies/ Fixed Income

- USD was generally weaker as markets now looked for the Fed to cut rates as soon as this month to counter any negative impact from the global coronavirus outbreak. . US 10-year yield continued to post record low as it dipped below the 1.09% area. Growing hope for a global policy response to counteract the economic impact of the coronavirus epidemic as G7 finance ministers and central bankers planned to hold a conference call this week.

- EUR/USD higher by over 0,5% to approach the 1.11 level. USD/JPY probed as high as 108.57 on stimulus hopes .

- GBP/USD bucked the trend and was lower by 0.3% as UK-EU trade talks were poised to kick off this week. Reports circulated that trade talks could break down within "weeks"

 

Economic Data

- (RU) Russia Feb PMI Manufacturing: 48.2 v 47.3e (10th month of contraction)

- (TR) Turkey Feb PMI Manufacturing: 52.4 v 51.3 prior (2nd straight expansion)

- (SE) Sweden Feb PMI Manufacturing: 53.2 v 51.3e (2nd straight expansion)

- (TH) Thailand Feb Business Sentiment Index: 44.1 v 48.5 prior

- (NL) Netherlands Feb Manufacturing PMI: 52.9 v 49.9 prior (1st expansion in 4 months)

- (HU) Hungary Feb Manufacturing PMI: 50.1 v 52.5e (50th month of expansion)

- (PL) Poland Feb PMI Manufacturing: 48.2 v 48.e (16th month of contraction)

- (ES) Spain Feb Manufacturing PMI: 50.4 v 48.9e (1st expansion in 9 months

- (CH) Swiss Feb PMI Manufacturing: 49.5 v 48.0e (12th month of contraction)

- (CZ) Czech Republic Feb PMI Manufacturing: 46.5 v 46.5e (15th month of contraction)

- (HK) Hong Kong Jan Retail Sales Value Y/Y: -21.4% v -20.8%e; Retail Sales Volume Y/Y: -23.0% v -22.1%e

- (IT) Italy Feb Manufacturing PMI: 48.7 v 49.0e (16th month of contraction)

- (FR) France Feb Final Manufacturing PMI: 49.8 v 49.7e (confirmed 1st contraction in 7 months)

- (DE) Germany Feb Final Manufacturing PMI: # v 47.8e (confirmed 14th straight contraction but highest since Jan 2019)

- (EU) Euro Zone Feb Final Manufacturing PMI: 49.2# v 49.1e (confirmed 13th straight month of contraction and highest since Feb 2019)

- (ZA) South Africa Feb Manufacturing PMI: 44.3 v 45.1e (10th straight contraction)

- (GR) Greece Feb Manufacturing PMI: 56.2 v 54.4 prior (33rd month of expansion)

- (CH) Swiss weekly Total Sight Deposits (CHF): 595.8B v 592.3B prior; Domestic Sight Deposits: 502.2B v 500.6B prior

- (NO) Norway Feb PMI Manufacturing: 52.2 v 51.1 prior (7th month of expansion)

- (IS) Iceland Q4 Current Account Balance (ISK): 51.0B v 63.0B prior

- (UK) Feb Final PMI Manufacturing: 51.7 v 51.9e

- (UK) Jan Net Consumer Credit: £1.2B v £1.0Be; Net Lending: £4.0B v £4.6Be

- (UK) Jan Mortgage Approvals: 70.9K v 68.0Ke (highest since Apr 2016)

- (UK) Jan M4 Money Supply M/M: 0.6% v 0.1% prior; Y/Y: 4.7% v 3.8% prior; M4 Ex IOFCs 3M Annualized: 5.6% v 3.9% prior

- (DK) Denmark Feb PMI Survey: 49,1 v 53.1 prior

- (IT) Italy 2019 GDP Annual Y/Y: 0.3% v 0.2%e; Budget Deficit to GDP: 1.6% v 2.2%e (lowest deficit since 2007)

 

Fixed Income Issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 1.27% v 1.40% prior; Bid-to-cover: 3.24x v 1.96x prior

 

Looking Ahead

- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: -4.5%e v -8.1% prior

- (RO) Romania Feb International Reserves: No est v $40.3B prior

- (IT) Italy Feb Budget Balance: No est v €3.0B prior

- 05:30 (DE) Germany to sell €3.0B in 6-month BuBills

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills ; Avg Yield: % v -0.585% prior; bid-to-cover: x v 1.31x prior (Feb 17th 2020)

- 06:00 (PT) Portugal Jan Industrial Production M/M: No est v 2.8% prior; Y/Y: No est v 3.3% prior

- 06:00 (PT) Portugal Jan Retail Sales M/M: No est v -1.5% prior; Y/Y: No est v 2.3% prior

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey

- 06:30 (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: 0.3%e v 3.5% prior; Y/Y: 1.2%e v 1.1% prior; Economic Activity Index (ex-morning) Y/Y: 0.6%e v 0.8% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:30 (ES) ECB”s De Guindos (Spain)

- 08:00 (BR) Brazil Feb PMI Manufacturing: No est v 51.0 prior

- 08:00 (CZ) Czech Feb Budget Balance (CZK): No est v -8.0B prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:30 (CA) Canada Jan MLI Leading Indicator M/M: No est v 0.4% prior

- 08:50 (FR) France Debt Agency (AFT) to sell €3.3-4.5B in 3-month, 6-month and 12-month bills

- 09:30 (CA) Canada Feb Manufacturing PMI: No est v 50.6 prior

- 09:45 (US) Feb Final Markit Manufacturing PMI: 50.8e v 50.8 prelim

- 09:45 (EU) ECB weekly QE bond buying update

- 10:00 (US) Jan Construction Spending M/M: +0.6%e v -0.2% prior

- 10:00 (US) Feb ISM Manufacturing: 50.5e v 50.9 prior; Prices Paid: 50.5e v 53.3 prior

- 10:00 (MX) Mexico Jan Total Remittances: $2.7Be v $3.1B prior

- 10:00 (MX) Mexico Central Bank Economist Survey

- 10:00 (CO) Colombia Feb PMI Manufacturing: No est v 53.4 prior

- 10:00 (CO) Colombia Jan Exports: $3.4Be v $3.3B prior

- 10:30 (MX) Mexico Feb PMI Manufacturing: No est v 49.0 prior

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

- 12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v -5.9% prior

- 13:00 (MX) Mexico Feb IMEF Manufacturing Index: 47.8e v 48.2 prior; Non-Manufacturing Index: 49.5e v 50.3 prior

- 13:00 (BR) Brazil Feb Trade Balance: +$1.5Be v -$1.8B prior; Total Exports: $15.0Be v $14.4B prior; Total Imports: $13.5Be v $16.2B prior

- 17:30 (AU) ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 108.3 prior

- 18:00 (KR) South Korea Q4 Final GDP Q/Q: 1.2%e v 1.2% prelim; Y/Y: 2.2%e v 2.2% prelim

- 18:00 (KR) South Korea CPI M/M: 0.0%e v +0.6% prior; Y/Y: 1.3%e v 1.5% prior; CPI Core Y/Y: 0.6%e v 0.9% prior

- 18:50 (JP) Japan End-Feb Monetary Base: No est v ¥517.2T prior; Y/Y: No est v 2.9% prior

- 19:30 (AU) Australia Jan Building Approvals M/M: +1.0%e v -0.2% prior; Y/Y: 2.4%e v 2.7% prior

- 19:30 (AU) Australia Q4 Current Account Balance: A$2.4Be v A$7.9B prior ; Net Exports of GDP: 0.2% v 0.2% prior

- 22:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.75%

- 22:30 (HK) Hong Kong to sell 3-month and 6-month bills

- 22:35 (JP) Japan to sell 10-Year JGB Bonds

- 23:30 (TW) Taiwan to sell TWD170B in 12-month Certificate of Deposits (NCD)