By Deepta Bolaky
It is becoming incredibly difficult to predict how the week will unfold as it is heavily dependent on the growth rate of the new coronavirus cases. The COVID-19 updates on the weekend have been mixed. It is too early to determine whether the epicentres of the virus have reached a peak in new cases. Investors will likely monitor the following:
Early Signs of Slowdown
After an overwhelming weekend filled with developments on the new coronavirus cases and the struggles of the medical sector to cope with the pandemic, the reported death toll in some epicentres like the US and Europe has shown early signs of a slowdown.
Anti-Malaria Drug Hoarding
Over the weekend, much attention was on the anti-malaria drug which was flaunted as a “game-changer” in the fight against the novel coronavirus. There were mixed messages around the hydroxychloroquine drug:
We expect the drug to be the unfolding development investors will likely monitor to see the effectiveness of the drug to treat patients while health officials carry larger clinical trials to validate smaller studies.
President Trump’s tweet last week on possible oil production cuts might have prompted a meeting between OPEC and its allies. The meeting was scheduled for Monday, but as of writing, it is reported that the meeting has been postponed and will likely take place on Thursday instead.
The initial hopes of a truce between Saudi Arabia and Russia tamed down during the weekend on speculations that the rift seems to have widened following the surprising attempts to bring Saudi Arabia into hostilities against the shale oil industry.
We expect the oil market to bear the return of pessimism until there is more clarity on the upcoming meeting. After dropping by more than 50% in March, crude oil prices rose significantly towards the end of last week.
Oil prices plunged on Monday morning as the meeting was pushed back. Traders to keep an eye on the meeting as a production cut could provide support to oil prices in the short-term.
China is slowly resuming activities as the worst of the epidemic appears to be over. Both NBS and Caixin surveys show that manufacturing activities rose back in expansionary levels. However, as per the NBS manufacturing report, Production and New Orders both rose above 50 while the Caixin report shows a drop in New Orders despite the expansion of the manufacturing output.
The rebound is not yet a done deal as it is just one-month data. After deteriorating at the quickest pace on record in February, operating conditions have stabilised in March. We expect market participants to keep monitoring the pace of recovery as China eases lockdown controls but also to keep an eye on the new coronavirus cases. 25 out of the 30 new cases are confirmed to be imported.
RBA Interest Rate Decision and Statement
The recent minutes had shown that another rate cut is off the cards as policymakers expressed their unwillingness to adopt negative interest rates. The RBA is currently relying on the launch of quantitative easing to support the economy. It will be interesting to see how the RBA is planning to interfere if the situation in Australian worsens.
FOMC and ECB Minutes
Both the US and Europe is the new epicentres of the virus. The attention will, therefore, primarily be driven by the growth rate of the virus cases which means that the minutes might not be a significant market mover.
However, the FOMC minutes might tame down the haven rally of the US dollar if it provides signs of unexpected support that the central banker is willing to take to offset the damage from the coronavirus outbreak.
The US dollar index which tracks the performance of a basket currency is trading in the 100-level backed by the increasing selling bias in other currencies continues and its haven status amid all the chaos. The main releases which may affect the greenback will be the Jobless Claims, FOMC Minutes, and CPI Figures.
Key Events Ahead
TD Securities Inflation (Australia)
Factory Orders (Germany)
Bank of Canada Business Outlook Survey (Canada)
OPEC Meeting (US)
NZIER Business Confidence and GDT Price Index (New Zealand)
Overall Household Spending and Leading Economic Index (Japan)
Eurogroup Meeting (Eurozone)
Imports, Exports, Trade Balance, RBA Interest Rate Decision and Rate Statement (Australia)
Industrial Production (Germany)
Ivey Purchasing Managers Index (Canada)
Machinery Orders (Japan)
Home Loans and Investment Lending for Homes (Australia)
Unemployment Rate (Switzerland)
10-y Bond Auction (Germany)
Housing Starts (Canada)
EIA Crude Oil Stocks Change and FOMC Minutes (US)
BoJ’s Governor Kuroda Speech (Japan)
Industrial & Manufacturing Production and Gross Domestic Product (UK)
Trade Balance (Germany)
ECB Monetary Policy Meeting Accounts (Eurozone)
Producer Price Index, Jobless Claims and Michigan Consumer Sentiment (US)
Unemployment Rate, Participation Rate, Average Hourly Wages and Net Change in Employment (Canada)
Consumer and Producer Price Index (China)
Consumer Price Index, Fed’s Mester Speech and Monthly Budget Statement (US)
By Deepta Bolaky
|Tuesday, 07 April 2020 |
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