The Insanity Continues: Futures Crash Limit Down, S&P Indicated 6% Lower

After surging 6% yesterday, with the Dow briefly rising more than 1,000 point, traders once again got a reminder of what record high VIX means when overnight futures crashed again - despite the Fed's launch of two Lehman-era crisis facilities, the PDCF and the CPFF - this time the selloff sparked by Mnuchin's dire warning that the unemployment rate could hit a depression-era 20% in the absence of government intervention - and again plunged limit down with the SPY ETF currently hinting at a -6% open.

Putting the latest market move in context... well, see for yourself:

  • March 12: Limit Down
  • March 13: Limit Up
  • March 16: Limit Down
  • March 17: Limit Up
  • March 18: limit Down

“A rise of 1,000 points in Dow is something you see only during a financial crisis. It is not a good sign,” said Tomoaki Shishido, senior fixed income strategist at Nomura Securities. “A rise of 100 points would be much better for the economy.”

“Another remarkable day in what is clearly fin-de-regime,” Rabobank’s global strategist Michael Every wrote. “Things have already irrevocably changed and whipsaw market action reflects that this is the case. The only issue is how much further they change from here, and hence where markets settle.”

With the market rejecting both the Trump admin's latest $1.3TN fiscal stimulus proposal and the Fed's panicked attempts to restore stability, there was no place to hide and European stocks (which at least were not halted) plunged alongside US futures: the Euro Stoxx 50 plunged -5.2%, Dax -4.6%, FTSE 100 -5.1% with industrial-goods and construction companies leading the decline and telecoms the only sector in the green. The Stoxx Europe 600 Index fell 4.6% as of 10:30am in London, reaching a new session low, as miners, constructors and industrial stocks drop more than 6%.

Asian stocks also plunged, led by energy and finance, after ending flat in the last session. Most markets in the region were down, with Australia's S&P/ASX 200 dropping 6.4% and South Korea's Kospi Index falling 4.9%, while Thailand's SET gained 0.2%. The Topix gained 0.2%, with Fuji Pharma and Fuso Pharma rising the most. The Shanghai Composite Index retreated 1.8%, with HNA Innovation and Shanghai Guangdian Electric Group posting the biggest slides.

Overnight, Britain launched a 330 billion pounds ($400 billion) rescue package for businesses threatened with collapse while France, which went into lockdown on Tuesday, is to pump 45 billion euros ($50 billion) of crisis measures into its economy to help companies and workers. 

Still, forecasters at banks are projecting a steep economic contraction in at least the second quarter as governments take draconian measures to combat the virus, shutting restaurants, closing schools and calling on people to stay home.

In rates, Treasury and European bond yields higher everywhere as markets price in the coming MMT "helicopter money" apocalypse, with the U.S 10-yr yield surging as much as +16bps at 1.23%, as the curve continues to steepen sharply; German yields jumped from +8bps to 19bps, and also steepened.

“While markets react to positive news on stimulus, that doesn’t last long. I think there are a lot of banks and investors whose balance sheet was badly hit and they still have lots of positions to sell,” said Shin-ichiro Kadota, senior currency and rates strategist at Barclays.

The planned U.S. stimulus could amount to as much as $1.3 trillion, meant to stave off the worst impact of a crisis that already looks set to plunge many of the world’s economies into recession. Meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. Those responses came after stresses appeared in the short-term funding markets.

“I don’t think we’re out of the woods yet in terms of liquidity,” Mark Konyn, chief investment officer at AIA Group in Hong Kong, told Bloomberg TV. “It’s a question of when the fiscal measures will have the most efficacy.”

In Europe, speculation grew around the issuance of joint euro zone “coronavirus” bonds or a European guarantee fund to help member states finance urgent health and economic policies. That lifted high-grade euro zone government bonds yield, led by Germany, where yields rose nine basis points to the highest level in over a month at -0.342%.

In Italy, bond yields exploded 53bps-48bps higher across the curve, with 10-yr yield highest since Dec. 2018 amid fears of a bond issuance spree coupled with concerns that the ECB is losing control of the bond market.

As Bloomberg put it "with about $1.14 trillion in fiscal support pledged or under consideration to offset the economic shock from the pandemic, investors are pricing in the risk of a surge in government borrowing." Another way of putting it is that helicopter money has always been the beginning of the end, as both stocks and bonds crater.  The Trump administration is moving toward a big fiscal package, while nations from the U.K. to France and Italy also unveiled plans to spend their way out of the crisis. Meanwhile, countries continue to ramp up measures to limit travel in a bid to contain the spreading virus.

“The missing fundamental ingredient for a sustainable recovery in risk appetite is some evidence that the growth of global Covid-19 infection rates is peaking,” said Paul O’Connor, head of multi-asset at Janus Henderson Investors. “Clearly, we are not there yet.”

In FX, the dollar surge is unstoppable and the Bloomberg USD index rose +0.5% to 1,2763 with G-10 gains led by JPY and CHF on haven demand, NZD and AUD the biggest laggards.

Traditional safe-haven assets such as gold were also under pressure as battered investors looked to unwind their damaged positions. Meanwhile, oil prices fell for a third session with U.S. crude futures tumbling to a 17-year low as Goldman cut its Brent price target to $20.

“Another remarkable day in what is clearly fin-de-regime,” Rabobank’s global strategist Michael Every wrote in a note.



Market Snapshot

  • S&P 500 futures down 3.7% to 2,403.50
  • STOXX Europe 600 down 2.7% to 283.30
  • MXAP down 2.5% to 127.34
  • MXAPJ down 3.9% to 410.50
  • Nikkei down 1.7% to 16,726.55
  • Topix up 0.2% to 1,270.84
  • Hang Seng Index down 4.2% to 22,291.82
  • Shanghai Composite down 1.8% to 2,728.76
  • Sensex down 4.4% to 29,238.22
  • Australia S&P/ASX 200 down 6.4% to 4,953.20
  • Kospi down 4.9% to 1,591.20
  • German 10Y yield rose 13.5 bps to -0.299%
  • Euro down 0.2% to $1.0981
  • Brent Futures down 1.5% to $28.30/bbl
  • Italian 10Y yield rose 18.8 bps to 2.175%
  • Spanish 10Y yield rose 16.4 bps to 1.197%
  • Brent Futures down 1.5% to $28.30/bbl
  • Gold spot down 1.9% to $1,499.03
  • U.S. Dollar Index up 0.1% to 99.69

Top Overnight News

  • The Trump administration is discussing a plan that could amount to as much as $1.2 trillion in spending -- including direct payments of $1,000 or more to Americans within two weeks -- to blunt some of the economic impact of the widening coronavirus outbreak
  • Leaders around the world escalated their efforts to limit travel and stop the virus’s spread. European countries agreed to shut their borders to foreigners and Prime Minister Scott Morrison told Australian citizens not to travel abroad
  • Angela Merkel wouldn’t rule out joint European Union debt issuance to help contain the impact of the coronavirus, an apparent softening of German opposition that could transform the finances of the 27-nation bloc
  • Oil briefly traded below its lowest settlement price in almost 17 years as the pandemic threatens to bring the global economy to a standstill
  • Japanese trade figures for February showed a continued slide in exports and a sharp plunge in Chinese imports as the virus outbreak slammed supply chains, choking off the flow of components feeding Japan’s factories and products for its stores
  • Joe Biden won the Democratic presidential primaries in Florida and Illinois Tuesday, as he looked to achieve amulti-state sweep that would give him a commanding lead over Bernie Sanders in the battle to secure the party’s presidential nomination
  • It is said that liquidity is a coward, it disappears at the first sign of trouble. What happened in Treasuries last week was one example of this, as problems in one small corner of the bond market helped spark a liquidity crisis in another that lead to a $5 trillion Federal Reserve promise to calm markets
  • Germany is standing by plans to invest record sums, even as the economic impact of coronavirus risks causing “considerable” disruption to the country’s budget prospects
  • The dramatic break below 60 U.S. cents for the Australian and New Zealand dollars is an ominous sign of deeper losses as two of the last major holdouts against quantitative easing race toward it.
  • Japan’s interest-rates swaps are seeing a mass exodus of foreign funds. The nation’s 30-year swap rate surged by more than 20 basis points, the most since 2008, on Wednesday, dramatically underperforming cash bonds.

Asian equity markets were indecisive as the region failed to sustain the rebound on Wall St from its worst sell-off since 1987, where sentiment was underpinned by efforts to address the coronavirus fallout including reports US plans stimulus of as much as USD 1.2tln consisting of a USD 300bln deferral in IRS payments and sending checks to citizens within 2 weeks, while the Fed also announced it will establish a commercial paper funding facility to support credit flow. ASX 200 (-6.4%) underperformed amid heavy losses in the tech and energy sectors, as well as a retreat in US equity futures after-hours which hit limit down, while Nikkei 225 (-1.6%) was initially positive following better than expected trade data despite Exports remaining at a contraction for the 15th consecutive month but the pared gains heading into the close. In terms of the notable stock movers, Fujifilm Holdings hit limit up after reports that China said the Co.’s influenza medicine was effective against coronavirus and are said to plan officially recommending the drug’s use for treatment, while SoftBank shares were at the other side of the spectrum on news it is backing away from part of the planned WeWork bailout. Hang Seng (-4.1%) and Shanghai Comp. (-1.8%) also conformed to the indecision and ahead of key earnings from Hong Kong heavyweight Tencent with broad selling later triggered after US equity futures hit limit down. Finally, 10yr JGBs declined as they tracked the recent losses in T-noted, and although prices initially rebounded off their lows after finding support at 152.00 and with the BoJ in the market for nearly JPY 1.2tln of JGBs heavily concentrated in 1yr-10yr maturities, this was short-lived and selling was then exacerbated on a break below the aforementioned support.

Top Asian News

  • China May Help Struggling Carmakers by Relaxing Emission Curbs
  • IndusInd Plunges by Record as Reassurances Fail to Calm Market
  • Wall Street’s New Virtual Workplace May Outlast the Virus
  • Japan’s Swap Rates Jump the Most Since 2008 as Funds Bail Out

Further detrimental losses seen in the European equity space [-5.9%] as optimism surrounding yesterday’s US intervention faded in overnight trade as virus fears continue to materialise, with Western countries’ operations coming to halt amid lockdown procedures in an attempt to slow the spread. Meanwhile, US equity futures have been locked in limit down since late-APAC trade following yesterday’s fleeting reprieve. Italy’s FTSE MIB (-2.5%) cushions some losses after Italy implemented a carpet ban on short-selling Italian stocks for three months. France’s CAC (-5.5%) fails to derive much support from its one-month short-sell ban. European sectors are mostly in the red, albeit defensives fare slightly better than cyclicals. Telecom names outperform drastically as consumers confined work-from-homes and self-quarantines exercise broadband use- with BT (+3.8%), Telecom Italia (+5.0%), and Orange (+5.1%) all benefitting as such. Energy meanwhile lags in the region, in-fitting with price action in the complex. Individual story-driven movers prove to be futile at this stage, although MTU Aero Engines (-17.9%), Rolls-Royce (-13.6%) experiences extra downside from broker downgrades.

Top European News

  • Italy’s Coronavirus Lockdown Came Only After a Tragic Denial
  • U.K. Grocers Ration Buying and Bulk Up Online to Deal With Virus
  • Europe Autos Fall as Feb. Sales Plunge Hints at FY Drop on Virus
  • Turkish Stocks Rise After Report of Erdogan Meeting With Bankers

In FX, demand for the Dollar is becoming insatiable and the scramble is stretching well beyond the realms of the currency markets, as stocks, bonds and commodities are dumped in near fire sale fashion. As a result, the index has posted a marginal new 2020 peak at 99.917 and it almost seems inevitable or destined to cross the 100.000 barrier at some stage.

  • NZD/CAD/AUD/GBP - The weakest G10 links and worst performers vs the Greenback as the funding and liquidity squeeze is compounded by renewed risk aversion, with the Kiwi now down under 0.5900, Loonie approaching 1.4350 and Aussie below 0.5950. Meanwhile, Sterling only gleaned brief support from the UK Government’s whopping additional coronavirus economic support package as Cable relinquished more big figures on the way through the psychological 1.2000 level, while Eur/Gbp has extended its rally beyond 0.9100 to circa 0.9175.
  • JPY/CHF/EUR - All displaying a degree of resilience and resistance to the general attraction of the Buck, but not impervious by any means with the Yen straddling 107.00, Franc pivoting 0.9600 and still wary of the SNB either sticking to its quarterly policy review timetable or deciding to strike early. On that note, the Euro has already digested the ECB’s latest policy measures and is now taking on board what EZ Governments have (left) to offer while keeping tabs on 1.1000.
  • SCANDI/EM - No surprise that the Scandinavian Crowns have fallen prey to the latest bout of risk aversion, while the Nok is also watching the steeper slide in crude prices anxiously along with the Mxn and Rub that has Brent weakness and spread to WTI convergence to contend with. However, some retracement in Eur/Nok after the Norges Bank more than trebled daily FX purchase on behalf of the Government and also noted that more oil revenue will have to be converted for financing anti-COVID-19 initiatives. Elsewhere, the Rand appears vulnerable to a test of 17.0000 ahead of SA retail sales data and post-CPI that was firmer than forecast, but not sufficient to alter consensus for a 50 bp SARB rate cut tomorrow. Sticking with Central Bank easing, not much respite for the Try from cheaper crude costs after the full point intermeeting CBRT move on Tuesday.
  • Norges Bank are to increase currency sales on behalf of the Norwegian Government; from NOK 500mln to an amount equivalent to NOK 1.6bln. (Newswires)

In commodities, WTI and Brent front-month futures continue to slide with both contracts bleeding below the USD 30/bbl mark – with the former declining below its YTD low of ~USD 27.40 and ts 2016 low of USD 26.06/bbl. Brent meanwhile sees its 2016 low of USD 27.10/bbl, having tested levels close to USD 28/bbl in early EU trade. Underlying themes remain unchanged, with the demand picture further deteriorates as the number of countries implementing lockdowns stack up in a bid to slow down virus contagion. Elsewhere, the breakdown amongst OPEC members provides further pressure for the complex, with ING expecting weak oil prices for a prolonged time as Saudi and Russia do not show signs of backing away from production hikes. Elsewhere, spot gold meanders around the USD 1500/oz mark as it clocks in losses of over USD 30/oz amid the ongoing liquidating issues. Finally, copper prices see further detrimental losses amid demand concerns, a firmer Buck, traders on the sidelines and the overall sentiment, with the red metal approaching USD 2/lb vs. Monday’s USD 2.52/lb high.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 55.4%
  • 8:30am: Housing Starts, est. 1.5m, prior 1.57m; Housing Starts MoM, est. -4.28%, prior -3.6%
  • 8:30am: Building Permits, est. 1.5m, prior 1.55m; Building Permits MoM, est. -3.23%, prior 9.2%

DB's Jim Reid concludes the overnight wrap

As Prime Minister Boris Johnson said yesterday, “We must act like any wartime government and do whatever it takes to support our economy”. As more and more Governments use the war footing analogy, yesterday we published a short note looking at deficits in war time through history. During times of war over the last 200-300 years (there have been more than you’d think) annual deficits in the US and UK grew to over 10%. In WWI and WWII they were often 20% plus. If shutdowns of major economies continue for as long as is starting to be feared then governments are going to see deficits of war time magnitude due to fiscal injections, automatic stabilisers and loss of revenues. We would expect that the only way of calming people and markets around this would be for pure helicopter money where central bank’s balance sheets balloon to absorb the increased debt. This was always going to happen in the years ahead for reasons we’ve discussed in recent years but this crisis will likely accelerate this. See the full report here.

Indeed it was a day of helicopter hints with Trump’s administration wanting to give citizens $1000 (more below) and Mrs Merkel suggesting European finance ministers are considering joint debt issuance - something Germany has been perennially resistant to. One would imagine the ECB would be only too happy to buy such bonds. There’s no further news so far but it looks like we’re heading for the printing presses and looking for potential pilots. If you’re looking to be really positive longer-term then maybe this crisis brings European integration sooner than anyone could have imagined. A long way off for now but it’s easy to see how this virus will be an era defining moment for many things.

Indeed longer-term there’s part of us that wonders whether all these operations and eventual helicopter money will be inflationary when the dust settles. That’s another story for another day but the authorities have got the perfect excuse to try to create it as they’ll hardly be blamed for doing too much to help people over the duration of this crisis. As we discussed yesterday all moral hazard concerns will be firmly set aside due to the circumstances.

Back to the US and in terms of what we heard yesterday, the White House originally planned to push an $850bn stimulus package, but by the end of the day Treasury Secretary Mnuchin was discussing a plan worth up to $1.2tn. The biggest and potentially quickest form of stimulus would come from sending checks in excess of $1000 directly to people, with a potential overall cost of over $500bn in total. The checks, amounting to helicopter money, would see $250bn sent by the end of April, with a second wave of $250bn a month later if the national emergency order is not lifted. The secretary noted that they wanted to target the checks to those that needed them, but also stressed urgency. The proposed legislation also includes $300bn of provisions for small business loans, $200bn in stabilization funds, and tax deferrals for individuals and corporates making up the rest of the $1.2tn price tag. It should be noted this is an additional stimulus bill on top of the House approved one that made its way to the Senate yesterday. Mnuchin also warned that the US unemployment rate could hit 20% without the virus stimulus bill.

Speaking of stimulus, Japan’s government is considering a cash handout of at least JPY 12,000 ($112) per person. As a reminder, a similar handout was given during the financial crisis by the Japanese government. Meanwhile, Bloomberg is reporting that Canada will today unveil a package of c.CAD 30bn (about 1% of GDP). Canada’s PM Trudeau has said that the fiscal stimulus program will likely inject cash into businesses to keep employees on the payroll even if they aren’t working, as well as bolstering government benefits and unemployment programs. Meanwhile, to arrest the continued decline in stock prices Italy’s market watchdog banned short selling on all Milan stock markets for 3 months while regulators in Belgium banned short selling on Euronext Brussels until April 17. The measure is only applicable to companies listed on Euronext Brussels and Euronext Growth. South Korea has also eased the cap on banks’ FX forward positions by 25% beginning March 19 as part of measures to expand foreign currency liquidity and ease the demand and supply imbalance in the local swap market.

Despite the various announcements, futures on the S&P 500 are again trading down -3.70% this morning. Asian equity markets are a bit more mixed with the Nikkei (+0.97%) and Shanghai Comp (0.69%) up while the Hang Seng (-0.42%) and Kospi (-1.52%) are down. The US dollar index is trading down -0.30% overnight after yesterdays +1.54% advance while, yields on 10y USTs are down -8.1bps to 0.997%. Elsewhere, Brent crude oil prices are up +1.08% this morning to $29.04. Earlier this morning WTI oil prices had traded at $26.20 (-2.8%), the lowest since May 2003 but have recovered since then to trade flat at 26.96.

As the virus continues to spread, the New York Times has reported overnight that the pandemic could last 18 months or longer citing a federal government document laying out options for countering the coronavirus. The plan, dated Friday, said there could be “multiple waves” during the outbreak and could cause widespread shortages. The newspaper cited the document saying that one option for President Donald Trump to deal with shortages would be to invoke the Defense Production Act of 1950, which allows the White House to force US companies to boost production of critical supplies and equipment..

On the monetary policy side of the equation, liquidity concerns have been mounting on an almost exponential curve lately and a big focus in recent days was the rapid rise of yields on commercial paper – the instruments typically used to meet near-term operational needs of companies. The Fed moved to alleviate strain in the c. $1.1tn market by announcing the establishment a Commercial Paper Funding Facility (CPFF). If that sounds familiar then it’s because the Fed did something similar in 2008. In a statement the Fed announced that the Treasury will provide $10bn of credit protection to the Fed in connection with CPFF from the Treasury’s ESF. The Federal Reserve will then provide financing to the SPV under the CPFF. Its loans will be secured by all of the assets of the SPV. Pricing is based on 3-month OIS plus 200bps, which compares to 100bps in 2008 but also with a 100bp fee for credit enhancement surcharge.

Secretary Mnuchin added that “we have the ability to have the Fed purchase up to $1tn of commercial paper as need”. It’s worth noting that in 2008 the facility topped out at around $350bn however the CP market was almost twice as big then as it is now for context. While the facility’s pricing appears less generous than it was in 2008 – clearly the Fed isn’t today targeting ultra-cheap funding - the fact that the Fed has moved to provide a backstop and provide a means of liquidity for short-term funding again is a step in the right direction. The coming days will be important in that sense. On a related note yesterday Craig published a note looking at the recent underperformance of very short dated USG IG bonds (maturing in 12 months or less). This $500bn market has been the weakest relative part of the IG market which goes to show the liquidity concerns the market has. The note has a full breakdown of debt due in the next 12 months by sector and the largest issuers, and highlights the most significant price drops in the last 10 days. For more, see Craig’s note linked here.

After the bell the Fed also relaunched the 2008 Primary Dealer Credit Facility (PDCF) which will offer overnight and term funding with maturities up to 90 days and will be available from the end of this week. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds, and a broad range of equity securities. The interest rate charged will be the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

Back to markets. Credit spreads continued to widen both here in Europe and in the US yesterday though but these interventions started to bring in some stabilisation and will help create a bit more pricing tension going forward. In Europe HY cash spreads were +42bps wider, while IG spreads widened +12 bps, while in the US HY spreads increased to 841bps widening +3bps and IG widened +17bps to 272bps. We’re now getting pretty close to what we thought were pretty aggressive bearish targets in IG. HY still has at least a couple of hundred basis points to go and will be much more about the economy and fund outflows than facilities the Fed can put in place.

And it wasn’t just the Fed announcing measures yesterday, with the global flow of monetary stimulus continuing. These included the Turkish central bank cutting rates by 100bps to 9.75%, Pakistan cutting by 75bps to 12.5%, Morocco cutting 25bps to 2%, Tunisia cutting 100bps to 6.75% and Poland cutting 50bps to 1%. Also the BoE announced that like the Fed, they would be buying commercial paper up to one-year in maturity issued by those firms that are making “material contribution to the U.K. economy”. This will be called the Covid Corporate Financing Facility.

In terms of new virus cases, in today’s pdf version of this note we show how there are tentative signs that case growth in Italy, France and Spain are slowing. This should be as expected given the extreme measures put in place. They’ll need to be there for much longer if they want to continue to reduce this but progress is being made and we’ll publish the table and graphs (data up to 5am) daily.

Positive newsflow and increasing hopes of a fiscal policy response supported a rebound in global markets yesterday, with the S&P 500 rising through the session to close up +6.00%, while the VIX index came down from its record high the previous day (when it rose above even its 2008 levels) to fall back -6.8pts to 75.9pts. In spite of the optimism pervading markets again yesterday, we shouldn’t get too ahead of ourselves, as the S&P was coming off its worst day since 1987, and the index is still down -25.31% from its peak just under a month ago. In Europe the STOXX 600 recovered from its earlier losses to close up +2.26%, which still leaves the index down by -32.92% since its peak on February 19th. However, the STOXX 600 Travel and Leisure index saw another day of falls in spite of the rebound elsewhere, closing down a further -5.41% after closing lower in 18 of the last 19 trading sessions. Airlines are continuing to struggle, with the Dow Jones index (+5.20%) lagging the S&P 500 and the NASDAQ yesterday thanks to Boeing’s poor performance, falling -4.22% (though up from its stunning intraday low of -21.86%). The best performing sectors were the defensive utilities and consumer staples companies as well as high growth semiconductors, all up near or over 9%. The worst performers were the consumer services industry (including hotels and restaurants) and autos just like in Europe.

Sovereign bonds continued to sell off, particularly in Europe, where peripheral spreads widened further yesterday. Fiscal concerns are slowly starting to come into pricing for strong and weaker countries alike. The spread of Italian 10yr yields over bunds were up a further +16.2bps to 279bps, their highest level since last June. Notably the issue wasn’t just confined to Italy, with both the 10yr Spanish and even French spread over bunds both reaching their widest level since April 2017. So certainly a sign of stresses in sovereign bond markets and perhaps reflecting the continued fallout from ECB President Lagarde’s remarks last week that “we are not here to close spreads.” German 10yr bund yields rose for the 6th straight day, up +3bps to -0.43%. In the US, we saw sovereigns sell off rapidly as the promise of increasing stimulus came through. The 10yr Treasury yield rose +36.0 bps to raise the benchmark yield over 1%, while 30yr Treasuries rose +40.0bps to 1.68%

The positive risk newsflow didn’t provide much help to commodities though, where Brent Crude closed -4.39% to $28.73. Silver (-2.29%) fell to its lowest level since May 2009 after an 8th consecutive decline, though gold did manage to snap a run of 5 successive declines to gain +0.94%.

Here in the UK, Chancellor Sunak announced £330bn of government-backed loans to keep business afloat through this virus-borne crisis. He promised to go further if more support is needed and reiterated the familiar refrain of doing “whatever it takes.” The £330bn of government-backed loans would amount to 15% of the UK’s GDP. The Chancellor also announced 20bn of tax cuts and grants for businesses, and a new lending facility that was agreed to with the BoE to increase the availability of low-cost commercial paper as we mentioned above. Shops and restaurants will not have to pay business rates this year, and mortgage lenders will now give a three month payment holiday to all borrowers affected by the virus.

Amidst the coronavirus situation, we also found out yesterday that the Brexit talks scheduled for today between the UK and the EU on their future relationship have been delayed. We also got a potentially interesting development on the Brexit transition from the Daily Telegraph’s Europe Editor, Peter Foster, who tweeted yesterday that there was “now top-level acceptance that UK WILL seek extension”. The government up to now have insisted they won’t extend the Brexit transition beyond the end of 2020, but under the Withdrawal Agreement they have until the end of June to decide on whether to go for an extension. The news was little respite for sterling, which fell for a 6th consecutive session against the US dollar, the first time that’s happened since May.

Somewhat down the headlines this morning, but the results from the Democratic primaries saw Joe Biden continue to pull away from the Senator Bernie Sanders. The former Vice President won in Florida, Arizona and Illinois early in the night, and it would seem like the math going forward means that there is not a path for the Vermont Senator. With Covid-19 spreading through the US and delaying primaries, including the Ohio primary that was supposed to be held tonight, there is a chance that Sanders will drop out. If Sanders does not drop out, it is most likely not to try and comeback, but rather to continue pulling Joe Biden further to the left ahead of the general election.

Wrapping up with the data, and in a sign that the virus is already wreaking economic havoc, the German ZEW survey saw the expectations reading falling to -49.5 in March (vs. -30.0 expected), which is the weakest reading since December 2011. Meanwhile the current situation reading also fell to -43.1, the lowest reading since March 2010. Over in the US, the data was from February, though retail sales that month unexpectedly fell by -0.5% (vs. +0.2% expected) in the biggest monthly fall since December 2018, while the retail sales ex auto and gas reading was down -0.2% (vs. +0.3% expected). Industrial production was up by +0.6% however (vs. +0.4% expected), while the number of job openings in January rebounded to 6.963m (vs. 6.4m expected). Finally for completion, the UK unemployment rate in the 3 months to January rose a tenth to 3.9% (vs. 3.8% expected).

To the day ahead now, and data releases include the final CPI and core CPI readings for the Euro Area in February, along with January’s trade balance. Meanwhile from Italy we’ll get January’s industrial sales and industrial orders, before the US reports February’s housing starts and building permits, weekly MBA mortgage applications, and we also get Canada’s CPI reading for February. Finally tonight, there’ll be a decision from the Brazilian central bank.