Archives of “March 3, 2020” day

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AUD looks through coronavirus risk through to recovery

  
  Analysis

RBA cuts as expected

The Reserve Bank of Australia cut interest rates as expected and the AUD rallied out of the decision. The main reason was that the RBA was looking through the impact of the virus, or at least uncertain of its impact, through to the end of the present crisis.  Here is a excerpt from the minutes:
RBA cuts as expectedAlso, the RBA did not signal further rate cuts which is why we saw Australian Bond Yields rise on the interest rate decision as well as some strength for the AUD.
A signal for the Fed?
Looking at Treasuries the 10 year yield is 62bp below the upper end of the target range for federal funds.
US 10 year Treasuries

US president Trump: Fed should ease and cut rate big

  
  Analysis
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Trump calls for Fed rate cuts again after the RBA decision earlier

Powell Trump

“Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown. They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so. Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!”

What else is new. Either way, the market has also already held the Fed hostage ahead of this month’s policy decision. Knowing the Fed, they’ll oblige to cut rates as such and Trump will get his wish – though that policy room is surely getting smaller.

G7 statement still under discussion

  
  Analysis
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Reuters citing an unnamed source

  • statement being drafted on coronavirus response
  • to be issued Tuesday or Wednesday
  • does not include specific language calling for fresh fiscal spending or coordinated interest rate cuts
  • finance leaders will pledge to work together to mitigate economic damage
  • statement still under discussion,. language subject to change
Uh-oh …. this’ll put a cat amongst the pigeons
Prompting Flows into yen

Japanese investors not impressed by BOJ’s efforts to ensure market stability today

  
  Analysis

The BOJ conducted another repo operation today to try and inject more liquidity into the market, but it was met with a cold reception

BOJ

The central bank offered to buy ¥500 billion worth of Japanese government debt via repo operations but only ¥150 billion was taken up.

Although a similar move yesterday was oversubscribed, today’s lack of enthusiasm is something to be mindful about.

The lack of take up is an indication of weaker demand for cash so that does say something. Are investors telling the BOJ that what is happening isn’t a liquidity problem?
Two days is a bit early to outline a trend but I reckon it is a spot worth keeping an eye on just in case we see more interesting developments.

Nikkei 225 closes lower by 1.22% at 21,082.73

  
Analysis, Global Indices

The early enthusiasm in the market fizzles out on report that G7 communique may not live up to the hype

Nikkei 03-03

Japanese stocks are closing at the lows for the day with early gains in the equities space also being pared as we look towards European trading. The Hang Seng is up by just 0.2% now with the Shanghai Composite up by 0.6% currently, way off earlier highs.

The fact that investors are also not keen on the liquidity injection by the BOJ is also something to be mindful about in the coming days.
US futures have also seen early gains ease, with E-minis down by ~0.2% at the moment.
As such, the yen leads gains in the currencies space with USD/JPY down to 107.70 now and the franc is also inching higher with USD/CHF falling to 0.9575 currently.

Dow closes up over 5% on the day

  
Analysis, US Market
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Major indices close at session highs.

The Dow had the biggest point gain ever, and in the process moved higher by over 5% on the day. The S&P index broke a 7 day decline and rose 4.61%. The NASDAQ index was a laggard with only a 4.5% gain.
The final numbers are showing:
  • The S&P index up 136.27 points or 4.61% at 3090.47. The S&P index closed above its 200 hour moving average at  3048.38. Now the price is above that moving average the next target would be the 100 day moving average at 3168.69
  • The NASDAQ index is ending the day up 384.797 points at 8952.16. That is a gain of of 4.49%. Technically, the price moved above its 100 day moving average at 8828.31. Its 50 day moving average looms ahead at 9245.93.
  • The Dow industrial average is closing up 1293.9 points or 5.09% at 26703.26.  Although the gain was the biggest point gain on record, the index still remains below its 200 day moving average at 27241.99.
Some of the bigger gains include:
  • Tesla, +11.46%
  • Costco, +9.95%
  • Apple, +8.85%
  • Gilead, +8.69%
  • Twitter, +7.92%
  • Walmart, +7.59%
  • UnitedHealth, +7.04%
  • Microsoft, +6.67%
  • Citigroup, +6.56%
  • Travelers, +6.56%
  • Merck, +6.3%
  • Amgen, +6.28%
  • Target, +5.9%
  • Intuit, +5.87%
  • Verizon, +5.82%
  • MasterCard, +5.73%
  • Visa, +5.53%
  • Home Depot, +5.45%

Losers on the day include:

  • Lyft, -3.12%
  • Square, -3.10%
  • First Solar, -1.92%
  • Chewy, -1.83%
  • Deutsche Bank, -1.3%
  • Alcoa, -1.15%
  • Daimler, -1.09%
  • FedEx, -0.75%
  • Chipotle, -0.71%
  • Papa Johns, -0.5%
  • United Airlines, -0.47%
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