24
Mar
24
Mar

Stimulus Measures Announced in Germany, Discussions in the US

The US dollar traded overall somewhat lower against other major currencies as the Federal Reserve announced a further QE measure by now buying corporate debt titles on the secondary markets. Many emerging market currencies like the Mexican peso (MXN) or the South African rand (ZAR) traded somewhat stronger by Tuesday morning after further depreciating on Monday despite the move from the Fed. For South Africa the global economic slowdown could not be the only factor affecting its currency in the next days. Moody’s is set to announce its rating decision on Friday, with some analysts fearing that this might spell an end to an investment grade rating for the country. 

Not only equities were on the rise on Monday – a sizable recovery was also seen in cryptocurrency markets with Bitcoin gaining nine percent over the course of 24 hours by Tuesday morning. This would also bring the weekly performance up by more than a quarter of its value following the dip at the time when most markets were crashing.

On Tuesday Service and Manufacturing PMI numbers will be released for Germany and the EU. In the UK results of the CBI Industrial Trends Survey will be published. Later from the US data on stores sales, new home sales and crude oil stockpiles can be expected. Further actions from central banks and governments around the world could be expected as both are trying to limit the fallout from the pandemic. On Tuesday the Hungarian central bank will meet to discuss its monetary policy, with analysts unsure whether a rate cut will be announced or a bond purchase program can be expected.

 

Gold

Gold and silver prices jumped higher on Monday, breaking for now with the negative trend from the onset of the bear-market earlier this month. Palladium prices also managed to recover, remaining now clearly above the price of gold. Analysts saw the new purchase program of the Federal Reserve as one driver for higher prices of precious metals.

With the yield on 10-year US Treasury Notes remaining around 0.8% and the dollar weakening against other major currencies, in theory could have helped push the price of the precious metal higher. Low yields on alternative assets seen to be safe reduce the opportunity cost of holding gold, which does not bear any interest.

The Gold chart

Germany 30

The German stock market index pushed higher on Monday, extending gains in the early trading session on Tuesday as was seen also in many other equity markets. Besides the global sentiment in the market, the announcement of a 750 billion euro stimulus bill by the German government could have alleviated concerns from both public and companies about the fallout from the pandemic. With this measure the government gives up as expected on its strict goals of a balanced budget and expects to add a significant amount of debt this year.

By Tuesday morning with the markets opening most major stocks traded with a significant upside. Infineon and ThyssenKrupp even scored double-digit percentage gains compared to the close on the previous day.

The Germany 30 chart

WTI Oil

After oil prices opened on Monday close to the low of last week, they managed to stabilize somewhat higher, while a barrel of WTI crude oil remained to be prices clearly below $25 for the May contract. Meanwhile gasoline futures further declined to the lowest levels seen since 2001 as the increasingly strict lockdown measures could lead to a further demand shock.

Besides the Coronavirus affecting the demand side, the break-down of OPEC+ at the beginning of the month with Saudi Arabia and Russia disagreeing on production quotas and subsequent announcements to flood the markets with cheap oil at discount prices at the same time affected the supply. This goes as far as some analysts suggesting that in theory negative oil prices could be seen in the markets for some time as oil storage capacity is rapidly being filled up.

On Tuesday the American Petroleum Institute (API) publishes its weekly crude oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday with data on crude oil, gasoline and distillate inventories.

The WTI Oil chart

US 500

After stock markets opened lower from the weekend, a moderate recovery took place over the course of the day, with some upside being attributed to the open-ended program where the Federal Reserve will purchase now also corporate bonds in an “open ended” program, while Democrats and Republicans are still discussing details over a stimulus plan.

Generally technology shares as in the US Tech 100 index fared better than many other sectors as was seen for example by comparing the performance of the tech index to the US 500, which traded significantly lower during regular trading hours.

Classic industry level shares were on the other hand still under severe pressure such a Ford (-7.02%), whose shares traded at the lowest level since the global financial crisis in 2009.  One factor that could have moves Ford’s stock price was the announcement by Fitch Ratings to cut its creditworthiness rating to BBB- with concerns that the pandemic will affect not only production but also the overall supply chain and demand as even Federal Reserve officials warned earlier of a severe economic contraction in the next quarter together with unemployment well in the double-digit percentage.

On Thursday the weekly Redbook Store Sales statistic will be published as well as the Richmond Fed Manufacturing Index.

The US 500 chart

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