- The COVID-19 coronavirus continues to spread, with a global surge in cases and the inevitable fatalities.
- The still more aggressive spread of the virus in the UK, across European nations and also throughout the USA has seen multiple countries go into some form of lockdown, with restrictions on public movement and work from home rules enforced.
- Panic buying has broadened globally, reflecting fears amongst the general public, with the purchase of goods now being restricted in many countries.
- Further interest rate cuts have been implemented by multiple Central Banks with many rates now at, close to or below zero percent.
- Alongside interest rate cuts, many Central Banks have restarted Quantitive Easing (QE) programs.
- In addition, governments in Europe, the UK, the Antipodes, plus both the State and Federal governments in the US, have all introduced various fiscal stimulus and protection measures.
- This to try to protect businesses and workers from the inevitable economic slowdown that the restrictions will create.
- Global stock markets remain extremely volatile, with daily swings of 5-10%, both down AND up.
- But since mid-March, although most of the major global equity averages have probed to new bear cycle lows, most have NOT seen the aggressive bearish moves seen in the first half of March.
- Turning to the safe haven assets, global bond markets HAVE sold off more aggressively in the past week from record high prices/ low yields, with investors now liquidating all assets, even the safe havens, possibly “selling the good to pay for the bad”.
- In the Forex space, the US Dollar has surged against all major currencies, strengthening even against the Japanese Yen, USDJPY rallying back above 110.00.
- The “risk currencies” amongst the Majors, the Australian, New Zealand and Canadian Dollars, continued to plunge lower, alongside Emerging Markets currencies.
- Moreover, even the sometimes-reserve currencies, the Euro and GB Pound have become casualties of the US Dollar strength, with EURUSD back below 1.0700.
- But the Pound Sterling was the headline grabber last week, with GBPUSD (Cable), aggressively pushing through Brexit lows, below 1.1500, to its lowest level since 1985!!
- On the commodity front, Gold has pushed still lower but somewhat stabilised in the past week, having sold off aggressively the prior week (likely for the “selling the good to pay for the bad” reason, plus from the surge in the US Dollar).
- The Oil price has pushed still lower, with West Texas Intermediate (WTI) oil probing close to $20 unable to recover from its 25% plunge the previous week after an oil price war was started between Russia and Saudi Arabia.
- Also, in the commodity space, base metals have plunged, with the price of Copper falling 20% last week, now 30% down from the early 2020 peak.
Key this week
- The European and US spread of and deaths from the coronavirus will remain in focus this week.
- The increasingly stringent containment policies put in place by governments will also likely impact markets.
- Further Central Bank and government support for financial markets, business and individuals will be under scrutiny.
- The overall functioning of the financial markets will be important too, of particular concern remain pressures in the credit markets.
- The oil price remains an important factor to monitor going forward.
- Data remains somewhat irrelevant, but below are the main data points to possibly watch.
|Date||Key Macroeconomic Events|
|23/03/20||Nothing of note|
|24/03/20||Global Markit Purchasing Managers Index (PMI)|
|25/03/20||Reserve Bank of New Zealand (RBNZ) interest rate decision; UK inflation data; US Capital Goods Orders|
|26/03/20||Bank of England (BoE) interest rate decision; US Gross Domestic Product (GDP);|
|27/03/20||US Personal Consumption Expenditure (PCE)|