Capital Markets: "US Over-Promises and Under-Delivers, while BOE Steps Up with 50 bp Rate Cut"

From Marc to Market:

Overview: The S&P 500 and Dow Jones Industrials sold off after the higher open and briefly traded below yesterday's lows. Investors seemed disappointed that the Trump Administration was not ready with specific policies after Monday's tease that had initially helped lift Asia Pacific and European markets earlier on Tuesday.
This sparked a sharp decline in Europe into the close. Several individual European markets posted bearish outside down days by trading above yesterday's highs and then reversing to close at new lows. However, as investors concluded that US fiscal support would be forthcoming US stocks rallied to new highs late in the session.
Yet, after the close, official comments gave a sense that there was still no agreement, and President Trump did not attend the White House briefing. US stocks softened in early electronic trading, which weighed on Asia-Pacific markets.
The Bank of England delivered an emergency 50 bp cut and some other credit easing measures shortly before the UK markets opened a few hours before the government unveils its. Sterling initially fell but quickly recovered to new session highs.

European equities are higher, and the Dow Jones Stoxx 600 is about 2% higher, led by financials, energy, and materials. US shares are unable to build on yesterday's gains, and the S&P 500 is a little more than 1% lower after yesterday's nearly 5% advance. Core European 10-year benchmark yields are 3-5 bp higher, while peripheral bond yields are lower, led by around 10 bp declines in Italy and Greece. The US 10-year Treasury yield is off about seven basis points (to 73 bp) after rising 26 bp yesterday. The dollar is trading heavily against all the major currencies. Emerging market currencies are mixed, with eastern and central European currencies faring best, with the Mexican peso and South African rand picking the rear, with 0.4%-0.5% losses. Gold is up 0.5% to recoup about a third of yesterday's decline, while crude pares its more than 10% gain and is straddling $34 a barrel.

Asia Pacific
Japan saw its first case of the coronavirus two months ago, and pressure continues to mount on the Abe government to take bolder action. Abe's public support has fallen to its lowest level in more than a year and a half. The government funds committed are not new spending but using reserves from previous budgets, including December's JPY13.2 trillion package. The handling of the public health crisis contrasts with how it handled the earthquake, tsunami, and nuclear accident that took place nine years ago today.

Australia is expected to unveil its fiscal response tomorrow. Reports suggest it will spend A$2.4 bln and include 100 pop-up clinics. South Korea is also putting together an extra budget. On monetary policy, several central banks that do not meet soon, like South Korea, India, and Malaysia, are seen as potential candidates to make emergency cuts....

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