Wednesday, March 25, 2020

Capital Markets: "Relief, but... "

From Marc to Market:
Overview: Global equities are marching higher. While the Dow Jones Industrials posted its biggest advance since 1933, the US is lagging behind other leading benchmarks.

The MSCI Asia Pacific advanced, led by Japan's Nikkei's 8% gain. It was third consecutive gain, during which time the Nikkei has rallied 17%. Europe's Dow Jone Stoxx 600 is up about 3.5% after bouncing 8.4% yesterday. Today looks to be the fourth gain in five sessions and during this period has also recouped around 17%.

Of note, the US S&P 500 has posted gains in seven sessions this month and rallied a cumulative 38.5%, but is still down 17%. The benchmark has not risen for two consecutive sessions since February 11-12 but could do so today. Benchmark bond yields are mostly a little firmer, though some European peripheral yields have slipped. The US dollar is trading heavier against the major currencies but the Japanese yen, with the Antipodean and Norwegian krone leading the way (+1.3%-1.7%). The Mexican peso and Korean won are the best-performing emerging market currencies (~1.6%), while the Chinese yuan, off 0.6%, is among the worst performers. Gold made a new high (~$1642) before reversing and is off around 1.5%. Oil is firmer and is looking to end a three-day 10%+ decline.

Asia Pacific
Japan's Government Pension Investment Fund, one of the largest pension funds in the world, announced yesterday it would boost the portfolio allocation of foreign bonds 10 percentage points to 25%. This is around $170 bln decision, though it is not clear the hedge ratio it will employ. Separately, the summer Olympics will be delayed a year and held in 2021 instead. Reports indicate the Abe government is negotiating an economic package of around JPY56 trillion (~$500 bln) that will also include cash payments (~JPY200k-JPY300k) directly to households.

Last week, defying expectations, China's benchmark one-year Prime Loan Rate was unchanged (4.05%), but may cut the deposit rate (1.5%) shortly. It has not been reduced since 2015 and would ostensibly help support lending margins. Reports also suggest China is considering a CNY2000 (~$280) payment to everyone as a pandemic subsidy. Apple reports that it expects to begin re-opening its stores in China in the first half of April. That said, news that Singapore has reintroduced a lockdown as a second wave of infections was detected, disappointed.....
....Tomorrow the US weekly jobless claims. The median forecast in the Bloomberg survey has risen to 1.5 mln. To put that number in perspective, weekly jobless claims peaked in the Great Financial Crisis near 665k. At the end of last week, Canada's Prime Minister Trudeau warned that Canadian unemployment claims were surging by half a million. Reports yesterday, citing an unnamed official, indicated that now the claims are closer to one million, or nearly 5% of Canada's workforce. ....