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What mattered last week and a preview of the week ahead

What mattered last week:

  • Another volatile week for stock markets as the Federal Reserve lowered rates by 50bp in response to the spread of the Covid-19 virus.
  • The Reserve Bank of Australia and the Bank of Canada cut interest rates by 25bp and 50bp respectively and left the door open for further monetary policy easings in the coming months.
  • While interest rate cuts provided some brief support to stock markets, the rapid rise of Covid-19 cases outside of China is scaring investors into safe-haven assets.
  • Witnessed most clearly by the yield on the U.S. 10-year Treasury note falling below 1% for the first time in history and touching a record low near 0.66%.
  • Gold rebounded strongly to make new cycle highs near US $1692.
  • Locally, the ASX200 finished the week almost 3.5% lower near 6200, almost 14% below recent highs.
  • In FX, the AUDUSD recovered lost ground to close back above .6600c. Support for the U.S. dollar has been undermined because the Federal Reserve has more room to cut interest rates than other central banks.

For the week ahead, the key events are:

Australia: NAB business confidence (Tuesday), Westpac consumer confidence and housing finance (Wednesday).

  • NAB business confidence (Tuesday): The spread of Covid19 has ensured a continuation of the negative news from late last year and this likely keeps business confidence in negative territory.

New Zealand: Business NZ PMI (Friday).

China: CPI (Tuesday).

Japan: Current account (Monday), machine tool orders (Tuesday), PPI (Thursday).

U.S: CPI (Wednesday), PPI (Thursday), Michigan consumer sentiment (Friday).

Canada: Housing starts, building permits (Monday), capacity utilization (Wednesday).

Euro Area: German balance of trade, current account and industrial production (Monday), EA industrial production and ECB interest rate meeting (Thursday).

  • ECB interest rate meeting (Thursday): The ECB is expected to announce further monetary easing to combat the impact of coronavirus – this may include another rate cut and/or expanding quantitative easing.

UK: Industrial production and GDP (Wednesday).

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