Thursday, March 19, 2020

Asia Times: Investors sell off assets across all markets for cash; RBA to announce emergency measures today

Tags
  • Dollar
  • Gold
  • Yen
  • Euro
  • Stocks
  • Oil

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Market Recap: Investors sell off assets across all markets for cash; RBA to announce emergency measures today

Major indices in the US fell on Wednesday, continuing to fall further into bear market territory. But some losses were pared off late into Wednesday’s trading session after the US Senate passed legislation bill H.R. 6201, the second virus relief bill to help pay for employees’ family and sick leave amid escalating cases of the virus in the US. The bill will also pay for virus testing and food assistance. In the S&P500 Index, the energy sector plunged 14.28% to lead losses among sectors while defensive sectors such as consumer staples and health care continued to be among the best performing.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -6.30% -1,338.46 19,898.92
S&P500 -5.18% -131.09 2,398.10
Nasdaq -4.70% -344.94 6,989.84
*Source: Bloomberg

High demand for the dollar continued in the foreign exchange market, driving the greenback higher against all other major currencies for the second day in a row. In Europe, the ECB announced a temporary asset purchase program worth 750bn euros to help businesses amid the virus crisis. The program will cover all assets eligible under the current program and will be extended to commercial papers of sufficient credit quality. Government debt from Greece will also be included into the program. ECB officials said that the new quantitative program will run until at least the end of the year. The emergency move from the ECB helped the euro to stay afloat against the dollar on Wednesday as traders viewed the move as a precursor to potentially more stimulus packages from the EU.

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Safe haven assets fell on Wednesday, as investors rushed to cash amid rising uncertainty. Gold fell more than 2%, essentially erasing gains since December last year. The yen fell slightly against the dollar but rose against the euro as it kept some of its safe haven properties amid surging demand for the greenback. US 10-year yields soared 11.3bps to 1.19% as US Treasuries faced its second day of selloffs. Correlation looks to be rising between safe haven assets and equities market, a common occurrence during times of crisis as demand shifts for liquid assets (cash and cash equivalents) instead of illiquid ones (stocks, bonds, etc).

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -2.76% -42.25 1,486.05
Silver -5.03% -0.63 11.64
JPY -0.35% -0.38 108.08
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +4.1 0.53%
10-Year +11.3 1.19%
30-Year +10.3 1.79%
*Source: Bloomberg

Brent dipped below US$25 per barrel after Saudi Arabia signalled again that the price war in oil markets is unlikely to end anytime soon. The Kingdom told its national oil producer Saudi Aramco to keep oil production at 12.3mn barrels per day for the coming months, confirming an almost definite oversupply in oil markets amid a demand crunch for energy products. WTI dived to almost US$20 per barrel, the lowest in two decades while Brent reached its lowest level since 2003.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -13.40% -3.85 24.88
WTI Crude -24.42% -6.58 20.37
*Source: Bloomberg

Asian equities will likely be mixed today as a result of the freefall in US markets and the strengthening dollar. The Nikkei will likely see some relief today, as the greenback strengthens against the yen, allowing some pressure to be lifted off Japanese exports. US equity futures were higher on Thursday morning after US President Donald Trump invoked a wartime act (Defense Production Act) late on Wednesday, allowing the US government to boost manufacturing in key areas such as medical protective equipment and masks.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.44% +241.59 16,990.12 8:24:05 AM
KOSPI Index -1.40% -22.33 1,565.26 8:44:00 AM
ASX200 Index +0.10% +5.20 4,956.80 8:44:05 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +1.57% +311.00 20,183.00 8:34:06 AM
S&P500 Futures +1.34% +32.25 2,434.50 8:34:07 AM
Nasdaq Futures +1.71% +123.25 7,329.25 8:34:06 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • RBA Emergency Monetary Policy Announcement
  • US Mar Business Outlook (Philadelphia Fed) (8.30pm)
  • US Mar 14 Initial Jobless Claims (8.30pm)