Wednesday, March 25, 2020

Asia Times: Dow makes its biggest one-day gain since 1933; Tokyo Olympics delayed to latest summer 2021

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • DXY

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Market Recap: Dow makes its biggest one-day gain since 1933; Tokyo Olympics delayed to latest summer 2021

US equities jumped on Tuesday as investors anticipated a US$2tn stimulus package from Congress in addition to the Fed’s stimulus move on Monday. US lawmakers said they were close to an agreement on the stimulus bill to help relieve the US economy from the economic impact of the coronavirus outbreak. The additional fiscal stimulus from the US government will be in addition to the Fed's move to extend its asset purchase program to corporate bonds and its new program to make direct loans to corporations and state governments. But it is unknown when the next vote to pass the bill will be. The energy sector led gains among the S&P500 sectors, surging 16.31% following a recovery in the crude oil prices. The Dow surged 11.37%, the most since 1933 while the S&P500 spiked the most since October 2008.

The Dow was mostly lifted by Boeing shares advancing 20.89% after announcing that the aircraft manufacturer plans to restart its 737 Max aircraft production by mid-year (Reuters updated this story on Wednesday morning for Boeing to restart its 737 Max production by May). But demand for its aircrafts may still face downward pressure this year, especially after the latest revenue forecast from IATA for the industry for 2020 to be only 44% of 2019's revenue. Japan and the IOC announcing that the Summer Olympic games in Tokyo will be delayed by about a year is likely to contribute to slowing revenue in the airline industry for 2020 as well.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +11.37% +2,112.98 20,704.91
S&P500 +9.38% +209.93 2,447.33
Nasdaq +8.12% +557.18 7,417.86
*Source: Bloomberg

Demand for the dollar finally started show some signs of a slowdown as all major currencies with the exception of the yen gained against the greenback. The Fed's move to make direct loans to companies likely helped relieve the upward pressure on the dollar as demand for cash reduced slightly. The Australian and New Zealand dollars continued to gain as China’s economy starts to move back into full capacity.

Markit preliminary manufacturing PMI reports for Germany, Eurozone, the UK and the US for March all beat economists’ estimates, although services PMIs all missed forecasts. Despite manufacturing PMI being better-than-expected, the preliminary PMI reports showed all sectors sharply contracting for the month as the effects of a lockdown across multiple countries starts to take its toll on the global economy.

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Safe haven assets were mostly mixed as investors were likely shifting towards higher risk strategies as the equity market shows signs of recovery. Gold surged 5.09% to reach back above the 1,600 level. The yen was flat against the dollar. US Treasuries fell across the board, pulling benchmark 10-year yields up 6bps to 0.85%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +5.09% +79.09 1,632.32
Silver +7.66% +1.02 13.17
JPY 0.00% 0.00 111.23
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +5.9 0.37%
10-Year +6.0 0.85%
30-Year +4.5 1.40%
*Source: Bloomberg

Crude oil prices extended into a two-day recovery as financial markets started to calm. Brent inched higher to US$27.15 per barrel while the US WTI benchmark advanced 2.78% to US$24.01 per barrel.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +0.44% +0.12 27.15
WTI Crude +2.78% +0.65 24.01
*Source: Bloomberg

Stocks in Asia looks set for a second day of gains, tracking equity market’s performance in the US. The Nikkei, KOSPI and ASX200 surged in the first hour of Wednesday's trading session. But futures tracking major indices in the US were trading in the red on Wednesday morning, likely as a result of a normalisation and surging cases of the virus in the US.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +5.28% +955.71 19,048.06 8:24:25 AM
KOSPI Index +2.30% +37.00 1,646.97 8:44:20 AM
ASX200 Index +3.55% +168.05 4,903.70 8:44:06 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.81% -166.00 20,442.00 8:36:07 AM
S&P500 Futures -1.23% -30.00 2,408.00 8:36:09 AM
Nasdaq Futures -1.41% -106.75 7,452.25 8:36:07 AM
*Source: Bloomberg

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

  • Germany Mar Business Climate/Expectations Survey (IFO) (F) (5pm)
  • UK Feb Inflation Rate (RPI/CPI) (5.30pm)
  • US Feb Durable Goods Orders (P) (8.30pm)