By Lorcan Roche Kelly
After an emergency meeting last night, the European Central Bank announced a €750 billion purchase program to help fight the effects of the coronavirus in the region. The Pandemic Emergency Purchase Program (PEPP) will expand the pool of assets the bank is purchasing to include commercial paper. Greek government bonds will be eligible for the first time. Yields on euro-area sovereign debt are plummeting across the region, with those on five-year Greek debt dropping more than 200 basis points to 1.5%. ECB President Christine Lagarde said in a Twitter post that “there are no limits to our commitment to the euro” with the bank also promising more purchases if necessary.
The ink is barely dry on the multi-billion-dollar House bill President Donald Trump signed yesterday and lawmakers are already rushing to agree on a second package. Even as Senators were voting 90-8 in favor of the legislation approved on Wednesday, they were working on measures which propose at least $1 trillion of aid. Senate Majority Leader Mitch McConnell wants Congress to work “at warp speed” on the complex measure which could include direct payment to taxpayers as well as help for industry and local government. With the House in recess this week, it will be Monday at the earliest before anything is ready for Trump’s signature.
It’s not just the ECB that has been stepping up to the plate, with global central banks rolling out a raft of new measures. The Federal Reserve announced late yesterday that it is launching a program to support money market mutual funds as strains continue in short-term funding markets. The central banks of Australia, Indonesia, the Philippines, Taiwan and Brazil have all cut rates in the past 24 hours. The Swiss National Bank held at minus 0.75%, but is stepping up currency interventions to try to stem the franc’s rise. Norway’s central bank is considering interventions of its own after the kroner slumped 7.5% against the dollar yesterday, following a 14% plunge on Tuesday.
The huge volatility in global equity markets shows little sign of easing. Overnight the MSCI Asia Pacific Index dropped 2.7% in a session that saw limit-down circuit breakers hit in multiple markets in the region. Japan’s Topix index went against the trend, posting a 1% gain as investors bet Bank of Japan would hike ETF purchases. In Europe, the Stoxx 600 Index was 0.7% higher at 5:50 a.m. Eastern Time as the boost from the ECB package was tempered by some awful survey data from Germany. S&P 500 futures pointed to further losses at the open, the 10-year Treasury yield was at 1.196% and gold was lower.
The weekly U.S. jobless claims total, published today at 8:30 a.m., is going to have a lot more significance in the coming week as economists search for early indications of the fallout from the coronavirus. Today’s number covers the period to Mar. 14, so may not show a huge deviation from the 220,000 economists forecast, as the rapid spread of the virus means an awful lot has changed since then. Also today, the Fed will run two $500 billion repo operations, and Accenture Plc and Lennar Corp. report earnings.