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Dollar-funding issues are in play

That’s one theory on what the Fed was worried about yesterday

Liquidity usually means US-dollar liquidity. The rally in USD/JPY is counter-intuitive and it’s extremely powerful right now.
Yen/dollar 3-month FX basis swap spreads have widened to 109.5 basis points, which is the largest gap since December 2016.
You have to wonder what’s going on behind the scenes. In USD/JPY, I highlighted the 61.8% retracement at 108.00 earlier. That’s an important level. Last at 107.61.

European shares end higher but the full story for the day is not so rosy

German Dax was up 9% at the high. Closes up 0.2%.

Well…the European shares are ending the day higher. However that is only half the story.  The other half of the story is that the major indices give up a big chunk of their gains from the highs.
The provisional numbers are showing:
  • German DAX, +0.2%. The high for the day was up 9%
  • France’s CAC, +1.4%. The high for the day was up 9.75%
  • UK FTSE 100, +1.7%. The high for the day was up 8.76%
  • Spain’s Ibex, +4.7%. The high price was up 11.73%
  • Italy’s FTSE MIB rose 6.3% but retrace from a 17.8% gain

For the week, the major indices got creamed.

  • German DAX, -20.01%
  • France’s CAC, -20.3%
  • UK’s FTSE 100, -17.6%. Worse since 2008.
  • Spain’s Ibex, -21%
  • Italy’s FTSE MIB -24%
How are the major European indices fairing for the year?
  • German DAX, -30.32%
  • France’s CAC, -31.42%
  • UK’s FTSE 100, -29.4%
  • Spain’s Ibex, -31.1%
  • Italy’s FTSE MIB, -32.7%

ECB’s Villeroy: We are making unlimited liquidity available to banks so they can lend

Says ECB package is coherent with the current economic situation

  • We see market volatility but we are guided by economic conditions
The ECB action yesterday was a massive boost for banks but it was more of a disappointment to the rates market. Investors are also sorely in need of coordinated stimulus to boost confidence and they need to see some light at the end of the tunnel.
If Europe goes into a massive lockdown like what we’re seeing with Italy, monetary stimulus is essentially useless in such an environment.

Nikkei 225 closes lower by 6.08% at 17,431.05

Down day but it could have been much worse

Nikkei 13-03

The late recovery in US futures and equity indices in the region helped to see the Nikkei shave off the heavier losses sustained during the session, but the index still closes lower by 6% after the bloodbath seen in Wall Street overnight.
On the week, the Nikkei is down by 16% while the Hang Seng – down by 3.6% today – is down by over 10.5% on the week. Chinese equities are among the “better” performers with the CSI 300 index down by just 1.6% today and 6.1% on the week.
For trading today, just keep in mind that sharp moves in the market tend to be accompanied by retracements more often than not. But that doesn’t mean that the worst is over.
Dow

EU’s Centeno says he expects finance ministers to agree fiscal measures “much larger” than €27bn

Financial Times with the report on a prediction from Mário Centeno, President of the Eurogroup

  • Eurozone finance ministers will agree a “very large” policy response to fight the economic fallout of coronavirus, the president of the eurogroup has predicted
  • bloc will unleash the “full flexibility” of its budget rules to boost spending
  • expected fiscal measures that together add up to a boost “much larger” than the €27bn aggregate level that was mentioned by Christine Lagarde
Centeno speaking with the FT Link 

Coronavirus – UK PM Johnson says “many more families are going to lose loved ones”

BBC reports on remarks from UK Prime Minister Boris Johnson

  • “This is the worst public health crisis for a generation”
  • its  “not right” to compare coronavirus to flu
  • “many more families are going to lose loved ones before their time” as the virus spreads
Comments from earlier.
In the UK:
  • total number of deaths 10
  • 596 confirmed cases in the UK, up from 456 on Wednesday
Governments around the world have recognised the seriousness of the deadly outbreak and are moving to limit loss of life. Except for the US:
  • Breaking – US Federal government coronavirus relief package has been delayed
    Coronavirus – Trump administration moving ahead with plan to kick 700,00 off food stamp program
  • Ohio health official estimates 100,000 people in state have coronavirus