Daily market review

United States

Equities extended last week's rebound with government policy action in focus, including expectations for a fourth US stimulus package, and more hopeful news on drugs and other mitigation efforts. The Dow industrials rose 3.2 percent, the S&P 500 gained 3.4 percent, and the NASDAQ was up 3.6 percent.

Other economic stimulus measures helping Monday included China cutting its repo rate again, Japan planning a huge new stimulus package, and other Asian countries unveiling stimulus measures. In the US, House Speaker Nancy Pelosi said a new package was in the works, to include infrastructure spending.

Even as lockdowns aimed at limiting the pandemic are expected to hit the economy, markets judge that risk assets can only recover when infections have peaked. In this light, President Trump's decision to delay his call for resuming normal activity was taken as good news. Markets also saw hopeful signs in news from pharmaceutical companies on testing and medicines.

Among companies in focus, Abbott Laboratories rose 6.4 percent after the company debuted a fast coronavirus test that it said would soon be available widely. Johnson & Johnson rose 8 percent on news it would begin human trials of a COVID-19 vaccine in September. Gilead rose 4.2 percent after saying it will soon have results for its test of its antiviral Remdesivir. Meanwhile, Apple rose 2.9 percent on an upgrade from BankAmerica, despite reports of plunging iPhone orders. On the negative side, oil prices dropped again on signs of weak demand, and energy stocks lagged.

In economic news, Texas manufacturing activity went into a freefall in March, with the Dallas Fed's general business activity index falling 71.2 points to minus 70.0, sharply below the consensus as well as the range of forecasts.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil dropped US$2.20 to US$22.65, while gold fell $0.70 to US$1,621.90. The US dollar was higher against most major currencies. The US Treasury 30-year bond yield rose 6 basis points to 1.32 percent while the 10-year note yield was flat at 0.69 percent.


Signs that public health measures may be taking hold gave stocks a lift Monday. The Europe-wide STOXX 600 rose 1.3 percent, the German DAX rose 1.9 percent, the French CAC gained 0.6 percent, and the UK FTSE-100 was up 1.0 percent.

The market keyed on data suggesting a slowing in the rate of new fatalities in hard-hit areas such as Spain and Italy, even as new cases and deaths rose elsewhere. Lockdown restrictions and physical distancing measures appeared to be slowing the spread of the virus in the UK, officials said.

Leading gains were utilities, telecom, media, health care, and technology. While laggards included real estate, travel & leisure, retail, insurance, and financial services.

On the company news front, prominent companies warning on the impact of the virus included ABB, the Swiss equipment maker, down 1.3 percent, and Easyjet, down 7.2 percent after grounding its entire fleet. Commerzbank down 5.6 percent, Unicredit down 7.6 percent, and ABN Amro off 10 percent all suspended their dividends after an ECB order.

In economic data, Eurozone economic sentiment dropped to 94.5 in March, down a record 8.9 points versus its revised February reading to reach its weakest level since August 2013. Separately, the KOF's Swiss leading economic index fell sharply in March as the early effects of the coronavirus took their toll. At 92.9, down from a slightly firmer revised 101.8 in February, the indicator posted one of the weakest levels seen since the SNB pulled the plug on its exchange rate target back in January 2015.

Asia Pacific

Most major Asian markets closed lower Monday, following the lead set by Friday on Wall Street with news relating to the global coronavirus pandemic over the weekend generally weighing on investor sentiment. Singapore's STI index was the worst performer in the region, closing down 4.4 percent after officials eased monetary policy but warned that the domestic economy will experience recession this year. Japan's Nikkei and Topix indices both closed down 1.6 percent, Hong Kong's Hang Seng index fell 1.3 percent on the day and the Shanghai Composite index dropped 0.9 percent.

Australia's All Ordinaries index was the main exception to the regional trend, surging 6.6 percent on the day with major banks among the strongest performers. Much of these gains followed news on Monday that the Australian government will provide significant additional support to the domestic economy with a major new wage subsidy package worth around A$80 billion. The wage subsidy will be available for up to six months for around 6 million workers and be worth around 70 percent of the national median wage. This package follows other measures announced in recent weeks, with the cumulative total assistance from the government and the Reserve Bank of Australia now at A$190 billion, or just over 16 percent of Australia's GDP.

The Monetary Authority of Singapore published its semi-annual monetary policy statement Monday, announcing that officials will target a zero rate of appreciation for Singapore's nominal effective exchange rate. This exchange rate has already depreciated significantly since the start of the year in response to the global coronavirus outbreak and Monday's decision effectively locks in this weaker exchange rate and represents a significant loosening of monetary policy settings. Officials expect the pandemic will push Singapore's economy into recession this year, forecasting GDP to contract by between 1.0 percent and 4.0 percent in 2020, with both headline and underlying inflation expected to be between minus 1.0 percent and zero.

Looking ahead*

On Tuesday in Asia/Pacific, unemployment, industrial production, and retail sales are due from Japan as is the Chinese CFLP manufacturing PMI. In Europe, UK Nationwide HPI, UK GDP, Swiss adjusted real retail sales, French consumer manufactured goods spending, French CPI, French PPI, German unemployment, Eurozone HICP, and Italian CPI figures are scheduled. In North America, Canadian monthly GDP, US S&P Case-Shiller HPI, US consumer confidence, and Chicago PMI reports are on tap.

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