Tuesday, March 3, 2020

Asia Times: Global markets look set for recovery on expectations for a coordinated stimulus package from major central banks and governments

  • Dollar
  • Gold
  • Stocks
  • Oil
  • RBA


Market Recap: Global markets look set for recovery on expectations for a coordinated stimulus package from major central banks and governments

US equities rebounded on Monday after G7 finance ministers and central bank governors were reportedly having a teleconference later today to discuss possible responses to the coronavirus outbreak. The DJIA made its biggest advance since 2009, while the S&P500 and Nasdaq both jumped more than 4%. The S&P500 and Nasdaq were mostly led by Apple shares which surged 9.31%. In the S&P500 index, the Utilities sector (+5.86%) led gains among all other sectors with the technology sector (+5.70%) close behind.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +5.09% +1,293.96 26,703.32
S&P500 +4.60% +136.01 3,090.23
Nasdaq +4.49% +384.80 8,952.17
*Source: Bloomberg

In the forex market, the greenback suffered on Monday amid speculation for a Fed rate cut later this month. The Dollar Index fell 0.79% as most major currencies gained against the dollar. ISM Manufacturing PMI fell slightly to 50.1, signalling that the US manufacturing sector is still expanding but at a slower rate, although details of the report revealed that the global supply chain is already starting to be impacted by the coronavirus outbreak. The report also showed supplier deliveries slowing in February, which would normally signal that demand for supplies are strong. But in the case of February, supplier deliveries were likely slowed due to the coronavirus' impact on the global supply chain, which caused delays in deliveries.

The Australian dollar gained 0.34% against the dollar ahead of today's RBA monetary policy meeting. But expect AUD/USD to trade relatively muted before RBA announces its decision. Financial markets are expecting a rate cut from the RBA to kick-off a series of central bank easing across the globe. Futures tracking the RBA's decision on its official cash rate implies a 105% probability of a rate cut later today at 11.30am (GMT +8). We expect a rate cut of 25bps to put its official cash rate at 0.50%, and possibly a downside potential of 0.07% for the Aussie after the announcement.


Safe haven assets were mostly lower on Monday as financial markets recovered from last week’s selloff. Gold recovered slightly after dipping more than 3% last Friday. The yen fell against the greenback and US Treasuries were mostly lower. Benchmark 10-year yields rose 1.5bps to 1.16%, while two-year yields fell 1bp to 0.90%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.24% +3.75 1,589.44
Silver +0.42% +0.07 16.45
JPY -0.41% -0.44 108.33
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -1.0 0.90%
10-Year +1.5 1.16%
30-Year +4.6 1.72%
*Source: Bloomberg

Both Brent and WTI crude futures were up more than 4% on Monday amid optimism that the possible stimulus from various G7 countries can help lift demand for energy products. WTI crude oil futures were 2.44% higher, trading at US$47.89 per barrel on Tuesday morning as of 8.26am (GMT +8).

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +4.49% +2.23 51.90
WTI Crude +4.45% +1.99 46.75
*Source: Bloomberg

Meanwhile on Tuesday morning, Asian stocks look set to track US' gains. The Nikkei, KOSPI and ASX200 were all trading upwards of 1% early into Tuesday's trading session. Downside risks for equity markets still remain however, with the count of coronavirus infections continuing to climb at an accelerated rate outside of China. A possible upset from the RBA may also dampen stock prices, as there is a small likelihood that the RBA will postpone a rate cut to April instead of cutting rates later today.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.14% +244.32 21,591.34 8:16:25 AM
KOSPI Index +2.09% +41.81 2,044.23 8:36:20 AM
ASX200 Index +1.91% +122.38 6,514.60 8:36:05 AM
*Source: Bloomberg

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

  • RBA Monetary Policy Decision (11.30am)
  • Switzerland Q4 GDP (2.45pm)
  • Eurozone Feb Inflation Rate (CPI) (P) (6pm)
  • Eurozone Jan Unemployment Rate (6pm)