EGM Weekly Market Wrap Up.

EGM Weekly Market Wrap Up.

EGM Weekly Market Wrap Up.
EGM Weekly Market Wrap Up.

Markets Still Flowing the Virus Direction.


It has been a great week in the financial markets and unfortunately did not end in a good way for many investors. Stocks are significantly down, and we have officially entered a bear market, most stocks for below 20% from their initial.  Government bond yields found a new low, credit bond yields rose further, the oil price collapsed on the back of lower demand and a possible oil price war between Saudi Arabia and Russia and there were big currency swings.

 

As reported by Danske this week, investors seek data for their reference while they keep their eyes on the policymakers. The ECB decided to keep its policy rates. Instead, the ECB focused on ‘targeted measures’ and went hard on liquidity. The ECB will conduct LTRO every week and ease the TLTRO III conditions. The package underwhelmed the market, with spread widening between peripheral and core bonds. Considering the downside risk, the Federal Reserve has so far refrained from making another emergency cut although it decided to inject more liquidity into the markets on Thursday while Bank of England made a 50bp emergency cut this week.

 

It is now the game of everyone as the EU Politicians supported the ongoing activities to slow down the spread of the virus, including closing down schools, recommending people to work from home and making emergency packages for companies, small and medium enterprises, to avoid a liquidity crisis. Experts show that economic policy is more effectual when it is fast and forceful, and we think policymakers should act in response to the current issues to apprehend the situation but, we think the policies will still come even as before(slowly).

 

As the data this week was less effective, we can ignore most of the data releases next week, as they are from before the spreading of the coronavirus in Europe and the US. The data releases are outdated reports, as the economy is taking another tone than in January and February. We are expecting only report to be interesting. In the US, we get a couple of regional PMIs and Bloomberg’s weekly consumer confidence indicators on Thursday. The German ZEW expectations on Tuesday are also of interest.

 

As we go into a new week, we hope to see some interest reports, more from the central banks. The Fed is set to announce its decision on Wednesday, and it is more likely that it may disappoint the expectations of the investors. Investors are already pricing in the Fed further rate cut the target range by 100bp down to 0.00-0.25% and expectations of an outright QE plan are rising. Risk is that the Fed delivers less, which will cause a negative market reaction, just like the ECB. On Thursday, the Bank of Japan meets. It has already scaled up asset buying. We could see an increase in the signaled annual pace of ETF-pickups and further activation of already existing loan-programs. We are also very interested in any fiscal and emergency

 

 

-Moses Kayode.

-Derivative Analyst, Eagle Global Markets.

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