Corona Shock!? Is this week a historic week? "Attention points and event schedule for the week of March 2"
Last week, due to the impact of COVID-19 (novel coronavirus), all markets shifted to risk-off sentiment.
The Dow Jones average recorded its largest decline ever, reaching levels that can be compared to the Lehman Brothers collapse.
An economist compared the impact of this COVID-19 (novel coronavirus) to the Lehman Shock.
The Lehman Shock was caused by a bank called Lehman Brothers and a financial product called subprime loans, so economists and financial experts could foresee the worst-case scenario and devise monetary policies to recover from it.
However, regarding the impact of COVID-19 (novel coronavirus) this time, economic and financial experts cannot foresee the virus's spread to the worst extent, making it difficult to decide how to respond.
Moreover, unlike in the Lehman Shock, interest rates are low and assets are expanding, so there are fewer policy options for monetary measures, which also differs.
Perhaps this week will be a historically shocking week.
◎ This Week's Points of Attention
1) COVID-19 (novel coronavirus)
Since last week, a pandemic has been feared, global stock prices have fallen, major bond markets have bought bonds, and in emerging markets bond sales have continued, leading to record risk-off conditions.
In Italy, France, the UK, the US, and Mexico, infections are spreading. Numbers vary by country due to differing testing, but as of February 29, there were over 85,000 infections and more than 2,900 deaths.
Prices and systems seem to be triggering a mechanical wave of selling, as if selling begets more selling.
There is a possibility that selling will continue this week as well.
Also, this week is the beginning of the month with several important indicators due.
Indicators affected by COVID-19 may be announced, potentially driving risk-off further.
This week will likely keep eyes on CPI-related news and headlines.
2) Policy Rates
RBA
At the last meeting, there were remarks about the risk of cuts and a stance against aggressive cuts, but the market situation has changed dramatically due to COVID-19 (novel coronavirus).
Even though Australia is moving away from Chinese dependence, the Australian economy is affected by China, and it is hard to foresee the outlook. Will the RBA cut rates? All eyes are on the RBA board.
If kept unchanged, attention will be on how the statement discusses the next rate cut and what the economic outlook implies.
If a rate cut occurs, is it a one-off cut or a path of cumulative cuts? Attention on this.
BOC
Canada is among the high-interest-rate currencies.
In the US, rate cuts are already priced in.
In this situation, will Canada hold steady or surprise with a rate cut? Attention.
If held, focus on the next rate cut, the economic outlook, and the policy stance in the statement.
3) Economic Indicators
China and US Manufacturing and Non-Manufacturing PMIs
On the weekend of February 29 (Saturday) at 10:00, the manufacturing and non-manufacturing PMIs for China were released with surprising figures.
• China Manufacturing PMI: 35.7 (vs. expected 45.0)
• China Non-Manufacturing PMI: 29.6 (vs. expected 50.5)
The results were shocking, but the deviation from expectations is also concerning.
Forecasts from Caixin PMI are considered more reliable than the official China PMIs.
If Caixin manufacturing PMI and Caixin services PMI show similar numbers, it could signal a significant risk-off move.
Also notable outside China is the United States, where the economy is thought to be solid; market watchers are watching for any deterioration in the US outlook.
Attention on ISM manufacturing index and ISM non-manufacturing index figures as well.
Australia GDP and Retail Sales
Australia's quarterly GDP and retail sales, which are sensitive to the Chinese economy, will be released.
This week, GDP and retail sales will be released after the Reserve Bank of Australia policy decision.
It will be a check against the outlook stated in the statement.
If the results diverge from expectations, a sharp drop is expected.
In particular, weak results could accelerate AUD selling, so caution is required.
Employment Data
Recent employment data has been less attention-grabbing and less volatile than before, but this time COVID-19 may cause large deviations between forecast and outcome.
Additionally, weak results could lead to expectations of rate cuts by the FOMC, which would push the dollar lower.
Canada will also be paying attention to employment data.
4) Key Speeches
This week two central banks will announce policy rates, so pay attention to remarks after those announcements.
Also, FOMC members will enter a blackout period after this week.
At the FOMC, attention is on whether there will be two or three rate cuts this year, or whether an emergency cut will be made.
Therefore, before entering the blackout period, keep an eye on what FOMC members say this week.
Similarly, MPC members in the UK should be watched for whether there will be a rate cut in March.
Besides central bankers, statements about COVID-19 (novel coronavirus) can influence risk-off, so keep an eye on each key figure and headline.
5) Super Tuesday
The highly watched event in the US presidential election, "Super Tuesday," is scheduled.
With many primaries occurring across weeks, winning Super Tuesday brings a candidate much closer to the presidency.
The Republicans seem to be settled on Trump as the nominee.
However, on the Democratic side, Buttigieg, Sanders who is leading, and Biden who secured a first win in the South Carolina primary earlier today are competing.
Watch who gets closer to the Democratic nomination on Super Tuesday.
6) OPEC Plus
With COVID-19’s impact, crude oil prices have fallen sharply.
Prices below $50 make production unprofitable.
To raise and stabilize prices, OPEC member and non-member nations are coordinating production cuts.
There are plans to continue or expand those coordinated cuts, and discussions are scheduled.
Before the talks, there are hints about coordinated cuts, but oil prices are still falling.
Pay attention to what results come from the discussions and whether they can stop the decline in oil prices.
7) UK-EU FTA Negotiations
This week, negotiations on a Free Trade Agreement (FTA) between the EU and the UK post-Brexit (end of transition period) commence.
If the UK does not reach an agreement by June, it will leave without a deal.
There have been bargaining rounds between the UK and the EU so far.
Beyond trade and tariffs, discussions are likely to cover fisheries rights, air defense zone, defense, contributions and subsidies, and supply chains; pay attention to what starts first and the stance in negotiations.
Also, the pound is expected to move significantly on headlines, so be careful with the pound.
◎ This Week's Events Schedule
March 2 (Monday)
First round of UK-EU FTA negotiations
10:45 CNYCaixin Manufacturing PMI
16:00 TRY Turkey Manufacturing PMI
16:30 SEK Sweden Manufacturing PMI
17:45 EUR Italy Manufacturing PMI (revised)
17:50 EUR France Manufacturing PMI (revised)
17:55 EUR Germany Manufacturing PMI (revised)
18:00 EUR Eurozone Manufacturing PMI (revised)
18:30 GBP UK Manufacturing PMI (revised)
23:45 USD US Manufacturing PMI (revised)
March 3 (Tuesday)
US Super Tuesday
00:00 USDISM Manufacturing Index
09:30 AUD Current Account and Building Permits
12:30 AUDRBA Board Meeting - Policy Rate and Statement
15:45 CHF Switzerland GDP
16:00 TRY Turkey CPI
17:00 EUR Draghi ECB Vice President speaks
18:30 GBP UK Construction PMI
19:00 EUR Eurozone HICP and Unemployment Rate
March 4 (Wednesday)
04:50 USDMester – Cleveland Fed President speaks (2020, 2022 voting rights)
06:45 NZD New Zealand Building Permits
08:50 USD Evans – Chicago Fed President speaks (2021 voting rights)
09:30 AUDAustralia Quarterly GDP
10:45 CNYCaixin Services PMI
16:30 CHF Switzerland CPI
17:45 EUR Italy Composite and Services PMI (revised)
17:50 EUR France Composite and Services PMI (revised)
17:55 EUR Germany Composite and Services PMI (revised)
18:00 EUR Italy GDP
18:00 EUR Eurozone Composite and Services PMI (revised)
18:30 GBP UK Composite and Services PMI
22:15 USDADP Employment Report
23:45 USD US Composite and Services PMI (revised)
March 5 (Thursday)
OPEC Meeting
00:00 USDISM Non-Manufacturing Index
00:00 CADBOC Policy Rate and Statement
00:30 USD Crude Oil Inventories
03:30 EUR Wohltmann – Deutsche Bundesbank President speaks
04:00 USD Beige Book (Beige Book – Federal Reserve District Reports)
08:30 USD Bullard – St. Louis Fed President speaks (2022 voting rights)
09:30 AUD Australia Trade Balance
10:30 JPY Suzuki – Bank of Japan Policy Board member speaks
22:00 GBPHolden – BoE Chief Economist speaks
March 6 (Friday)
OPEC Plus Meeting
02:00 GBPCarney – BoE Governor speaks
02:45 CADPoloz – BOC Governor speaks
08:30 USDKaplan – Dallas Fed President speaks (2020 voting rights)
09:30 AUDAustralia Retail Sales
10:30 USDWilliams – New York Fed President speaks
17:30 GBP Halifax House Price Index
22:30 USDNFP Employment, Average Hourly Earnings, Unemployment Rate・Trade Balance
22:30 CADCanada Employment Change and Unemployment Rate・Trade Balance
23:20 USD Evans – Chicago Fed President speaks (2021 voting rights)・Mester – Cleveland Fed President speaks (2020, 2022 voting rights)
March 7 (Saturday)
00:00 CAD Ivey PMI
01:20 USD Bullard – St. Louis Fed President speaks (2022 voting rights)
03:00 USD Baker Hughes Rig Count
05:00 USD Consumer Credit
05:30 USD George – Kansas City Fed President speaks (2022 voting rights)
March 8 (Sunday)
US Daylight Saving Time start
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