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Day Ahead: Top 3 Things to Watch for March 24

2020-03-24 21:07:47

1, Congressional Stimulus Package in Focus Again

While another rescue plan from the Federal Reserve to ensure liquidity in the financial markets was initially greeted by equity buying, that enthusiasm faded as the Senate was unable to agree on a stimulus package.

Republicans and Democrats remain at loggerheads about the details of a package of about $2 trillion to help businesses and individuals.

A procedural vote failed again, so the major indexes could be tethered to any headlines out of Capitol Hill tomorrow.

Senate Majority Leader Mitch McConnell said that further delay could mean a package would be delayed until Friday, according to published reports.

2. March PMIs Arrive

Manufacturing and services activity in Europe and the U.S. highlight the economic calendar for tomorrow.

The eurozone numbers arrive at 9 AM GMT.

The March Markit manufacturing purchasing managers’ index (PMI) is expected to come in at 39, according to economists’ forecasts compiled by Investing.com. The services PMI is also expected to have dropped to 39, while the composite PMI is seen 38.8.

The U.S. numbers are due to be released at 9:45 AM ET (13:45 GMT).

March’s manufacturing PMI is expected to have fallen to 42.8, with the services PMI forecast to come in at 42.

At 10:00 AM ET, February new home sales numbers arrive.Sales of new homes are expected to have dropped 2% in February to an annual rate of 750,000.

3. Nike to Report With Stores Shut

Nike (NYSE:NKE) is still scheduled to report earnings after the market closes tomorrow and could give investors a snapshot of how things are faring in retail and apparel.

The company is expected to report a profit of 61 cents per share, down from 68 cents per share in the year-ago quarter, according to analysts’ forecasts compiled by Investing.com. But sales are seen rising to about $9.9 billion from $9.61 billion.

On March 15, Nike made the decision to close its stores in multiple countries, including the U.S., Canada, Western Europe, Australia and New Zealand.

But it is still selling goods on its website and its apps, which could provide insight into how online retail is holding up for more discretionary goods.

Top 5 Things to Know in the Market on Monday, March 23rd

2020-03-24 09:09:06

1. House Democrats stall McConnell's $1 trillion package

The Senate’s ‘phase 3’ package of economic support measures for the U.S. economy stalled after running into resistance from House Democrats. A procedural vote on the package, originally scheduled for Sunday evening, has accordingly been rescheduled to midday eastern time, according to various reports.

The bill has a sticker value of well over $1 trillion, including a reported $50 billion earmarked for the stricken airline industry.

On Sunday, St. Louis Fed President James Bullard told Bloomberg he thought U.S. economic activity could halve in the second quarter as activity shuts down.

President Donald Trump again expressed impatience with the effect of public health measures on the economy, tweeting that “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF” and promising a review of the administration’s current advice within a couple of weeks.

2. Euro zone to meet amid calls for it to take giant leap with 'Corona bonds'

EU finance ministers are set to hold another teleconference on Monday ahead of a Eurogroup meeting on Tuesday, amid growing calls for the currency union to issue joint debt instruments to share the burden of supporting the economy through the Covid-19 crisis.

Portugual's central bank Governor Carlos Costa on Monday followed Italian Prime Minister Giuseppe Conte in calling for the bloc to issue jointly-guaranteed debt, a proposal that was repeatedly resisted by the likes of Germany and the Netherlands during the last euro crisis.

Germany itself is set to end a decade of austerity this week with a new emergency budget that envisages a deficit of around 156 billion euros and total support measures for the economy of over 1 trillion ($1.07 trillion)

The Ifo research institute estimated a hit to the German economy of some 730 billion euros from the pandemic.

3. Signs of a slowdown in new Covid-19 cases in Europe; U.S. picture unclear

The rate of growth in new Covid-19 infections across Europe appeared to slow, albeit the overall numbers of both infections and deaths continue to rise alarmingly.

At the weekend, Europe’s largest economy, Germany, imposed a two-week ban on all non-essential meetings of more than two people, while Chancellor Angela Merkel went into self-isolation after having contact with a doctor who subsequently tested positive for the Covid-19 virus.

Elsewhere, Spain extended its emergency lockdown regime by another two weeks to early April while the U.K. reportedly pondered stricter measures to enforce its hitherto relaxed steps to encourage social distancing.

Analysts at Pantheon Macroeconomics said the rate of new infections also appears at first sight to be slowing in the U.S., but warned that the incompleteness of testing data made it impossible to say for sure. Chief economist Ian Shepherdson noted that New York City data are probably more reliable than national data. "The number of cases per million is now much higher than in Italy, and, at 941 yesterday, it will soon shoot above Hubei's 1,185," he wrote in a note to clients.

4. Stocks set to open lower amid ongoing signs of liquidity squeeze

U.S. stocks are set to open lower on disappointment at Congress’s failure to pass the latest economic support bill, amid ongoing signs of liquidity stresses in various asset classes.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 504 points, or 2.7%, while the S&P 500 Futures contract was down 2.7% and the Nasdaq 100 futures contract was down 2.3%.

Overnight, risk assets had trended down in both Europe and Asia, but declines were mostly orderly.

However, signs of dysfunction in markets continue to pop up, with the Financial Times reporting that Goldman Sachs (NYSE:GS) had to intervene to support liquidity in two of its money market funds, while reports also circulated of various Scandinavian funds suspending redemptions.

The reports suggest that central bank efforts over the last two weeks to keep markets functional haven’t been entirely successful.

5. Big Oil cuts back

Royal Dutch Shell (LON:RDSa) and Total (PA:TOTF) both suspended their stock buyback programs and announced big cuts to capital expenditure to conserve cash.

However, both companies left their dividends intact for the time being.

In the U.S., meanwhile, The Wall Street Journal reported that Occidental Petroleum (NYSE:OXY) is set to appoint two representatives of activist investor Carl Icahn to its board, ending a bitter struggle over the company’s direction as it struggles with a heavy debt load after last year’s acquisition of Anadarko.

Crude oil futures resumed their declines, WTI falling 0.5% to $22.50 a barrel and Brent falling 4.1% to $25.87.

Economic Calendar - Top 5 Things to Watch This Week

2020-03-23 10:36:34

1. Data to show early economic hit from virus
Few doubt that the global economy will tip into recession as countries around the globe go into lockdown amid ongoing virus containment efforts. It goes without saying that large drops are likely in PMI data coming out this week in the U.S., Eurozone and the U.K.

The PMI surveys are typically conducted in the second half of a month and the data in the "flash" survey is usually collected in the week or so before the data is released, so economists reckon next week's PMIs will provide the most comprehensive overview so far of the coronavirus impact.

Meanwhile, Thursday’s figures on initial jobless claims will be the first to show the full extent of the impact on the U.S. labor market. Economists at Goldman Sachs have estimated claims are set to jump to a record 2.25 million, according to an analysis of preliminary reports across 30 states.

2. U.S. government response awaited
Republicans and Democrats in the U.S. Senate on Saturday continued with efforts to reach a deal on a $1 trillion-plus bill aimed at mitigating the coronavirus pandemic’s economic fallout for workers and businesses.

White House economic adviser Larry Kudlow said he expects the final legislative package to be worth $1.3 trillion to $1.4 trillion.

Taken together with steps already taken by the U.S. Federal Reserve and the administration, the prospective bill would have a $2 trillion net impact on a U.S. economy, according to White House officials.

3. Liquidity squeeze to ease?
A liquidity squeeze prompted the Federal Reserve on Friday to enhance the dollar liquidity swap line arrangements it has with the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank.

To see if that does the trick, watch for dollar exchange rates to stabilize.

Demand for the world’s reserve currency had jumped amid a rush for cash in anticipation of a prolonged pandemic, with there being a substantial liquidity mismatch between global demand for U.S. dollars and those on offer.

4. U.S stock valuation picture may become clearer
As the U.S. stock market has tumbled, valuations have also come down sharply.

The S&P 500's price-to-earnings ratio, based on earnings estimates for the next year, has dropped from over 19 times in late February to 14.2 times as of last Wednesday, according to Refinitiv data, taking the valuation below its historical average.

But the picture is complicated by the fact that earnings estimates may have not come down enough to account for the coronavirus fallout.

The picture may become clearer in the coming weeks, as the first quarter comes to an end and companies start preparing their results. Last week, FedEx (NYSE:FDX) and Marriott (NASDAQ:MAR) withdrew their 2020 financial forecasts because of the outbreak.

Nike (NYSE:NKE), Micron Technology (NASDAQ:MU), and KB Home (NYSE:KBH) are among the U.S. companies due to report results this week.

5. Emerging markets
Emerging market assets have been hammered, with currencies plunging to fresh record lows, bonds plunging and stocks down nearly 10% last week. Several factors have contributed - the strong dollar, a darkening economic outlook, tumbling oil prices as well as rising borrowing costs.

Investors piling into the greenback have seen enduring stresses in dollar funding markets, with hurried swap lines between central banks earlier in the week doing little to alleviate the credit strains at the heart of the problem.

Central banks in the United States, the euro zone, Canada, Britain, Japan and Switzerland stepped in again on Friday, agreeing to increase the frequency of their one-week U.S. dollar credit facility.

In emerging markets, policymakers that lack the firepower to support currencies or face challenges to cut rates, will be keeping their fingers crossed that steps taken by major central banks will be enough to end the crisis.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Friday, March 20th

2020-03-20 18:51:27

1. California in lockdown as virus spreads; Germany may follow on Sunday

California ordered its population of 40 million to stay home to stop the spread of the coronavirus, the latest hammer blow to the global economy from a virus that is still spreading fast outside of China.

In Germany, expectations of a full lockdown are also rising as Chancellor Angela Merkel scheduled a call with state governors for Sunday to assess the effectiveness of the less draconian measures that have so far been taken.

Worldwide, the death toll from the virus has now topped 10,000, while the number of confirmed cases has hit 245,000, according to data compiled by Johns Hopkins University. The U.S. tally of confirmed cases has risen to 14,250. California Governor Gavin Newsom estimated that over half of the state’s population – some 25 million people - will be infected over an eight-week period.

2. Republicans stimulus bill: helicopter money and part-nationalization

Senate Republicans introduced a stimulus package worth over $1 trillion to buttress Congress’s more modest first two attempts to support the economy through the coronavirus outbreak.

The plan makes so-called ‘helicopter money’ a reality, calling for adults to receive up to $1,200 per month, with an extra $500 for every child. Payments will scaled down for higher earners.

The bill also includes $50 billion in loan guarantees for passenger air carriers, $8 billion for cargo air carriers and $150 billion for other large businesses, and authorizes the federal government to take equity stakes.

3. Dollar retreats as squeeze eases

The extreme dollar rally went into reverse, as a massive expansion of central bank liquidity finally started to bring the supply of dollars back into line with demand.

The Federal Reserve’s action to backstop the commercial paper and money market funds this week has underpinned domestic U.S. markets, while the announcement of nine more dollar swap facilities with foreign banks will allow dollars to reach more corners of global markets more quickly, reducing near-term default risks.

Other central bank actions, such as the dramatic expansion of quantitative easing programs at the European Central Bank and Bank of England in the last 36 hours, have also supported European markets.

By 6:55 AM ET (1055 GMT), the dollar index that tracks the greenback against a basket of developed market currencies was down 1.0% at 102.54. It’s still up 3.9% on the week, however.

4. Stocks rally ahead of futures and options expiry

The easing of stress in funding markets has allowed global stock markets to bounce sharply. U.S. stock markets are set to open higher, with the Dow Jones 30 futures indicating a gain of 719 points or 3.6%. The S&P 500 futures contract is up 3.2% and the Nasdaq 100 futures contract up 4.4%.

In Europe, the Stoxx 600 benchmark rebounded sharply to be up 3.6%, while in Asia, the Chinese CSI 300 closed up 1.3%.

Market movements are being amplified by the fact that most of the March contracts in the world’s major futures and options products expire Friday – the routing ‘quadruple witching’ effect.

5. Oil rockets on report of U.S. output regulation

Crude oil futures leaped on the back of a report by The Wall Street Journal alleging that the U.S. is imposing production quotas on domestic companies. By 6:55 AM ET, U.S. crude was up 5.1% at $27.22, while Brent was up 4.5% at $29.46 a barrel.

The U.S. has a history of regulating production through the Texas Railroad Commission back to before World War 2, but abandoned the practice nearly 50 years ago.

The WSJ reported that the U.S. may lean on Saudi Arabia and Russia to rein in their output, with the threat of sanctions directed at the latter in particular.

Bloomberg reported that President Vladimir Putin sees the price war initiated by Saudi Arabia as ‘blackmail’ and is refusing to give in. Russia’s budget is designed to balance at a price of $40 a barrel, while Saudi Arabia and most OPEC producers need a much higher price to meet their budget needs.

Top 5 Things to Know in the Market on Thursday, March 19th

2020-03-19 20:18:03

1. Senate approves $500 billion stimulus; Fed to backstop money-market funds

The U.S. Senate passed without amendment the House of Representatives’ $500 billion bill of emergency measures to support the U.S. economy, the latest in a growing list of global actions to backstop an economy headed for recession due to the coronavirus pandemic.

The bill, dismissed by the administration and Senate Republicans last week as a ‘liberal wish list’ includes provisions for paid sick leave and free testing for the virus.

Attention is now turning to the administration’s next step, which reports suggest will include a $50 billion support package for the airlines industry and a further $500 billion in direct payments to households to make good expected income shortfalls.

Additionally, the Federal Reserve announced a new lending facility aimed at easing stresses in the money-market fund sector, which has been rocked by a surge in redemptions.

2. ECB bazooka stems growing euro zone break up risk

The European Central Bank announced its biggest ever anti-crisis package, aiming to nip in the bud growing doubts about its willingness to backstop the currency union’s weaker member states.

The ECB said it would buy up to another 750 billion euros ($820 billion) in government and private-sector bonds and lift its previous self-imposed limits that stopped it concentrating its firepower on countries facing the biggest stress.

Greek and Italian bond spreads, which had surged since President Christine Lagarde’s communications gaffe at last week’s press conference, narrowed sharply, but the boost to market confidence was less evident in stocks, with only Italy and Spain among the bigger markets posting gains.

The Australian and Swiss central banks also announced further easing measures.

3. Stocks set to open lower; dollar drives higher

U.S. stocks are set to open lower again on Thursday as the widening shutdown of the U.S. and European economies focuses minds on the depths of the coming recession.

By 6:50 AM ET (1050 GMT), the Dow Jones 30 futures contract was down 343 points, or 1.7%, while the S&P 500 futures contract was down 1.7% and the Nasdaq 100 contract was down 0.8%.

European stocks were mixed, while Chinese and other Asian markets had ended lower overnight.

The global dollar squeeze continued, driving the dollar index to its highest since January 2017, rising 1% against the Swiss franc after the Swiss National Bank signalled it would step up interventions in the currency market to stop the franc appreciating. The dollar also posted extraordinary gains against emerging currencies from Indonesia to Mexico. The dollar also hit a five-month high against the Chinese yuan of 7.1496. The Norwegian krone suffered its worst daily drop in half a century, amid collapsing oil prices.

4. Jobless claims to grab attention

While most economic indicators are passing by unnoticed, markets will be paying attention to the release of U.S. initial jobless claims at 8:30 AM ET (1230 GMT).

Given their timeliness, the numbers will be the first hard data to show the actual impact of slowing activity on the job market.

Elsewhere, German business confidence, as measured by the Ifo index, registered its sharpest monthly decline ever in an early unscheduled release.

5. Liquidity hit by stressed marketplaces

Concerns about liquidity in global markets continue to grow as exchanges restrict operations and bank traders disperse from their cavernous trading rooms to work from home.

The New York Stock Exhchange has decided to close its trading floor after two employees tested positive, albeit electronic trading, which accounts for the vast bulk of turnover, will continue as normal.

In London, ever-tighter lockdown measures are expected to hit liquidity in European markets, and the global foreign exchange market.

Short-selling bans in various markets such as France, Italy and Span remain in place, further crimping liquidity in European stocks.

Top 5 Things to Know in the Market on Wednesday, March 18th

2020-03-18 14:13:22

1. Markets resume sell-off

Global stock markets resumed their descent, afraid that government measures to support the economy still won’t be enough to avoid a sharp recession.

By 6:45 AM ET (1045 GMT), U.S. stock futures had given up most of the gains made by underlying cash indices on Tuesday. Dow Jones 30 Futures were down 833 points or 4.0%, while the S&P 500 Futures contract was down 3.7% and the Nasdaq 100 futures contract down 4.5%.

In Europe, the benchmark Stoxx 600 was down 4.6%, while in Asia overnight, the Nikkei and Chinese CSI 300 had both fallen 1.7%, while Australia’s S&P/ASX 200 fell 6.4%.

Signs of dysfunction in financial markets continue unabated, as the European Central Bank allotted $75.8 billion through an 84-day swap operation with eurozone banks – more than it ever did during the 2008/9 crisis. It also lent another $36 billion through a one-week facility.

The benchmark 10-year Treasury yield rose 15 basis points to 1.14%, while gold futures fell 1.1% to $1,509.02 an ounce.

2. The dollar is the ultimate risk-aversion measure

The biggest single indicator of risk aversion, and of stress in global financial markets, remains the price of the dollar (hence the massive demand for dollars at the ECB’s swap operation).

The index that measures the dollar against developed-market peers has risen over 4% against developed-market currencies in the last nine days, and hit a fresh two-year high overnight, thanks to sharp gains against commodity currencies such as the loonie, Aussie and kiwi.

It’s making even sharper gains against emerging currencies, hitting a fresh all-time high against the Brazilian real on Tuesday, and rising 3% against the ruble to a new four-year high in early European trading on Wednesday. The dollar’s also up 4% against the Mexican peso overnight, and up over 1% against the Turkish lira at a two-year high.

3. France gets its bazooka ready after Merkel flags talks on euro-bonds

France is due to announce an emergency budget in what is likely to be the latest in a series of fiscal bazookas to be fired at the Covid-19 pandemic.

Late on Tuesday, German Chancellor Angela Merkel raised the hope that the crisis could lead to the euro zone issuing jointly-guaranteed bonds to finance the region’s response packages. That would be a major leap forward from the response to the sovereign debt crisis that began a decade ago.

However, eurozone sovereign spreads continued to widen on Wednesday, mindful that any such move would need the approval of parliaments that have become more sceptical, rather than less, toward such measures over the last few years. German 10-year bond yields rose to a two-month high of -0.27% on a combination of Merkel's comments and forced selling by portfolio investors to raise liquidity.

4. Biden nearly home and hosed

Former Vice President Joe Biden all-but wrapped up the Democratic Party’s presidential nomination with a clean sweep of primary victories in Florida, Arizona and Illinois.

The victories amped up the pressure on Vermont Sen. Bernie Sanders to drop out of the race. After the latest round of primaries, Biden has 1,147 delegates compared to Sanders 861. To be sure of victory, candidates need the support of 1,991 delegates at the national convention.

5. Tesla will have to shut its Fremont factory

Among many stocks likely to be pressured at the opening is Tesla.

Alameda County officials confirmed on Tuesday that the carmaker’s Fremont factory is not classified as an essential business and is therefore subject to the lockdown order issued by Bay Area authorities over the weekend.

The measures will bring Tesla’s most important production facility effectively to a halt. However, it’s far from alone in having that problem – German automaker BMW joined Volkswagen and Fiat Chrysler in suspending production at its European factories earlier Wednesday.

Top 5 Things to Know in the Market on Tuesday, March 17th

2020-03-17 13:04:31

1. Airlines seek $50 billion bailout as Trump warns of recession

U.S. airlines have approached the federal government with a request for $50 billion in financial assistance, plus tax relief, as they struggle with a crisis that threatens to eclipse even the period after the 9/11 attacks.

Airlines for America, the industry association, said on its website it has asked for grants of up to $25 billion and loans of up to another $25 billion.

At a press conference on Monday, President Donald Trump had said: ““We’re going to back the airlines 100…We have to back the airlines. It’s not their fault.”

Bloomberg reported on Tuesday that, over the last 10 years, the U.S.'s biggest airlines spent 96% of free cash flow on stock buybacks.

In a significant change of tone, Trump had said at the press conference that the coronavirus could last through August, and that the U.S. economy may tip into recession as a result.

2. Philippines Shuts Financial Markets

The Philippines became the first country to shut its financial markets due to the Covid-19 crisis.

The Manila Stock Exchange has fallen by around one-third since the virus started to make headlines in mid-January, despite the government ordering state pension funds to increase their purchases of equities last week.

The Philippines only has a relatively modest 142 cases of Covid-19 confirmed, according to John Hopkins data. The move follows an order on Monday by President Rodrigo Duterte to impose emergency quarantine measures in Luzon, which accounts for some two-thirds of the country’s GDP.

More modest restrictions on financial markets have also been imposed in Europe on Tuesday. France, Spain and Italy all imposed short-selling bans on selected stocks and index products.

3. Risk aversion gains upper hand again

The overnight bounce in U.S. stock futures has fizzled, setting cash markets up for only a weak bounce when they open.

By 6:40 AM ET (1040 GMT), the Dow 30 futures contract was up 208 points, or 1.0%, while the S&P 500 futures contract was also up 1.0% and the Nasdaq 100 futures contract up 1.6%.

The S&P VIX index, which closed at its highest since 2008 on Monday, was down only fractionally at 80.66.

The dollar, which had plunged last week as the Federal Reserve wiped out the greenback’s interest rate premium, is now rebounding sharply as investors put an increasingly high premium on the world’s most liquid and trusted financial asset. By 6:40 AM ET, the dollar index, which tracks the greenback against a basket of developed-market currencies, was up 0.8% at 98.975.

4. Europe in Lockdown

President Emmanuel Macron instructed France’s population to self-isolate for 15 days to stop the spread of the coronavirus. It’s the most restrictive public health measure in Europe outside Italy.

Macron promised to set aside 300 billion euros in state support for the economy, around 13% of GDP, without providing too much detail about how it would be spent.

He also promised that no French business would be allowed to fail during the outbreak. For context, over 4,000 French enterprises failed each month on average in 2019.

Europe continues to report sharp increases in new infections, albeit the pace of increase in Italy, which has suffered the worst outbreak, appears to be slowing.

European heads of government are due to hold another teleconference at 12 PM ET (1600 GMT). The EU has already said it will effectively suspend its fiscal rules for the duration of the crisis.

5. Volkswagen, Airbus, Renault to suspend production

More of Europe’s biggest companies said they will suspend production at their factories, against a backdrop of increasingly severe quarantining measures across the continent.

Volkswagen said it will suspend production at most of its European plants from Saturday, initially for a period of two weeks.

In addition, Airbus (PA:AIR) said it would stop production at its plants in France and Spain. Automaker Renault (PA:RENA), having said it would halt production in France on Monday, now says it will also suspend production in Spain.

Top 5 Things to Know in the Market on Monday, March 16th

2020-03-17 12:58:19

1. Fed takes emergency action

The Federal Reserve took more emergency action to stem the panic in global financial markets, cutting the target range for fed funds to near 0% and resuming large-scale asset purchases to ensure liquidity.

The Fed said it will buy $500 billion of U.S. Treasury bonds and $200 billion of agency debt, although it didn’t specify a timeframe for its purchases.

In addition, the Fed said it would expand and reduce the cost of dollar swap facilities with five other major global central banks. The facilities were a key element in ensuring dollar liquidity to financial centers around the world during the last financial crisis in 2008/9.

The measures came after President Donald Trump declared a national emergency after the market close on Friday. Trump also announced over the weekend that he had tested negative for the Covid-19 virus after coming into contact with a Brazilian official who has been confirmed with the disease. Goldman Sachs (NYSE:GS) analysts predicted the U.S. economy could contract by 5% in the second quarter.

2. Central banks open the taps; governments seen following

Other central banks around the world continue to open the monetary taps in an increasingly desperate efforts to keep financial markets orderly.

The Bank of Japan said it would double its target for purchases of exchange-traded funds to the equivalent of $112 billion. The Reserve Bank of New Zealand cut its key rate by 75 basis points to 0.25% and said it would not raise it for at least a year. And the Bank of Korea, which had earlier resisted rate cuts despite the country suffering a severe Covid-19 outbreak itself, cut its key rate by 50 basis points to 0.75%.

Elsewhere, Robert Holzmann, one of the more hawkish members of the European Central Bank’s governing council, flagged the possibility of more direct intervention to stabilize eurozone bond markets.

“If there is a need to intervene in the area of government bonds, measures will be taken,” Holzmann said.

Eurozone finance ministers are currently meeting and are expected to announce fresh measures to support the economy later.

3. China’s data as bad as expected

The scale of the havoc wrought on the Chinese economy was confirmed by figures showing sharp declines in industrial production, fixed asset investment and retail sales.

Industrial production fell 13.5% on the year in February, while retail sales fell over 20% and fixed asset investment fell 24.5%. The numbers confirm that a sharp contraction in GDP in the first quarter is all but inevitable.

However, anecdotal reports such as pollution and traffic measures suggest a gradual return to normality continues. In Europe, retailers Kingfisher (LON:KGF) and Associated British Foods (LON:ABF) (the owner of Primark) both reported that their Chinese supply chains were operating more or less normally. Their big concern, as with many others, is now with the extent of store closures in Europe due to public health measures.

4. Stocks set to open sharply lower

U.S. stock markets are set to open sharply lower, giving up around half the gains they made on Friday in anticipation of more emergency policy measures to support the U.S. economy.

By 6:40 AM ET (1040 GMT), Dow 30 futures were down 1,045 points or 4.6% at 21,794 points. The S&P 500 futures contract was down 4.8% and the Nasdaq 100 futures contract was down 4.6%.

The flight out of risk assets into havens continued, with the 10-year Treasury yield falling 17 basis points to 0.77% and the two-year yield falling 17 basis points to 0.32%. Gold futures fell 0.7% to $1,507.00 as investors continued to liquidate positions to meet margin calls in other assets.

Overnight, the Chinese Shanghai Shenzhen CSI 300 index had fallen 5.3%, ending a period of Chinese outperformance, while Australia’s benchmark index fell 9.7% and the Euro Stoxx 600 fell 7.9%.

5. Companies struggle to keep pace with virus spread

Companies around the world issued more warnings about the outlook for their businesses amid increasingly severe shutdowns in the U.S. and Europe. Over the weekend, New York and Los Angeles tightened restrictions on bars and restaurants, while many European countries closed their borders, even within the Schengen free-travel area.

Airlines were again in the front line: British Airways owner IAG (LON:ICAG) said it would run its April-May scheduled at only 25% of capacity, while United Airlines (NASDAQ:UAL) slashed its schedule by half.

EasyJet (LON:EZJ) warned that government support will be needed to ensure the survival of much of the industry. Carnival (NYSE:CCL) suspended new cruises for four more of its lines, having already suspended the Diamond cruise line last week.

Fiat Chrysler (NYSE:FCAU) said it will temporarily close eight plants across Europe, while tiremaker Michelin (PA:MICP) said it will close plants in France, Spain and Italy.

Economic Calendar - Top 5 Things to Watch This Week

2020-03-15 18:55:32

1. Just how deep will the Fed cut?
Ahead of the Fed’s upcoming rate setting meeting on Wednesday the main question is just how deeply it will cut interest rates and what other measures in the form of quantitative or credit easing might be announced.

The Fed is seen cutting rates by as much as three quarters of a percentage point, with financial markets predicting policymakers will be forced to cut to zero by April to boost the economy.

The Fed will also update its forecasts for economic growth, and this will give investors an insight into whether any officials foresee a recession, and if so, how deep and how long it might be. The range of forecasts, which are anonymous, will also offer clues on how divided policymakers are.

2. Central bank headaches
On Thursday the Bank of Japan and the Swiss National Bank are to hold rate setting meetings, just hours after the Fed decision is announced.

The SNB will have to decide whether its regular interventions to push down the Swiss franc are still tenable without lowering its interest rates even further.

The BOJ is expected to ease policy to cushion the economic fallout from the coronavirus and shore up business confidence in the world's third-largest economy. In conjunction, the government is working on a new spending package of up to 20 trillion yen ($190 billion), as it tries to fend off a recession.

Russia, so far considered one of the better placed emerging economies due to its solid central banking credentials, has suddenly found itself grappling with a $30-per-barrel fall in oil prices, which has sent the ruble reeling. Its central bank meets on Friday.

3. Heightened market volatility set to continue
With one of Wall Street's wildest weeks in recent memory now in the history books, investors are bracing for more uncertainty and big market swings ahead.

Overwhelmingly, caution remains the watchword for investors and analysts reeling from a week that saw all three U.S. exchanges confirm bear markets, oil prices plummet to multiyear lows and wild fluctuations in bond yields and currencies.

U.S. President Donald Trump declared a national emergency on Friday. The U.S. has recorded more than 2,000 cases and 50 deaths but has been criticized for slow testing.

Investors are hoping actions by the Fed will help to soothe the roiled stock market, but rate cuts may not help equities. The S&P 500 ended up falling 2.8% on March 3 despite the Fed's surprise half-percentage point cut, which boosted sentiment but also led investors to speculate on what other actions the Fed could take.

Whatever actions the Fed takes, some investors said they are ultimately secondary to the responses of the world's governments.

"While we think central bank policy is important, we think the fiscal is much more important at this stage," said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.

4. European Union finance ministers to hold talks
European Union finance ministers will meet on Monday to discuss the impact of the coronavirus and measures to restart their economies, but by video call rather than in person after France and Spain joined Italy in imposing lockdowns on tens of millions of people.

Mario Centeno, the chair of the "Eurogroup" of euro zone finance ministers, said in a tweet late on Saturday that the sense of urgency and coordinated effort was unprecedented.

A focus of discussions is likely to be the European Commission plan unveiled on Friday to boost spending on sectors of the economy hit by the coronavirus and to let EU nations run bigger deficits to help cushion businesses.

The EU executive, which predicted the outbreak would lead to a recession in the bloc this year, wants to channel 37 billion euros ($41 billion) of existing EU funds to companies in greatest need and take a lenient approach to state aid rules.

Monday will also see a G7 video conference call where French President Emmanuel Macron will continue to call for a coordinated fiscal response.

5. Economic data
On Monday, China is to release data on industrial production, retail sales and fixed asset investment for February, which will give investors an insight into damage the coronavirus lockdown inflicted on the world’s second-largest economy.

In the U.S. figures on industrial production and retail sales for last month will indicate how the economy was doing as the coronavirus outbreak emerged, while manufacturing indexes and housing sector data may point to effects from the virus.

In the eurozone, Tuesday's Germany’s ZEW investor confidence indicator is expected to decline sharply amid major economic disruption caused by the pandemic to one of the world’s most trade-dependent economies.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Wednesday, March 11th

2020-03-11 19:19:04

1. U.S. Coronavirus cases hit 1,000; Treasury seen extending April tax deadline

The number of confirmed coronavirus cases in the U.S. topped 1,000, according to data compiled by Johns Hopkins University. It says there have been 28 deaths and 8 complete recoveries. The U.S. Center for Disease Control and Prevention is still not publishing nationwide data.

Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have begun talks on what would be likely to be a bipartisan plan for stimulus measures. Senate Leader Mitch McConnell signaled that Senate Republicans would likely go along with whatever those two agree.

The Wall Street Journal reported that the Treasury is considering extending the April 15 deadline for filing 2019 taxes, in a move that would amount to a de facto bridging loan from the government to business and households struggling with short-term cash flow issues. It said the full details of the plan hadn’t been finalized.

The number of cases in Italy, meanwhile, passed 10,000, and continued to rise sharply in Germany, France and Spain. By contrast, South Korea followed China in reporting a sharp drop in the number of new cases. South Korea also reported a jump in new cases to 242, reversing a recent trend that had seen them drop from a peak of over 800 to below 200 within a week.

2. Bank of England announces emergency policy package

The Bank of England cut its key rate by 50 basis points to 0.25%, aiming to support an economy that is set to be hurt by fallout of the spreading coronavirus.

After an emergency meeting on Tuesday, the Bank also said it will offer a new term funding scheme with additional incentives for small and medium-sized enterprises, something it said could inject over 100 billion pounds.

In addition, the BoE will waive the existing Countercyclical Capital Buffer of 1%, aiming to avoid a credit squeeze to the real economy.

The moves came on the same day that the government is expected to announce a big increase in public borrowing in its annual budget, albeit largely unrelated to Covid-19 factors.

The pound rose to $1.2946 from $1.2937 immediately before the announcement. The 10-Year U.K. Gilt yield rose to 0.28% from 0.24%, while the FTSE 100 rose 0.4% to 5982 points.

3. Global stocks turn lower after Trump’s no-show, bounce after BoE action

U.S. stock markets are set to open lower, after President Donald Trump failed to present the package of policy measures that he had flagged on Monday, reviving fears that the coronavirus will have a major impact on the U.S. economy. Trump repeated to reporters that the strength of domestic consumption was likely to minimize the virus' impact on the economy.

By 6:20 AM ET (1020 GMT), Dow 30 futures were down 440 points or 1.8%, while the S&P 500 Futures contract was down 2.0% and the Nasdaq 100 was down 1.9%. That was still up clearly from overnight lows.

All three indices had risen nearly 5% on Tuesday in anticipation of the administration’s measures.

Overnight, China’s CSI 300 index had fallen 1.8% and Japan’s Nikkei had fallen 2.3%. However, Europe’s markets rose after the Bank of England's announcement, which strengthened expectations of further action from the European Central Bank on Thursday.

The European Commission had signaled on Tuesday after a call with government leaders that it would temporarily relax state aid policy and push member states to speed up spending of EU budget funds. ECB President Lagarde warned on the same call that Europe faced a 2008-style crisis if governments don’t step in to support the economy.

4. Biden consolidates lead in primaries

Former Vice President Joe Biden won the primaries in Michigan, Idaho, Missouri and Mississippi by a convincing margin, giving him what could be a decisive lead in the race for the Democratic Party’s presidential nomination.

His rival Bernie Sanders took North Dakota and had a slender lead in Washington state with 70% of votes counted. However, he now trails Biden by 160 in the tally of pledged delegates.

The results put pressure on Sanders to concede defeat and bring the campaign to an early close. Sanders didn’t make a public statement after the results.

5. Saudi Arabia prepares to ramp up output even more

Saudi Arabia ratcheted up the oil price war that broke out at the weekend. National oil company Aramco (SE:2222) said it had received instructions to increase its maximum sustainable capacity to 13 million barrels a day, up from 12 million currently. The current ceiling has never been tested in earnest.

The move comes only a day after Aramco said it would sell over 12.3 million b/d in April, up some 2.5 million b/d from what it was producing under the previous output restraint deal between OPEC and Russia.

The company didn’t say how long it would take to reach this new level of capacity.

U.S. crude futures turned lower on the news. By 6:25 AM ET, they were at $33.27 a barrel, down 3.2% on the day. Brent crude was at $36.05 a barrel, down 3.1%.

The U.S. government’s inventory data are due at 10:30 AM ET, while OPEC is due to release its monthly report at some time during the day.

Top 5 Things to Know in the Market on Tuesday, March 10th

2020-03-10 17:46:26

1. Trump reacts

President Donald Trump said the U.S. administration was preparing measures to support the economy and insulate it against a spreading coronavirus outbreak.

Trump, who continues to play down an outbreak that he initially styled a "Democrat hoax", promised a “very major” package of relief measures, but gave few details beyond mentioning a possible cut in payroll taxes and other unspecified help for hourly-paid workers. Meanwhile, his new chief of staff Mark Meadows was forced to self-isolate after coming into contact with someone since diagnosed with the virus.

Treasury Secretary Steven Mnuchin said the measures would be aimed at those hardest hit by the outbreak, including small and medium-sized enterprises. He downplayed parallels with the financial crisis of 2008 and said the economy “will be in very good shape a year from now.”

The comments came as the number of confirmed cases in the U.S. topped 600, amid fears that its relaxed attitude to testing may have allowed the disease to spread more widely than necessary.

2. Markets bounce sharply after worst day since 2008

Global stock markets bounced and oil prices corrected upwards after Monday’s bloodbath. Safe havens such as gold and government bonds retreated.

By 6:30 AM ET (1030 GMT), the Dow 30 futures contract was up 1,007 points or 4.2%, while the S&P 500 Futures contract was up 4.4% and the Nasdaq 100 contract was up 4.6%. All three indices had suffered their worst one-day loss in 12 years, down over 7%, on fears that the Covid-19 outbreak could trigger a global recession.

Overnight, the Shanghai Shenzhen CSI 300 had risen 2.7% and Hong Kong’s Hang Seng had risen 1.4%, while the Japanese Nikkei underperformed, rising 0.9% amid sustained strength in the yen.

European markets bounced by between 3% and 5%, with the benchmark Stoxx 600 rising 3.7%.

In the bond markets, the 10-year U.S. Treasury yield rebounded to 0.72%, only a couple of basis points below where it was on Thursday night, while the German 10-Year Bund yield rebounded six basis points to -0.74%. Gold futures retreated some 0.9%.

3. Italy enacts nationwide quarantine

The Italian government issued a nationwide quarantine, restricting the movement of people throughout the country, in an effort to bring the spreading coronavirus epidemic under control.

Italy registered nearly 1,800 new cases of the virus on Monday, taking the total number of cases there to over 9,100, with 463 fatalities.

The government also extended the shutdown of all schools until April. Spain also ordered a nationwide school shutdown.

Italy’s stock market, which had fallen the most in Europe on Monday, also made one of the weakest rebounds on Tuesday, rising only 3.1%. The yield on 10-Year Italian debt rose to a new for 2020 of 1.47% before sharply reversing to 1.30%.

4. Biden looks to consolidate lead in six more primaries

The Democratic Party primaries continue Tuesday, with former Vice President Joe Biden looking to cement his lead over progressive rival Bernie Sanders.

After his sweep of southern states in Super Tuesday’s primaries last week, Biden holds the lead in national pledged delegates with 664, compared to Sanders’ 573. The required total for victory is 1,991 and there are 352 up for grabs today.

Sanders could narrow the gap if he carries Michigan in particular, a state he won ahead of Hillary Clinton in the 2016 primaries. The other five states voting today are Idaho, Mississippi, Missouri, North Dakota and Washington.

5. Oil rebounds but Russian markets plummet as Putin embarks on oil price war

Crude oil prices rebounded over 7% after suffering their worst one-day loss in nearly 30 years on Monday in response to the start of a new three-way price war between Saudi Arabia, Russia and U.S. shale producers.

Russia’s ruble fell 5% against the dollar to its lowest level since 2016 on Tuesday as local financial markets reopened after a public holiday on Monday. The benchmark RTS index fell as much as 15% before paring losses to be down only 10.9%.

Russia’s leadership has been defiant, saying that its sovereign wealth fund and conservative budget planning mean it could withstand up to 10 years of prices at current levels. Russia’s budget balances at an oil price just over $40 a barrel, while Saudi Arabia requires a far higher price. The Saudi budget already expected a deficit of 6.4% of GDP this year.

Economic Calendar - Top 5 Things to Watch This Week

2020-03-09 18:11:36

1. ECB meeting
Thursday’s ECB meeting will be a test case for Christine Lagarde. The ECB needs to strike a balance between demonstrating its ability to act and the awareness that supporting the economic recovery might need large doses of government spending rather than more monetary stimulus.

Some ECB policymakers have cautioned against a quick move; where rates are already deeply negative further cuts may have limited impact.

“We could see a mix of several smaller measures like a 10bp rate cut, tweaks to collaterals, targeted longer-term refinancing operations (TLTRO) and an increase of the Corporate Sector Purchase Program (CSPP),” analysts at ING wrote in a note.

2. UK budget
Britain’s new Chancellor of the Exchequer Rishi Sunak will present his first budget on Wednesday. He was already expected to announce a stimulus package targeting poorer regions, but the spread of coronavirus means he may have no choice but to boost public spending further.

Those expectations were further raised when incoming Bank of England Governor Andrew Bailey suggested a coordinated response between the government and central bank to help small businesses caught up in the coronavirus fallout.

Bailey also said that he would want to see more evidence of the impact of the virus before considering a rate cut at the BoE’s next scheduled policy meeting on March 26.

3. Fed blackout, U.S. data
Fed policymakers will be in their traditional “blackout” period before their upcoming meeting, during which they avoid making policy pronouncements of any kind, just as global markets are hanging on to every clue about the upcoming decision. Fears over spreading coronavirus have fueled expectations that the central bank will cut rates again after last week’s emergency cut. Investors are trying to gauge whether policymakers are seriously worried about a sharp economic downturn or simply want to insure against that possibility.

On the data front, investors will be focusing on Friday’s preliminary March reading of the University of Michigan consumer sentiment index. The consensus forecast is for a substantial decline given the plunge in equity markets and the negative coronavirus headlines and this could underline worries about the prospect of weaker economic activity in the coming months.

The calendar this week also features data on jobless claims, inflation and trade, but the reports are mainly from the period before virus fears really took hold in the U.S., so will likely take more of a back seat.

4. Chinese data
Chinese data published Saturday showed that exports contracted sharply in the first two months of the year, and imports declined, amid the health crisis triggered by the coronavirus outbreak.

Chinese inflation figures, due out on Tuesday will likely indicate that supply disruptions saw producer prices contract last month.

Looking ahead, authorities will want to address the growth risks, so expect more cuts in bank reserve ratios, money market yields and benchmark rates. Beijing is also likely to speed up infrastructure projects to get economic momentum going.

Meanwhile, foreign investors are rushing into Chinese equities and rich-yielding yuan bonds as other markets tumble. But they are also questioning the shape of China's recovery and whether that could be undermined by the global spread of the virus.

5. Oil price war
A three-year honeymoon between OPEC and Russia collapsed on Friday after Moscow refused to support deeper oil cuts to cope with the outbreak of coronavirus and OPEC responded by removing all limits on its own production.

Oil prices plunged 10% as the development revived fears of a 2014 price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output limiting pacts.

All limits will expire at the end of the month, meaning that OPEC members and non-OPEC producers can in theory pump at will in an already oversupplied market.

"This is an unexpected development that falls far below our worst-case scenario and will create one of the most severe oil price crisis in history," said Bjoernar Tonhaugen of Rystad Energy.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Friday, March 6th

2020-03-06 12:42:12

1. Oil plunges as Russia says Nyet to OPEC cut

Crude oil futures plummeted as Russia reportedly refused to support the Organization of Petroleum Exporting Countries' proposal to cut crude output by an additional 1.5 million barrels a day.

OPEC had agreed its proposal on Thursday, desperate to bring the global oil market back into balance. Demand has fallen through the first quarter due to the coronavirus outbreak and major agencies now expect no demand growth at all over the year as a whole.

Reuters cited unnamed sources saying that Russia would only agree to extend the current deal on output restraint, arguing that fiscal measures to support demand could still be taken by governments around the world.

By 6:40 AM ET (1140 GMT), Brent crude futures were down 4.4% at $47.74 a barrel, having earlier hit an intraday low of $47.02. U.S. crude futures were down 4.4% at $43.84.

2. Global stock sell-off continues as bond yields hit record lows

Risk aversion continued undimmed in global markets, pushing the U.S. 10-year Treasury yield down as much as 23 basis points in the course of the European morning to a new record low of 0.70%.

European stocks shed billions more in market value, with the Stoxx 600 falling 3.1% to 369.18, the German DAX falling 3.0% and the U.K. FTSE 100 falling 2.8%.

The German 10-Year benchmark yield also touched its all-time record low of -0.74% before rebounding.

Asian markets had also fallen heavily, with the Japanese Nikkei losing 2.7% as the yen continued to soar against the dollar. USD/JPY fell to a seven-month low of 105 before retracing, on ever-stronger expectations of further interest rate cuts from the Federal Reserve that will cut the nominal premium in dollar rates over those of haven currencies.

3. U.S. stocks set to open sharply lower

U.S. stock markets, which led the rest of the world lower with Thursday’s sell-off, are in no mood to reverse course on Friday.

The three major indices are all called to open down over 2%: as of 6:30 AM ET (1130 GMT), the Dow 30 futures contract was down 586 points of 2.2% while the S&P 500 Futures contract was down 2.6% and the Nasdaq 100 contract was down 2.9%.

The losses come against a backdrop of further steep increases in the number of confirmed coronavirus cases in Europe and Iran.

The number of confirmed cases globally is now over 99,000, while the number of deaths recorded is over 3,300.

4. Payrolls set to be ignored as markets focus on virus developments

It may be the least relevant payrolls report in recent history.

The Bureau of Labor Statistics is due to update the world on the state of the U.S. labor market in February, but the reality is that markets are now solely focused on the spread of the coronavirus and the global policy response to it.

Analysts expect nonfarm payroll growth to have slowed to 175,000 from 225,000 in January, while average hourly earnings are expected to tick up again to 0.3%, having weakened to an 11-month low in January.

Elsewhere overnight, a blistering start to the year for German factory orders was similarly lost in the growing noise of panic as Europe reported further big jumps in confirmed cases of the virus, making the likelihood of growth-sapping public-health measures all the likelier.

5. India's no. 4 bank collapses

The Indian rupee weakened to a new all-time low of 74.075 to the dollar after India’s regulators took control of the country’s fourth-largest bank, Yes Bank.

Finance Minister Nirmala Sitharaman pledged that the bank would honor obligations to depositors, but the authorities have limited withdrawals to the equivalent of less than $700 for the present.

The news comes against a backdrop of rising fears that India is ill-equipped to deal with the coronavirus outbreak, given its limited healthcare system and the poor access to water and sanitation in its rural districts in particular.

Top 5 Things to Know in the Market on Thursday, March 5th

2020-03-05 17:17:56

1. OPEC sets up big output cut deal with Russia

OPEC ministers reportedly agreed to cut crude oil production by another 1.5 million barrels a day from current levels in an effort to bring output into line with collapsing demand.

The deal, first reported by Reuters, is conditional on cooperation from Russia and others. The non-OPEC members of the so-called OPEC+ bloc are due to discuss the measures in a meeting on Friday.

Russia has been reportedly pressing to keep output stable through the first quarter, despite increasingly obvious signs of demand destruction, intent on stopping the U.S. from making further gains in global market share. U.S. output hit a record high last week, and U.S. exports continued their rising trend.

U.S. crude futures rose some 50c on the news but pared gains to trade at $46.80 a barrel by 6:35 AM ET (1135 GMT), up less than 0.1% on the day, while Brent futures were up 0.1% at $51.23.

2. House passes Covid-19 spending measures; Trump continues to downplay disease

The House of Representatives passed a bill authorizing some $8.3 billion in spending to contain and treat the coronavirus in the U.S.

The number of confirmed cases in the U.S. has risen to 153, with 11 deaths recorded so far, concentrated in a single county of Washington state.

President Donald Trump, who has described the coronavirus as a Democrat hoax and who said last week that the number of cases would soon fall from 15 to “one or two”, again played down the risks to Americans in an interview on Fox News late on Wednesday.

3. U.S. stocks set to open lower as global warnings resume

U.S. stocks are set to open sharply lower, giving up around half of Wednesday’s gains, as the steady drumbeat of corporate warnings about the impact of the Covid-19 outbreak reminded markets of the limitations of policy measures such as interest rate cuts.

By 6:35 AM ET, the Dow futures contract was down 480 points or 1.8%, while the S&P 500 futures contract was down 2.0% and the Nasdaq 100 contract was down 1.9%.

In Europe, the benchmark Stoxx 600 index reversed early gains to be down 1.6%, after Covid-related warnings from auto supplier Continental (DE:CONG), which said it expected global car production to fall as much as 5% this year due to the outbreak. Fashion house Hugo Boss (DE:BOSSn) and U.K. broadcaster ITV (LON:ITV) also warned of hits to revenues.

4. IATA sounds alarm for airlines again (only much louder)

The International Air Transport Association sharply raised its assessment of the economic hit to the airline business from the coronavirus.

The IATA said in a statement that it now sees total revenue losses this year for the industry as high as $113 billion - nearly four times its previous estimate of $29 billion.

Airlines in the big Asia-Pacific markets are likely to be worst hit, likely to lose $50 billion in revenue. It estimated Europe could see losses of up to $44 billion, while the impact in the U.S. and Canada is likely to be smaller, at only $21.1 billion. On the flip side, the IATA said savings from lower fuel prices are likely to be no more than $28 billion and will in any case be partly delayed due to hedging.

“The airline industry will need consideration for relief on taxes, charges and slot allocation. These are extraordinary times,” IATA head Alexandre de Juniac said.

On Wednesday, Europe’s largest regional airline Flybe – already struggling with long-standing profitability issues – collapsed after the U.K. government balked at a rescue plan.

5. Durable goods, jobless claims due; retail earnings in focus

On an otherwise light day for data, U.S. durable goods orders for February are due at 10 AM ET (1500 GMT). Before that, there’ll also be weekly jobless claims numbers. Costco (NASDAQ:COST) and Kroger (NYSE:KR) dominate a similarly light earnings schedule.

Markets are already pricing in further action from the Federal Reserve at its March meeting, although St Louis Fed President James Bullard played down such hopes in an interview with Bloomberg late on Wednesday.

Dallas Fed President Robert Kaplan is due to speak at 6:30 PM in one of the last appearances before the Fed’s traditional pre-meeting blackout begins. In Europe, Bank of England chief economist Andy Haldane is due to speak at 8 AM ET (1300 GMT), with an interest rate cut at the BoE’s next meeting now firmly in play.

Top 5 Things to Know in the Market on Wednesday, March 4th

2020-03-04 21:03:05

1. It's Biden vs. Sanders

Joe Biden triumphally resurrected his campaign for the Democratic Party’s presidential nomination, winning the primaries in all but one of the biggest states to declare on Super Tuesday.

The exception was, predictably, California, which was carried by Vermont Sen. Bernie Sanders. However, the results propelled Biden – whose campaign was seen as dead in the water after weak showings in Iowa and New Hampshire – above Sanders in the tally of convention delegates for the first time. Biden now leads by 397 to Sanders’ 356.

The campaigns of media mogul Mike Bloomberg and Sen. Elizabeth Warren – who lost to Biden in her home state of Massachusetts – are now over in all but name.

2. U.S. stocks turn sharply higher

U.S. futures turned positive overnight, after the results of Super Tuesday sharply reduced the chance of a Sanders presidency, an outcome not favored by Wall Street.

By 6:40 AM ET (1140 GMT), the Dow 30 futures contract was up 575 points or 2.2%, while the S&P 500 futures contract was up 2.0% and the Nasdaq 100 contract was up 2.1%.

In part, that also reflects the more considered response to the Federal Reserve’s emergency half-point interest rate cut on Tuesday. Stocks had sold off aggressively in the wake of a move that smacked of panic, although many analysts agreed with Fed Chair Jerome Powell’s assessment that – while it couldn’t stop the virus itself – it would provide a “meaningful boost” to the economy.

Looser financial conditions globally should reduce the risk of viable companies going bankrupt due to essentially short-term problems with cash flow due to the virus.

3. Follow the leader

The Bank of Canada is expected to follow the Federal Reserve’s lead and cut its key rate by 50 basis points at its policy meeting, after keeping it steady at 1.75% for the last year and a half.

The bank will announce its decision at 10 AM ET (1500 GMT). Until the Fed’s move on Tuesday, expectations had been only for a 25 basis-point cut.

Elsewhere, the Reserve Bank of India signalled it could cut interest rates further to support its economy, sending the rupee back towards its record low against the dollar.

The Fed’s move has also put a harsh spotlight on the European Central Bank, which has much less room to ease policy than the Fed. Market prices reflect expectations that it will cut its deposit rate by 10 basis points at its meeting next Thursday. However, that may not be enough to stop a narrowing interest rate differential with the U.S. pushing the euro higher: it’s already up 2.4% against the dollar in the last week.

4. Nordstrom's new leadership fails to reassure

Hewlett Packard Enterprise (NYSE:HPE) and retailer Nordstrom (NYSE:JWN) are set to open sharply lower after reporting weaker-than-expected results after the close on Tuesday.

Nordstrom stock fell 7.2% - after already falling 2.9% in normal trading – after saying earnings per share fell some 3% from a year earlier in the fourth quarter. The market had expected it to defend 2018’s level. The market wasn’t reassured by the announcement that Erik Nordstrom will become sole CEO of the company, while his brother Pete will become President and chief brand officer.

HPE, meanwhile, slumped 5.8%, after a 2.3% drop in normal hours after reporting a sharp drop in server sales in the three months through December.

5. Saudi Arabia seeks massive OPEC+ cut

Saudi Arabia is reportedly pushing its allies inside and outside OPEC to cut over 1 million barrels of oil a day from their already-reduced output levels, in what looks like an increasingly desperate effort to stabilize the world oil market.

OPEC’s Joint Ministerial Monitoring Committee meets in Vienna on Wednesday ahead of a two-day meeting of ministers that is expected to sign off on some form of additional output restraint to avoid another catastrophic glut. As ever, the most difficult part of the talks will be apportioning the burden of those cuts.

U.S. crude futures, which have rebounded from below $45 at the depth of the market panic, were up 0.6% at $47.47 a barrel, while global benchmark Brent was up 0.7% at $52.22 a barrel.

At 10:30 AM ET (1530 GMT), the U.S. government will release its weekly stockpiles report. The American Petroleum Institute’s report of a 1.6 million-barrel build in crude inventories on Tuesday was somewhat below expectations for a build of 2.64 million barrels in today’s EIA data.

Top 5 Things to Know in the Market on Tuesday, March 3rd

2020-03-03 20:09:30

1. G7 talks virus

World markets are holding their breath to see what the G7 – a body that has done its best to make itself irrelevant in recent years with its own divisions – can deliver in the way of coordinated economic policy support in the face of the spreading coronavirus.

Newswire reports suggest finance ministers and central bank governors will hold a conference call on the subject at 7 AM ET (1200 GMT), following on from a string of individual statements by the Federal Reserve, Bank of Japan, ECB and Bank of England, all committing themselves to keeping financial markets orderly and taking “appropriate” action to support the economy.

According to Reuters, the draft communique from the call did not mention concrete or coordinated measures. However, there was action overnight from the Reserve Bank of Australia, which cut its key rate to a new record low of 0.5%, and its Malaysian counterpart, which also cut by 25 basis points to 2.50%.

2. Global bounce in risk assets continues

The sharp rally in U.S. equity markets on Monday was followed overnight by gains in Asian and European stocks, despite lingering concerns that looser monetary policy – expectations for which were chiefly responsible for the bounce – will be of limited use in fighting the virus.

China’s main stock indices rose by between 0.5% and 0.9%, while Europe’s bourses rebounded more vigorously – the benchmark Stoxx 600 gained 2.2%. In all cases, this represents little more than a return from levels that appeared deeply oversold in the short term.

In commodity markets, U.S. crude futures rebounded nearly 4% to $48.51 a barrel, while Brent crude rose 3.3% to $53.63, on hopes both for monetary stimulus and for an additional cut in output of as much as 1 million barrels a day from OPEC and its allies. Minister are flying into Vienna on Tuesday ahead of a meeting scheduled to take place on Thursday and Friday.

3. U.S. stocks set to open higher

The rebound in U.S. stocks is set to continue at the opening, in the absence of fresh shocks on the coronavirus front.

By 6:35 AM ET (1135 GMT), the Dow 30 futures contract was up 183 points or 0.7%, while the S&P 500 futures contract was up 0.5% and the Nasdaq 100 futures contract was up 0.8%. The Dow future is now 9.7% below its pre-outbreak peak. However, credit spreads remain under pressure, suggesting that there is still plenty of skepticism as regards the sustainability of the recovery.

The virus continues to spread across the U.S., however, with the state of Georgia reporting its first two cases and the overall number of confirmed cases rising to 105. The U.S. death toll remains at six, of which five were in the same care home in Seattle, Wa.

The mood is being improved by increased signs of a return to normal levels of economic activity in China. Hon Hai Precision, which assembles the iPhone for Apple (NASDAQ:AAPL), said it expects “normal” working conditions at its Chinese factories to be resumed by the end of March.

4. Mester, Evans to add to rate chatter

The data calendar for Tuesday is relatively light, with appearances by Fed officials Loretta Mester and Charles Evans likely to spark more interest than either vehicle sales numbers or the Institute of Supply Management’s New York Business Conditions index.

In the same vein, the American Petroleum Institute’s weekly update on U.S. oil supplies is likely to be overshadowed by newswire updates out of Vienna ahead of the ‘OPEC+’ meeting.

Earlier, the euro zone’s consumer price index remained stuck at 1.2% in February, with the core index surprisingly ticking up to the same rate. The euro zone’s jobless rate remained at a 10-year low of 7.4%.

The U.K.’s construction PMI, meanwhile, rose to a 13-month high of 52.6, a development that was all but lost in the noise around the coronavirus outbreak.

5. Super Tuesday for the Democrats

The race for the Democratic Party’s presidential nomination reaches a critical stage, as voters in 14 states – including the key states of California and Texas -- head to the polls in Super Tuesday.

The field has essentially narrowed to four candidates after Minnesota Senator Amy Klobuchar and South Bend Mayor Pete Buttigeig both withdrew and endorsed former Vice President Joe Biden.

Biden is widely seen as gathering voters from both of those two, and their rejection of Mike Bloomberg is likely to give Biden an even greater chance of becoming the standard bearer for moderate Democrats. The other big question of the day is to what extent – if at all - Sen. Elizabeth Warren can dent Vermont Sen. Bernie Sanders’ lead among the progressive wing of the party.