The Market Becomes Unpleasant as the World Closes Down.

The Market Becomes Unpleasant as the World Closes Down.

The Market Becomes Unpleasant as the World Closes Down

The Market Becomes Unpleasant as the World Closes Down.


The impact of Coronavirus still remains the interior focus for the market this week. We will consider more data on the economic impact of the virus.

 

PMIs are due for release Tuesday this week for the euro area and the US for March. Both are likely to review a very significant drop in values.

 

On Thursday the US weekly jobless claims will give us more information about the increase in the unemployment rate.

 

The Euro group will have a call to further discuss EU measures to support the member states. Activating the European Stability Mechanism (ESM) or considering the issuance of corona bonds as an option.

 

Euro area consumer confidence for March will escalate tension of how severe household sentiment is being hit.

 

In the US, the politicians have started the negotiations on a third emergency spending package, which may be approved this week. The size of the package has only been increasing in recent days and they are now discussing an amount of around USD1, 500-2,000bn (or 7-9% of GDP) as reported by Danske bank. The sooner the better for the chances of an economic rebound in H2. That is not the same as there are no disagreements between Republicans and Democrats that need to be resolved and hence further negotiations are needed. 

 

Energy prices slid toward this multi-decade low on plunging demand due to the economic fallout from the coronavirus crisis, and as prospects for an OPEC-Texas production, deal faded.

 

“The government is taking a ‘whatever it takes’ approach,” said Marshall Steeves, an analyst at IHS Markit.

 

That doesn’t change the fact that demand destruction is going to continue. There are still so many unknowns on the demand front. The duration of this economic shutdown is so uncertain and it is believed that the bottom may not be in yet.”

 

On Friday morning Norges Bank made an emergency cut in rates of 75bp. soaring temporary unemployment benefit applications but markets had priced in closer to a 50bp reduction for the coming weeks. Norges Bank’ statement did not rule out an additional cut to 0% but we think the bar for cutting rates further is high and the probability of negative rates is minuscule.

 

Japan’s PM Shinzo Abe today opened up for the possibility of postponing the Tokyo 2020 Olympics. So far the alternative seems to be postponing only and not cancelling. Canada stated it will not send teams to the Olympics this summer. Early trade data out of South Korea today show that in the first 20 days of March exports were up 10% y/y as lockdowns across the world have increased demand for teleconferencing equipment. Adjusting for the number of workdays, the year-on-year change was largely zero, though. The stock market is turning increasingly sour today with Asia Pacific shares outside Japan and S&P500 futures down around 5%. Nikkei 225 is up 2% after markets were closed on Friday in Japan, where stocks were up in the rest of Asia.

 

Today, oilprice.com reported that the solar market is becoming supersized, with the size and scale of solar projects soaring and some of the biggest names in the tech industry getting behind the renewable energy boom. Despite the high profile failure of the $1 billion Crescent Dunes solar plant developed by Solar Reserve way out in the Nevada desert, which was going to be the biggest solar plant in the world, the solar industry is moving forward in its belief that, in most cases, bigger is better.

 

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