Market News & Analysis
What mattered last week and a preview of the week ahead
Tony Sycamore March 2, 2020 10:30 AM
What mattered last week:
- A week to forget for stock markets, suffering their largest weekly drop since the Global Financial Crisis (GFC) on fears the Covid-19 virus will become a global pandemic and derail economic growth.
- The catalyst being the spread of the virus outside of China in countries including South Korea, Italy, and Iran.
- Prompting expectations of Central bank interest rate cuts as early as this week from the RBA, Bank of Canada and possibly the Federal Reserve.
- This and flight to safety flows saw bond yields plunge, the yield on the 10-year Treasury note falling to 1.12%, the lowest level on record.
- Gold and silver fell as the sharp fall in stock markets, prompted traders to cut positions across the board.
- Although not as hard as crude 0il (-16%) which closed below $45.00 on concerns of plummeting demand.
- Locally, the ASX200 finished the week almost 10% lower near 6450 after making fresh all-time highs near 7200, just 10 days earlier.
- In FX, the AUDUSD fell over 2.5%, closing the week near .6500c, its lowest close since March 2009.
For the week ahead, the key events are:
Australia: Business inventories and company profits (Monday), building permits, current account, RBA interest rate meeting (Tuesday), GDP Q4 (Wednesday), balance of trade (Thursday).
- RBA Interest rate meeting (Tuesday): Soft economic data, combined with the threat to growth from Covid-19 have significantly increased the probability the RBA will cut interest rates this week by 25bp to 0.50%.
New Zealand: Terms of trade (Monday), global dairy auction (Tuesday), building permits (Wednesday).
China: Caixin manufacturing PMI (Monday), Caixin services PMI and composite PMI (Wednesday), balance of trade and foreign exchange reserves (Saturday).
- Caixin manufacturing PMI (Monday): Is expected to fall sharply due to the impact of the Covid-19 outbreak.
Japan: Consumer confidence (Tuesday), leading economic index (Friday).
U.S: ISM manufacturing PMI (Monday), employment (Friday).
- Employment (Friday): Non-Farm Payrolls are expected to have risen by 180,000 in February and the unemployment rate is expected to remain stable at 3.6%.
Canada: Markit manufacturing PMI (Tuesday), BoC interest rate decision (Thursday), employment (Friday)
- BoC interest rate decision (Thursday): We think the threat of Covid-19 to growth is likely to see the BoC cut rates by 25bps to 1.50% and leave the door open for a follow-up rate cut in April.
Euro Area: EA employment and inflation (Tuesday), German and EA retail sales (Wednesday), German factory orders (Friday).
UK: Construction PMI (Tuesday), new car sales (Thursday), Halifax house price index (Friday).
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