Morning Minutes 3/3/2020

Morning Minutes

Markets Fluctuate as Investors Digest Central Bank Responses To Coronavirus

March 2, 2020
8:45 am EST

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Coming off a big rebound Monday that saw the Dow Industrials stage their biggest one-day gain in over a decade (a gain of 1,293 points or 5.1%), world markets have been swinging back and forth overnight and into this morning.

Monday’s gains had partly been driven by speculation that governments and central banks were preparing to step up and support the world economy with monetary/economic stimulus. Overnight, markets rallied as the Reserve Bank of Australia delivered on stimulus, cutting its benchmark rate by 0.25% to a record low 0.50%. This morning, on the other hand, investors were underwhelmed by a statement from G-7 officials which stated that they are prepared to take action to combat the negative impact of coronavirus on economies, but since they did not announce any plans, actions or timelines, markets dropped back a bit.

Currently, US index futures are trading between flat and up 0.4%. Dow futures are up 22 points while S&P 500 futures are unchanged. Overseas, major European indices are in the green today with gains varying between 0.8% for Milan and 1.7% for Frankfurt. Asia-Pacific markets were mixed overnight. Sydney and Shanghai both gained about 0.7% on the RBA rate cut, while Hong Kong was flat and Tokyo fell 1.2%. Commodities have had a mixed response to overnight developments. WTI and Brent crude oil are both up about 2.3%, but copper is down 1.0%. Gold is trading back above $1,600/oz up 0.6% on the day. Bonds are down slightly with no signs of immediate stimulus outside of Australia.

Today is light for economic news but we could see positioning ahead of significant developments later in the week. Tomorrow the Bank of Canada is meeting. The street is currently expecting no change to the 1.75% benchmark rate, a stance which can be supported by yesterday’s Canadian Manufacturing PMI report (51.8 vs previous 50.6, which was also better than the US manufacturing PMI of 50.7). Wednesday also brings Service PMI reports from around the world plus the US ADP private sector payrolls report (street 170K vs previous 291K). US nonfarm payrolls and Canadian employment numbers are due on Friday.

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