Friday, March 20, 2020

Asia Times: Equities find some relief on Thursday; RBA slashes interest rates to 0.25%

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • Federal Reserve
  • RBA

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Market Recap: Equities find some relief on Thursday; RBA slashes interest rates to 0.25%

Stocks in the US managed to recover slightly on Thursday, as investors viewed the global efforts to relieve the chaos in financial markets as a slight positive. The Fed opened dollar-swap lines with central banks in nine new countries including Singapore, Australia and New Zealand, to help with the dollar liquidity crunch around the world. US President Donald Trump backed the idea of government gaining interests in companies that get government aid. Tech stocks led gains on Thursday, pushing the Nasdaq to lead major indices in gains. In the S&P500, the energy sector led gains among sectors in the index, surging 6.75% as oil prices recovered losses from Wednesday.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +0.95% +188.27 20,087.19
S&P500 +0.47% +11.29 2,409.39
Nasdaq +2.30% +160.73 7,150.58
*Source: Bloomberg

The dollar still managed to lead the basket of G-10 currencies despite efforts from the Fed and rising unemployment in the US. The Dollar Index rose for the third day in a row to 102.76 as the outlook for US oil started to become less negative. Initial jobless claims in the US for the week ended March 14 climbed 70,000 to 281,000, highlighting the initial impact on employment the virus already has in the US. The Philadelphia Fed business outlook index also missed estimates of 8.0, to sharply decline to -12.7 for March.

The RBA slashed its official cash rate to 0.25% after its emergency meeting on Thursday. The Australian central bank also offered to purchase A$5bn worth of government bonds to attempt to lower yields in the Australian market. The Australian dollar rose more than 1% on the announcement from the RBA to as high as 0.5804. But was unable to hold onto gains as the greenback strengthened thanks to the surge in oil markets.

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Gold continued to fall as safe haven assets looked slightly mixed on Thursday. The yen weakened against the dollar as global risk slightly reduced. US Treasuries were lifted on Thursday, likely thanks to the Fed's relief efforts and signals that more relief may be on the way. Benchmark 10-year yields were down 5.1bps as a result.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -1.00% -14.81 1,471.24
Silver +1.15% +0.14 11.78
JPY -2.43% -2.63 110.71
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -8.3 0.45%
10-Year -5.1 1.14%
30-Year -0.3 1.78%
*Source: Bloomberg

Oil gained the most on Thursday after Trump signalled that he may become involved in the price war between Saudi Arabia and Russia, likely in a bid to ease the pressure on oil prices to save US shale oil companies. US confirming its pledge to fill its Strategic Petroleum Reserve with 30mn barrels of oil from the US also likely contributed to the surge in oil prices. WTI spiked 23.81%, or US$4.85 to US$25.22 per barrel as a result.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +14.43% +3.59 28.47
WTI Crude +23.81% +4.85 25.22
*Source: Bloomberg

Meanwhile Asia looks set to track US markets on Friday morning. The KOSPI and ASX200 were trading in the green early into Friday's trading session. The Tokyo Stock Exchange will be closed for a bank holiday today and reopen on Monday. Trading in Australia, Singapore, South Korea and New Zealand will likely find some relief today, thanks to the Fed extending swap lines to these countries to help with liquidity in financial markets. But futures tracking major indices in the US were more than 1% lower on Friday morning, signalling that stocks in the US is still on track to suffer more than the current 13% loss on the week. Expect high volatility to continue before financial markets close for the weekend.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 0.00% 0.00 - #N/A N/A
KOSPI Index +1.04% +15.09 1,472.80 8:53:40 AM
ASX200 Index +2.90% +138.56 4,921.50 8:53:35 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -1.62% -322.00 19,549.00 8:45:48 AM
S&P500 Futures -1.82% -43.50 2,345.75 8:45:48 AM
Nasdaq Futures -0.87% -63.50 7,210.00 8:45:48 AM
*Source: Bloomberg

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

  • PBoC decision on 1-Year & 5-Year Loan Prime Rates (9.30am)
  • US Feb Exising Home Sales (10pm)