European Equities Recover on BOE Cues, US Inflation Data in Focus

 BOE Cues
BOE interest rate decision

Global equities turned sour on dovish cues from the US, the latest developments in the UK on budget, and BOE rate decision helped improve risk sentiment. 

Summary: Global equities are seeing mixed activity on fresh developments surrounding stimulus measures. While news of supportive measures from President Trump to support the US economy helped the market recover earlier this week, the impact from the update has since evaporated and has been replaced with a lot of questions surrounding stimulus measures bringing caution back to the market.

Following dovish activity in Wall Street last night, the Asian market also saw major indices across key markets –China, Hong Kong, Singapore, South Korea, Japan, and Australia trade and close on a dovish note. However, the European market saw major indices and key equities trade on a positive note after four consecutive bearish sessions on unexpected double whammy from the UK.

While the UK is no longer a part of EU, the move by BOE to reduce interest rates to record low of 0.25% and announcement stating budget plan set to release later today contains measures to boost economic stimulus and includes more funding for the healthcare sector to fight COVID-19 outbreak came as a highly welcomed move. 

Precious Metals: Price of Gold, Silver, and other major rare metals climbed higher in the Asian session as demand for safe-haven assets remained high in Pacific-Asian hours over escalating doubts and concerns surrounding Trump’s stimulus measures. But gains were capped, and price action of major safe-haven metals turned range-bound over a sharp spike of risk sentiment in the European session. 

Crude Oil: Crude oil price climbed earlier in the day as fresh hopes on rumors of US oil producers planning to cut output to help ease declining crude oil prices. But the early gains were reversed and crude oil prices began to decline on both Brent and WTI futures as Saudi energy ministry has ordered Saudi Aramco to raise its output capacity by 1 million bpd as part of its price war with Russia. 

DAX: The US Dollar index, which measures US Greenback’s strength against six major currencies, declined in the global market today as sovereign bond yields began to decline once again. Fresh doubts and concerns surrounding US stimulus measures have caused risk sentiment to decline in the market weighing down US bond yields and futures trading in the international market, which in turn influenced a decline of USD. 

On The Lookout: Global crude oil scenario is heading towards the direction of a glut as Saudi took its first step in a price war by ramping up production of crude oil by 1 million bpd. Given the end of the supply cut agreement as of 31st March 2020, the coronavirus hit the global economy is already facing a decrease in demand and consumption of oil. A further increase of supply by other OPEC members in order to retain market share and not lose out of profits would lead to a worse than expected pile-up of crude oil stockpile, creating a prolonged global glut outcome.

Following UK’s move to announce a two-layered support measure, the European Commission has signaled government leaders of member nations to speed up spending of EU budget funds and that it would temporarily relax state aid policy in order to support economic activities which have taken a serious hit from ongoing COVID-19 outbreak. In the US, the victim count for COVID-19 scales 1000, while President Trump’s lack of follow up on his stimulus measures announcement caused concerns to escalate surrounding stimulus measures, which continue to lack key details.

On the economic calendar release front, the US calendar is set to see the release of Core CPI data, EIA weekly crude oil inventory data, and federal budget balance for February. 

Trading Perspective: in the forex market, broad-based USD selling activity on declining US T.Yields and fresh political woes from US markets helped keep other major currencies retain positive price action. US stock futures trading in the international market continued to decline over lack of follow up announcements surrounding President Trump’s stimulus measures

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