(05 March 2020)DAILY MARKET BRIEF 1:$7.8bn fiscal stimulus package boosts US equities
US equities coughed to life as the Congress agreed to spend $7.8 billion to combat the coronavirus on Wednesday. This was three times the
amount suggested by President Donald Trump, a kind of surprise needed to boost the investor sentiment nowadays.
It is clear,
investors around the world now believe that the monetary policy alone cannot tackle another financial crisis, given that the starting
point for the interest rates is already extremely low and rock-bottom interest rates prove to be increasingly inefficient to fuel
investment. This is especially true in Europe and Japan.
The Dow (+4.53%), the S&P500 (+4.22%) and Nasdaq (+3.85%) rallied on
Wednesday, and demand in US equities remained strong in Asia sending the three major US stock futures 2% higher.
The US 10-year yield
recovered past 1%, giving a positive spin to the US dollar. The ISM non-manufacturing index pointed that services in the US expanded at the
highest speed in a year in February. The coronavirus outbreak had little impact on business surveys so far, how the hard data is impacted is
yet to be seen.
Speaking of hard data, the ADP report showed that the US economy added 183’000 private jobs in February, better than 170’000
expected by analysts, but less than 209’000 printed a month earlier. Due Friday, the nonfarm payrolls are expected at 175’000, versus last
month’s 225’000.
In Australia, the trade surplus beat analyst expectations in January. The surplus retreated to A$ 5.21 billion
from A$ 5.38 billion printed a month earlier, versus A$ 4.80 bn penciled in. The Aussie advanced to 0.6630 against the US dollar, as the latest
trade data suggested that the coronavirus outbreak in China didn’t hit the Australian economy as hard as many expected, at least in January.
Elsewhere,
the Bank of Canada (BoC) surprised by a 50-basis-point cut on Wednesday, sending the USDCAD to 1.3430. Stocks in Toronto rose 2.22%.
The
Bank of England (BoE) Governor Bailey swam against the tide, however, saying ‘what we need is frankly more evidence than we have at the moment
as to exactly how this is feeding through’. Sterling surged to 1.2874 against the greenback as BoE doves flew off on Bailey’s comments. Yet,
the upside potential should remain limited on further USD recovery and mounting anxieties around the Brexit negotiations.
Most Asian
markets gained in the overnight trading session. The CSI 300 surged 2.16%, the ASX 200 and Nikkei rose past 1%.
By Ipek Ozkardeskaya
