Capital Markets: "The Rot Continues but Somewhat Less Dollar Friendly"

From Marc to Market:

Overview: A new phase of the Covid-19 is at hand. Yesterday was the first time that the number of new cases in the world surpassed the number of new cases China acknowledged. This confirms what we have known, namely that the battle for containing it in China has been lost. However, it wasn't until the US officials warned of it that the equities reversed their earlier gains, and the S&P 500 settled at new lows (since early December). President Trump's public address late yesterday failed to reassure investors, and risk-aversion continues. China and Hong Kong markets were among the exceptions, while Tokyo lost 2%, and South Korea and Taiwan markets lost more than 1%. Europe's Dow Jones Stoxx 600 staged an impressive recovery yesterday, leaving a hammer candlestick in its wake, but led by losses in consumer discretionary and finance sectors, the benchmark is off about 1.5% in late morning turnover. US shares are trading heavily, and the S&P is set to open around 0.8% lower. Ten-year benchmark yields are 1-2 bp lower, which puts the US 10-year yield below 1.3%. Peripheral European bond yields are edging higher as they are regarded as risk assets. The dollar is heavy against all the major currencies but the Canadian dollar and British pound. Emerging market currencies are mixed, helping the JP Morgan Emerging Market Currency Index is steady. Gold is firm but remains within Tuesday's range (~$1625-$1664). April light sweet crude oil is straddling the $48-mark after posting a high near $54.65 last week.

Asia Pacific
Defying expectations, South Korea's central bank did not cut the key seven-day repo rate. Still, despite the acceleration of Covid-19 contagion, and cases in Seoul have been reported, the central bank has maintained a sense of humor. It suggests its forecasting tools are precise enough to shave its GDP forecast by 0.2% to 2.1%. South Korea expanded by 2.0% in 2019. The CPI forecast was unchanged at 1.0%. Last year, South Korea's CPI rose by 0.4%. The central bank will extend a cheap loan facility.

Japan is discouraging large public events over the next two weeks and will close public schools as well. This includes sporting events and concerts, for example. Meanwhile, one of the most vocal doves at the Bank of Japan (Kataoka) played down the need for easier monetary policy in response to the virus. The central bank meets on March 19....

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