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Stocks rise, dollar slips after Powell leaves door ajar

EQUITIES

Asian equities are pushing higher overnight. China reporting the lowest number of new cases of the coronavirus since January keeps the prospect of a pandemic at bay. China’s CSI 300 is flat today but has risen the prior six days in a row and is up 8% from the lows.

The Dow and S&P 500 notched up record highs, boosted by the approval of the T-Mobile and Sprint merger. Stocks finished higher but ended well off daily peaks in signs of little reticence that the Fed is ‘closely monitoring’ the coronavirus. Our main takeaways from Fed Chair Powell’s testimony to Congress were that 1. Deeming the treasury purchases a success and the word ‘gradual’ in plans to stop using repo operations is good from a liquidity justification to be long stocks, but 2. Crystallising the threat of the coronavirus is not so good from an economic perspective.

The DAX looks set for a higher open after 1% gains on Tuesday. The FTSE 100 looks ready to open back above the 7,700 threshold. Looking now at the STOXX 600 at record highs and up 6 of the last 7 days, it looks like markets have already priced in a big 2020 earnings recovery. If the coronavirus, or some other black swan does throttle the expected recovery come Q1 earnings season, then we could be in a tricky spot.

 

FOREX

The New Zealand dollar s the top FX-mover overnight following the RBNZ decision to keep rates on hold. The decision was anticipated but a message of now more cuts this year saw the Kiwi climb 0.9%.

The dollar was lower yesterday because it felt like Jay Powell left the door slightly ajar for a rate cut this year. It seems that one cause for the Fed to adjust its plans and lower interest rates again is the coronavirus. We would look at any US dollar weakness as a correction. When all the CB’s are eyeing the coronavirus as a possible reason to add policy accommodation, the USD should still be favoured when the US economy is outperforming others.

18-3-2020

The rebound on stimulus hopes loses momentum. Brent < $30
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17-3-2020

Stocks Rebound after rout, Airline bailouts? Gold holds $1450
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16-3-2020

Central Bank Bazooka Misses Target, Stocks in Freefall
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12-3-2020

Dow falls into bear market, FTSE to tank, little hope for ECB
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10-3-2020

US tax cuts lightening the mood in market hangover
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5-3-2020

OPEC meeting, Flybe administration & fortune favours a brave BOE
Shares in Europe look set for higher open following the wake of a ‘Biden bounce’ on Wall Street. The Dow saw another +1000-points day led by healthcare companies on the hope the US can avoid a national healthcare service under a President Sanders. Actually, we… Read more

28-2-2020

Next step bear market (unless oil can bounce). Euro rally continues
This week has been quite the doozy. Recapping oil is down 12% and the Dow Jones is down 11% and we haven’t had Friday yet. Futures are pointing to another 900-point slide on Friday in the Dow on Friday’s open after the biggest one-day points fall ever on Thurs… Read more

27-2-2020

Shares and yields slide in coronavirus spotlight. Sterling a haven?
There have been few places to hide while the coronavirus takes the spotlight across global markets. It’s looking like a defensive start to Thursday with shares pointing lower, bond yields falling, and haven currencies bid. Investors don’t like the uncertainty… Read more