(18 March 2020)DAILY MARKET BRIEF 2:European inflation figures are seen unchanged
Due today, European inflation figures are seen unchanged in February. But the expectations proved weak factoring in the impact of
coronavirus pandemic this far, hence investors should stand ready for disappointment.
The euro dashed below the 1.10 mark on the back
of a rush toward the US dollar but recovered past this level in the overnight trading session. Higher US yields widened the rate differential
between the euro and the dollar holdings, turning the table again in favour of a stronger US dollar. The three-month euro-dollar basis
swaps, a gauge of how costly it is to buy a dollar, traded at the widest since 2011.
Cable hit 1.20. The UK government announced a credit
facility lending similar to the Fed’s on top of monetary measures revealed last week. The Bank of England (BoE) could lend up to 15% of the
British GDP this year, along with an additional fiscal package worth 2% of the GDP.
Though the central banks are running out of steam, the
fiscal policies have significant room to expand, but of course, decisions on this end have wider political implications, especially in
peripheral Europe where governments were constrained with years-long austerity measures a decade ago. Therefore, European countries
may find it harder to loosen their purses’ strings compared to the US and the UK.
In the equity markets, Asian stocks failed to follow up
on New York gains. The ASX 200 tanked 6.43% as WTI crude extended losses to $26 a barrel. Nikkei slid 1.68% as Japanese exports fell for the
fifteenth consecutive month.
Massive fiscal and monetary measures have again been a flash in the pan. US futures slumped near 4% reversing
Tuesday’s gains.
FTSE futures (-4.09%) hint that British stocks will continue nose-bleeding on Wednesday. Energy stocks will inevitably
feel the pinch of further slump in oil prices.
By Ipek Ozkardeskaya
