Overview: It appears after a few days of miscues, US officials struck the right chord, and the global capital markets seemed to stabilize shortly after the US session ended. President Trump's press conference today is expected to spell out in greater detail relief for households and businesses. Asia Pacific equities rallied, led by a 3% surge in Australia. Most markets gained 1%, though South Korea and Taiwan lagged behind. Europe's Dow Jones Stoxx 600 is snapping a three-day 13.5% drop with around a 2% gain through the European morning. US shares are also higher, recouping around 3% of yesterday's 7.6% fall. Bond yields have snapped back. Core European yields are 8-11 bp higher and the US 10-year yield is up 14 bp at about 68 bp. Italian bond yields that surged during the panic risk-off have come back 8-10 bp lower. The dollar is clawing back losses against most of the major currencies. The Norwegian krone and Canadian dollar have been helped by the bounce in oil prices. April WTI jumped 5% but pared early gains. It is up around 3.6% after falling more than 40% over the past four sessions. Gold is off by a little more than 1% (~$1662).
Asia Pacific
Japan's Diet is set to grant Prime Minister Abe the power to declare a national emergency. Abe, in turn, is pushing a fiscal package that will include about $4 bln for addressing the coronavirus as part of an o overall economic package of around $16 bln. At the same time, the BOJ has stepped up its ETF purchases, including JPY101 bln today (its fourth purchases this month), even though the pullback in the yen helped spur a recovery in Japanese shares earlier day. Separately, South Korea introduced a ban on short-selling.
China reported February CPI eased to 5.2% from 5.4% and PPI fell to minus 0.4% from 0.1%. Food prices rose nearly 22% from a year ago, led by the 135% increase in pork prices, added 1.3 percentage points to the annual CPI. The data was brushed aside as nearly irrelevant in the current context. Meanwhile, reports suggest that while manufacturers are increasing re-opening businesses, the cancelation of orders (domestic and foreign) and other disruptions may make for a slow and modest recovery. ...
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....With the circuit breakers for equities hit and speculation of a repeat of last week's emergency 50 bp cut inter-meeting, the Federal Reserve bought some time by boosting the amount of liquidity it would provide via its repo operations. A couple overnight repos were oversubscribed though it did not result in a spike in rates. Previously, the Fed offered up to $100 bln in overnight repos and $20 bln for two-week term operations. The amounts have been increased to $150 bln and $45 bln, respectively. The reason it buys the Fed a few days is that on March 12, it is due to update the funding schedule. The adjustment means that the Fed can provide $285 bln of liquidity through its repo operations rather than $180 bln. As of the end of last week, the outstanding repos were for almost $180 bln. According to the CME's model, the March fed funds futures contract is pricing in about near certainty (98%) chance of a 75 bp rate cut next week that would bring the target to 0.25%-0.50%. ........MUCH MORE
