Can each country’s monetary and fiscal policies support the economy? “Attention points and event schedule for the week of March 16”
Last week saw a record drop in stock prices, making it a once-in-a-decade market worldwide.
It remains unclear how long the impact of COVID-19 (novel coronavirus) will continue, with no clear path ahead.
Even when bad things happen, if the worst-case scenario becomes visible, it is priced in and over, but the fact that the worst-case scenario is not yet visible and the end is not in sight is heightening anxiety.
Although stock prices rebounded over the weekend after President Trump’s speech, there is no clear outlook for next week at all.
◎ This Week’s Points of Focus
1) The Impact of COVID-19 (novel coronavirus)
This week as well, COVID-19 vs. national responses; which side will prevail is a focal point.
The United States declared a state of emergency over the weekend.
Policies such as waiving student loan interest and large-scale oil purchases and strategic stockpiling were announced, and travel from the UK and Ireland that had been exempted has now been banned.
In addition, existing funds totaling around 4.6 trillion yen have become available, urgent-response centers were established in all hospitals, and about 0.8 trillion yen in loans for small and medium-sized enterprises were announced as part of the measures.
Spain also declared a state of emergency; a sense of vigilance is spreading across Europe and the United States.
If the state of emergency continues to spread this week, risk-off is expected to advance.
Among world leaders, there are people suspected of infection.
If infections and affected regions continue to spread this week, diplomatic events and economic activities will be canceled, and the global economy will stagnate.
Whether economic measures can compensate for this, or whether there will be countermeasures to suppress COVID-19 (novel coronavirus), or medicines that can address it, until then risk-off is expected to persist.
2) Policy Rates
This week, policy rates from the FOMC, the Bank of Japan, the Swiss National Bank, and the Turkish Central Bank will be announced.
FOMC
The FOMC held an emergency meeting on the 3rd and implemented an emergency rate cut of 0.5%.
However, market reaction has been muted and stock prices have continued to fall.
The market is expecting further easing.
According to FedWatch, markets have priced in about an 80% chance of a 1% rate cut this week.
Whether this FOMC will cut by 0.75% or 1% appears certain to be a large cut.
In addition to rate cuts, attention is on additional easing and the resumption of QE.
The Fed has already announced that it will begin large-scale asset purchases: buying long-term government debt, initiating $60 billion of Treasuries purchases, and injecting $500 billion into short-term money markets.
It is expected that this could be QE-like; the exact stance is of interest.
Bank of Japan
The BOJ’s statement will come after the FOMC announcement.
With the FOMC’s announcement, attention shifts to how the BOJ will respond.
The ECB, which also implements negative rates, is holding rates and expanding easing measures.
Even if the BOJ expands easing measures, it has not yet exhausted the existing tools, so attention is likely to turn to whether it will implement changes such as YCC (yield curve control).
Swiss National Bank
Switzerland’s SNB has also implemented negative interest rates, with one of the widest negative-rate spreads among major economies.
However, at the latest ECB Council, the ECB has approached -0.5%.
EUR/CHF has fallen to 1.0550 francs, with franc strength advancing.
All eyes are on whether the SNB will widen its negative rate or take other measures.
Turkish Central Bank
The Turkish central bank has been in a tug-of-war between President Erdogan, who wants to cut rates for economic stimulus, and the central bank, which wants to raise rates to defend the currency.
However, amid COVID-19’s impact with many countries cutting rates, the expected approach of the Turkish central bank is a key focus.
3) Economic Indicators
Global risk-off sentiment is strong, and headlines related to COVID-19 and stock prices are influencing the market.
It is difficult for economic indicators to react promptly.
Nevertheless, negative data are likely to trigger swift responses.
Key items to watch include U.S. retail sales, Canada’s CPI, Canada’s retail sales, New Zealand quarterly GDP, Australia’s employment numbers and unemployment rate.
All except New Zealand have already announced rate cuts.
It is important to observe how COVID-19’s impact progresses.
4) Stock Prices
Last week saw a record stock market drop, with daily moves exceeding $1,000 up and down.
Negative news triggers steep declines, continuing a historically large drop.
If negative headlines persist this week, further declines are anticipated.
As noted above, it remains to be seen whether each country’s responses can halt the stock-price slide; market moves merit close attention.
By Sunday the 15th, the Dow was over $1,000 below the Friday close.
I expect an opening gap at the start of next week.
◎ This Week’s Event Schedule
March 16 (Monday)
Eurogroup meeting of EU finance ministers
G7 emergency summit (video conference)
11:00 CNY China Industrial Production
19:00 EUR Italy HICP (consumer price index)
March 17 (Tuesday)
09:30 AUDRBA Meeting Minutes
18:30 GBP UK unemployment rate and average earnings
19:00 EUR Germany ZEW economic sentiment
19:00 EUR Eurozone ZEW economic sentiment
21:30 USDU.S. Retail Sales
March 18 (Wednesday)
06:45 NZD NZ current account balance
08:50 JPY Japan trade balance
10:00 AUD RBA Assistant Governor Speech
19:00 EUR Eurozone HICP
21:30 USD U.S. housing starts
21:30 CADCanada CPI (consumer price index)
23:30 USD Crude oil inventories
March 19 (Thursday)
03:00 USDFOMC Policy Rate and statement release
03:30 USDPowell FOMC press conference
06:45 NZDNZ Quarterly GDP
08:30 JPY National CPI
09:30 AUDAustralia employment change and unemployment rate
Around 12:00 JPYBank of Japan Policy Meeting; Rate decision and statement release
15:30 JPYKuroda Bank of Japan Governor press conference
17:30 CHFSwiss National Bank (SNB) policy rate and statement release
20:00 TRYTurkey policy rate release
21:30 CADCanada retail sales
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