By Lorcan Roche Kelly
A little risk on
After yesterday’s relatively calm day in U.S. markets — by recent standards anyway — global markets are moving higher today. Benchmark indexes in South Korea and Taiwan jumped more than 6% overnight, helping to lift the MSCI Asia Pacific Index 3.2%. Japan was closed for a holiday. In Europe, the Stoxx 600 Index was 4.5% higher at 5:40 a.m. Eastern Time with every sector of the gauge posting strong gains. S&P 500 futures pointed to a bounce at the open, the 10-year Treasury yield was at 1.05% and gold was higher.
The greenback slumped, losing ground against every major currency after it had gained 8% in the previous eight sessions. Analysts are flagging concerns that the coronavirus outbreak in the U.S. may prove to be worse than feared, pushing the country into a recession and possibly a depression, hitting demand for the currency. On the supply side, the increased number of swap lines opened by the Federal Reserve with other central banks, aimed at reducing the international shortage, are also helping push the dollar lower.
California introduced the most restrictive measures yet to fight the spread of the pandemic in the U.S., ordering all of the state’s 40 million residents to go into home isolation. Businesses deemed non-essential will be shut and people only allowed out to stock up on essentials. The move comes as the World Health Organization said the virus is now infecting people at a faster pace with the global death toll topping 10,000, according to data from Johns Hopkins University. Outside the U.S., Italy is set to reinforce and extend its near-total lockdown of the economy, while the U.K. will announce new measures in an attempt to save millions of jobs.
Treasury Secretary Steven Mnuchin urged Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi to move fast to pass a second package of support measures, warning them that major parts of the economy are already shut down. He said that the objective is to have legislation through Congress and signed by President Donald Trump on Monday. The package announced by the Senate includes tax rebates of $1,200 to individuals targeted at those earning under $99,000 and $208 billion of loans for companies suffering from the outbreak.
Once again the economic data available today is probably going to look a little stale to markets with January retail sales for Canada at 8:30 a.m. and U.S. existing home sales numbers for February published at 10:00 a.m. There may be more to see for under-pressure oil traders in the Baker-Hughes rigcount number at 1:30 p.m. In dollar liquidity, it is a big day for Fed repo, with $1.5 trillion on offer across three different operations today. The one number that everyone is hanging on at the moment is jobless claims, with yesterday’s print showing a 70,000 increase, and Goldman Sachs Group Inc. warning that it could surge to a record 2.25 million for this week, with that data published next Thursday.