Expectations surrounding stimulus measures and updates surrounding Trump’s support measures to drive Wall Street, amid a silent economic calendar schedule.
Summary: Wall Street yesterday faced its biggest one-day decline since 2008 as multi-pronged bearish cues assaulted market since the start of the trading session. However, Asian and European markets have managed to trade on a positive note today, rebounding from previous session lows on fresh stimulus cues.
Reports hinted at US President Donald Trump gearing up to provide major relief measures to support the economy. There were even reports that the measures included a payroll tax cut which along with news from Japan stating that government and central bank are working together to ease economic woes with plans for an additional infusion of US$ 4.1 billion into the market to ease effects of the coronavirus outbreak greatly helped improve investor sentiment.
In Italy, where the current victim count seems to be second-highest outside of China, deputy economy minister made an announcement stating that mortgage payments will be suspended, providing some relief to the Italian market. Investor expectations that other G7 & G20 members will also announce stimulus measures soon helped improve market mood.
In the European market, major indices and equities recovered nearly half of the previous session’s decline, gaining considerable gap from 8-month lows tested yesterday.
Precious Metals: Rare metals are trading slightly below the previous session’s high as fresh stimulus hopes eased demand for safe-haven assets. However, gold and other major rare metals continue to hold above key support levels as caution still looms high over escalating COVID-19 victim and death toll count.
Crude Oil: Having closed with nearly 25% decline in the previous session, both WTI and Brent futures trading in the international market recovered nearly 12% during today’s trading session on fresh stimulus hopes. Further gains are capped as traders now await US weekly API stockpile count and price war updates.
DXY: US Dollar index, which measures US Greenback’s strength against six major currencies, managed to gain some ground from the previous session’s lows on President Trump’s support measures update. However, the index still remains below the 96 handle as US T.Yields continues to remain near 2019 lows.
On The Lookout: While President Trump has announced that measures will be taken to support the economy, as the update lacked details, traders await further details to gain a better understanding of how much the relief measures will help improve the economy. For now, the only things clear are that there will be a payroll tax cut, unspecified help for hourly-paid workers and measures to support small and medium-sized enterprises that are expected to be hit the hardest by this coronavirus outbreak.
In Italy, which boasts the highest victim count for COVID-19 outside of China, a quarantine which was initially issues for just Northern Province has now been upgraded to a nationwide move, which also includes the shutdown of all schools until April aside from its move to suspend mortgage payments.
On price war developments, Russia has decided to fight back against move initiated by Saudi Arabia, stating that it stands firm on its commitment to production and supply related decisions. Russia has made it clear that its Sovereign wealth fund and conservative budget planning facilitates the Russian economy to withstand the current level of oil price for nearly 10 years from now which now leaves a big question mark on how big a glut scenario will come out as the year moves forward.
On the release front, the US calendar sees the release of API weekly crude oil stockpile data while later in Pacific-Asian market hours, the Australian calendar will see speech from RBA Asst Gov Debelle and Home Loans data.
Trading Perspective: Major global currencies lost a significant portion of its gains against US Greenback as news of fresh supportive measures helped US Greenback rebound in the global market. As both risk sentiment and crude oil price rebounded in the global market today – major factors which caused a meltdown in Wall Street last night have improved today, Wall Street indices are expected to make a comeback and trade on a positive note today.
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