Headlines Do Not Wipe Out Market Caution

Global Economy

BBVA Research / Stocks reversed yesterday’s gains with the technological sector underperforming as investors weighed the fall in coronavirus cases, after China changed once again its counting methodology to report infections. Additionally, both Iran and South Korea announced their first fatalities from the epidemic, while two more deaths were confirmed in Japan, raising investors’ concerns. Nonetheless, Asian equities remained resilient following the PBoC decision to reduce its benchmark prime lending rate to boost its economy.

Regarding policy meetings , the latest FOMC minutes did not bring any more material to the table, as Fed officials reiterated that interest rates are unlikely to be moved this year and that the U. S. economy is in a good place despite increasing global risks. Later today, the ECB released the outcome from January’s meeting, trumpeting optimism across the market in order to assess the environment now that the virus epidemic is showing a downward growth trend.

Mixed data in the U. S. and the Eurozone, while positive in China. Philadelphia Fed Business Outlook rose unexpectedly in February ( 36.7 % MoM ; Cons : 11.0 % MoM ; Prev : 17. 0 % MoM) highlighting the strength in the U. S. manufacturing sector, whereas continuing claims showed a marginal increase above market expectations. In the Eurozone, advanced consumer confidence rose to – 6.6 in February (Cons : – 8.2; Prev :     -8.1). Germany consumer confidence index slightly decreased in March, in line with consensus ( 9. 8 ; Prev : 9. 9), while annual producer price index soared in January ( 0,2 % YoY ; Cons : – 0.4 % YoY ; Prev : – 0. 2 % YoY), the first annual increase since August last year. Separately, China’s new money supply soared in January ( 3340.0b ; Cons : 3100.0b; Prev: 1140.0b) underpinned by the implementation of recent fiscal policy measures to boost the economy, while M 2 money supply rose to 8.4 % YoY in January slightly below an 8.7 % YoY rise in December ( 8 . 6 % MoM).

Sovereign bond yields dipped across the board due to investors’ remaining concerns about the potential scope of the coronavirus outbreak . The 10Y UST yield outperformed its core peers thanks to its safe – haven nature, rather than solid U. S. business outlook data. In Europe, core bonds trailed the periphery, where both Italian and Spanish bonds led the way over peers following the oversubscription rate at the 10Y Spanish debt auction. In this context, expectations of a further ECB rate cut by the end of 2020 hovered around 60%.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.