Markets Roundup
The market mood is mixed with stocks stabilizing after Tuesday's decline, while the dollar is marginally lower against most currencies with the exception of the New Zealand dollar, that suffered from a dovish rate decision. Jerome Powell, Chairman of the Federal Reserve, stands out.
Risk-off: The US Senate is advancing a bill to punish China over coronavirus. Lindsey Graham, a Republican Senator, accused China of deception over the virus. The world's largest economies are at loggerheads. The US warning: Another adverse factor is the warning by Dr. Anthony Fauci. The White House's medic warned of many deaths and sufferings if the US economy opens early. The University of Washington foresees 147,000 US coronavirus deaths by August. It currently stands at around 80,000.
Hope? On the other hand, Gilead Sciences announced it will ramp up production of Remdesivir, a drug that has shown to help COVID-19 patients. Two Japanese drugs, Avigan and Camostat, are also eyed.
Powell: The Fed Chair will speak ahead of the US market open and will likely comment on negative rates – prospect markets priced last week and that President Donald Trump wants. So far, officials have rejected the idea that has been controversial in Japan and in the eurozone. He may also comment on falling US inflation. Other topics include potentially more monetary and fiscal support to the economy. Reiterating his commitment to do whatever is needed could boost stocks and weigh on the dollar.
Fears of second waves: Shulan, a city in China's northern Jilin province has declared a wartime control mode amid a cluster of new cases. In Germany, the virus' Reproduction rate (R) dipped below 1, an encouraging sign, but it is stubbornly high in several regions, prompting speculation of reimposing lockdowns.
The New Zealand dollar has been hit hard by the Reserve Bank of New Zealand's decision to expand its bond-buying scheme, a move that surprised markets.GBP/USD is trying to recover after a slide below 1.23 on Tuesday. The government wants to restart the real-estate market and considers new taxes to fill its dwindling coffers, after extending its furlough program – supporting people who are unable to work. The deficit is set to leap to £337 billion this year. GDP figures for the first quarter are set to show the worst contraction since the financial crisis.
Eurozone: Industrial output figures and further coronavirus statistics are eyed to see if the recent baby steps to lift lockdowns have triggered an increase in the infections. EUR/USD remains stable.
Cryptocurrencies have been moving higher, with Bitcoin hovering around $9,000 as analysts digest the results of the Bitcoin halving.
India: A 20 lakh crore stimulus from the government which accounts for 10% of the GDP and the fourth largest in the world. While PM Modi did not provide any specific details about the relief package, he said the stimulus plan includes announcements already made by the government and the Reserve Bank of India. Going by that, the government has already announced a 1.7-trln-rupee package for the poor late in March, and the Reserve Bank of India has infused massive amounts of liquidity in the banking system to cushion the blow to the economy due to nationwide lockdown that started on Mar 25. Currency dealers were sceptical about the quantum of the relief plan, and that the steps taken by the RBI and the Centre so far may have accounted for as much as half of the 20-trln-rupee package already. Finance Minister Nirmala Sitharaman will announce details of the economic package from today.