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* A look at the day ahead from EMEA deputy markets editor
Sujata
Rao. The views expressed are her own.
March 3 (Reuters) - The Reserve Bank of Australia kicked off
the new rate cutting cycle with a 50bp cut and left open the
possibility of more easing. Remember, at this time last week the
chances of an Aussie rate cut were at 10%. Malaysia too cut
rates to a 10-year low.
Just as swift has been the repricing of interest rate
expectations elsewhere - so much so that bets are on for a
coordinated Big Bang-type move of the kind last seen in 2011,
never mind that Reuters reported the draft G7 communique so far
excludes direct calls for new government spending or coordinated
central bank rate cuts. Instead it merely commits to work
together to mitigate the damage to economies from the epidemic.
G7 finance ministers and central bank governors will hold a
conference call at 1200 GMT on Tuesday, led by U.S. Treasury
Secretary Steven Mnuchin and Federal Reserve Chairman Jerome
Powell.
But the Reuters report on the communique has somewhat
dampened markets enthusiasm – the yen is back up today and gold
is down. The yield on the benchmark 10-year U.S. Treasury note
is up 4 bps this morning after hitting an all-time low of 1.03%
yesterday, while the 10-year German yield is flat after sliding
to a six-month low of -0.67%. Essentially the message to central
banks seems to be: deliver or else.
On the whole, hopes remain that stimulus of some kind is
still on the way, with markets still assigning 100 bps of cuts
in the United States (U.S. President Trump chipped in with a
demand for the Fed to "ease and cut rate big") and policy easing
of some kind in the euro zone, Japan and Britain. Canada is
expected to cut rates by a quarter point on Wednesday.
All that is helping European shares to open firmer following
a stonking close in New York on Monday -- the Dow Jones' 5% rise
means it recouped almost half what it lost last week and posted
its biggest one day gain since March 2009. But U.S. equity
futures are flat this morning.
Earlier in Asia, Shanghai shares rose around 0.7%, coming
off their highs after the Reuters report on the G7 while the
yuan retreated from 6-week highs. Japanese shares reversed
earlier gains as the yen firmed and investors got a reminder of
the growth risks that are underlying markets' paranoia - data
showed Japan's consumer confidence fell in February to the
weakest since October.
We get more data today, with flash inflation in the euro
zone the most closely watched after inflation expectations in
the bloc fell to record lows yesterday. The euro has pulled back
after surging yesterday to two month highs against the dollar,
while the greenback index is marginally firmer. The Aussie has
firmed despite the rate cut.
Finally, lets not forget it is 'Super Tuesday' today in the
Democratic primaries where one-third of delegates are in play to
nominate the candidate who will face off against Trump in
November.
Meanwhile the coronavirus continues to spread, with 3,000
deaths worldwide and cases in at least 60 countries. So it's
unsurprising that almost every single earnings update in Europe
mentions coronavirus and some warn it will impact 2020 results.
To mention just a few, Swiss computer mice and keyboards
maker Logitech and UK's Intertek warned of
supply problems from the coronavirus outbreak in China. Robert
Walters and Beiersdorf highlighted coronavirus
concerns, but were not precise about the impact from the virus.
Greggs shares for once could likely disappoint with muted
reaction after the British baker said it saw a significant
slowdown in February due to widespread storms.
Other potential moves: Wirecard negative
read-across from Visa warning; semis on watch after
Microchip Tech has withdrawn prior guidance; HelloFresh
seen jumping after it confirmed better-than-expected
2019 results and forecast strong growth in 2020.
In emerging markets, the main equity index gained nearly 1%.
All major Asian markets are up; Taiwan rose 1.4% lifted by
Apple supplier Foxconn which said it would resume normal
production in China by end March and that it saw no large impact
on production or supply chains.
China's finance ministry announced it would funnel some $15
billion towards preventing the further spread of the virus and
further reducing the tax burden on stricken enterprises.
Indonesian stocks jumped more than 3% in their biggest daily
gains in nearly three years.
But emerging currencies weakened against a tepid dollar,
with the yuan snapping a seven day winning streak and the
central bank guiding the midpoint lower for the second straight
day. South Africa’s rand and Turkey’s lira both weakened 0.6%.
(Reporting by Sujata Rao
Editing by Peter Graff)
