Markets Roil as Oil Price War Takes Centre Stage
COVID-19 UPDATE
Monday saw Italy put the entire country on lockdown as the total number of confirmed cases clocked over 9,000 with 463 deaths, only second to China. Containment efforts in China have borne fruit with Monday’s new confirmed cases representing just 1% of global infections which stood at 3,959. First cases of infection were also confirmed in Cyprus and Panama.
UNITED STATES
US stocks notched their worst 1-day declines since 2008 as an oil price-war between OPEC and Russia exacerbated global growth slowdown fears over the spread of the coronavirus. Stocks opened to steep losses which triggered a temporary halt to trading across stock markets following the S&P tumbling 7%. It would then go on to close 7.59% lower while the DOW and the NASDAQ closed 7.78% and 7.28% lower respectively. Treasury yields closed lower, albeit having retraced from early lows, with 2Y and 10Y USTs closing at 0.3810% and 0.5407% respectively.
UNITED KINGDOM
British business confidence has plummeted as the spread of COVID-19 ex-China has intensified according to a survey by the Institute of Directors. The survey, undertaken between February 28 and March 9 among the 920 members of the IoD, marks a significant divergence from the optimism that followed the Tory election victory with 60% of the respondents saying the virus posed moderate to severe threat to businesses. The spread of the virus in the UK has increased lately with the latest figures on Monday showing 319 confirmed cases and 5 deaths. The pound closed firmer at $1.3117 while yield on 10Y and 30Y UKTs closed lower at 0.159% and 0.505% respectively.
EUROPEAN UNION
German Industrial production rebounded in January to add to the good news following an earlier release of an uptick in factory orders in the same month. Output surged 3.0% in the month following a 2.2% decline in December. The data showed Europe’s largest economy showing signs of recovery before the latest threat of the coronavirus. The German government seems to be providing moderate stimulus with the latest announced measures only set to provide an investment boost for businesses in 2021 while an acceleration of an income tax cut didn’t pan out and will only get into effect later in the year as originally planned. The euro closed at $1.1450 while yield on 10Y and 30Y DBRs closed lower at -0.856% and -0.490% respectively.
ASIA
Asian stocks were higher on Tuesday on reports that the US may be preparing to offer a tax cut to ease the pain of COVID-19 outbreak. The ASX led gains at 3.10% while the HANG SENG and the NIKKEI rose 1.70% and 0.85% respectively. The CSI gained 1.72% with Chinese consumer inflation slowing from 5.4% to 5.2% YoY in February.
MENA
Lebanese Finance Minister Ghazi Wazni said the country will present an economic and financial plan to the IMF as it prepares to engage creditors after missing payment on Eurobond due for redemption on March 9. While the country has a seven-day grace period to make the payment, Fitch downgraded it on Monday from CC to C, saying it may put the country into “restricted default” should it fail to make good on the payment within the seven days. Talks with IMF will likely face some opposition from Hezbollah as the Iran-backed group has previously rejected financial aid from the IMF fearing it could hurt the poor.
LATAM
Brazil economists cut their 2020 growth forecasts for a fourth straight week according to the latest central bank survey. The latest forecast for 2020 GDP growth came at 1.99% down from 2.17% previously with the key rate expected to end 2021 at 5.5% from 5.75%. The survey was however taken before Monday’s crash in oil prices and will likely show further downgrades next week. The revisions came as Brazil’s economy grew 1.1% in 2019, the slowest since 2016. The real closed weaker at 4.7220 to the dollar while BRAZIL 50s shed some 7 points to trade in the mid 105s.
RUSSIA
Russia’s Economy Ministry said inflation may start picking up in March due to volatility in financial markets. The ministry’s statement on Monday was accompanied by an estimate of 2.4% annual inflation in March amid the global sell-off that followed Russia’s oil price war with Saudi Arabia. The ruble opened over 6% weaker against the dollar on Tuesday having closed at 68.566 to the dollar ion Friday and following a holiday on Monday, prompting the central bank to bring forward foreign currency sales. The statement from the bank said this was aimed at reducing volatility in markets. RUSSIA 47s closed some 6 points lower, trading in the low 128s.