"Japan's central bank will monitor the developments of the situation with the utmost attention, guaranteeing the markets the necessary liquidity and ensuring stability with market operations and asset purchases". With these words, Haruhiko Kuroda, the governor of the BoJ, took the field this morning, thus starting the action of the central banks to counter the effects of the coronavirus. The move comes after a thrilling week in which all stock exchanges, starting with Wall Street, lost more than 11% under the pressure of the epidemic, which has now reached more than 60 countries.
Kuroda's words, followed by the purchase of bonds for 500 billion yen, equal to 4,7 billion dollars, had an immediate echo on the markets, also because they were in line with the promises of the Fed chairman, Jerome Powell, who had already declared on Friday evening, at the end of a nightmare day: "We will be able to intervene appropriately".
In Tokyo, where schools are closed indefinitely as of today, the Nikkei index is up 1,3%. Korea and Hong Kong rose by about one percentage point. The reaction of the Chinese Stock Exchanges was even more tonic: Shanghai and Shenzhen rose by 3%, reversing the negative start, in the wake of the negative data from the PMI indices, which signal a sudden slowdown in the manufacturing economy, even worse than forecasts. But this could translate into new stimuli. The shot in the arm was immediately extended to futures on the US markets (+0,9%) and those on the British Stock Exchange (up by 2,4%).
It is easy to predict a robust rebound for European opening-up, also driven by the extraordinary measures already anticipated by Italy: Economy Minister Roberto Gualtieri has already announced that he will ask Parliament to authorize recourse to a higher deficit of 3,6 billion EUR. A request that must go through the favorable vote of the Chambers, according to the provisions of article 81 of the Constitution.
NEW HISTORIC LOW FOR US BONDS
Pending the Federal Reserve's measures, the decline in US ten-year bond yields continues: 1,0347%, new all-time low, down by a further 11 points compared to Friday. Goldman Sachs expects a rate cut of at least a quarter of a point on March 18 followed, if necessary, by a second by June. The economists who sign the note believe that the Fed will move in concert with the other major central banks, in order to make shock therapy even more effective. Japan has already moved and on Wednesday the Central Bank of Canada could be the first to proceed down the path of massive cuts in the cost of borrowing.
Even Donald Trump, in the crosshairs of the democratic opposition also for the cuts in healthcare that weigh on the fight against the coronavirus, continues in the meantime to call for a robust cut in the cost of money. Meanwhile, Joe Biden, the most feared Democratic opponent, who won the primary in South Carolina, is back in the running. Thus the outcome of the "super Tuesday" is regaining interest: tomorrow, in fact, the primaries will be held in five states, one of the most important stages for choosing Trump's challenger.
The dollar-yen exchange rate rises again after last week's sharp declines. The Chinese yuan strengthened for the third consecutive day, at 6,97 against the dollar.
OIL LUMP IN SIGHT OF OPEC+
Gold bounces back above $1.600 an ounce after Friday's slide.
Sharp rebound in oil: Brent +3,8%, to 51,58 dollars, a few days after the OPEC+ meeting on Thursday and Friday. It will be an opportunity to agree on new cuts in production and thus curb the collapse in prices. A cut of one million barrels is under discussion, but there is disagreement on the distribution of the lower production.
EURO ON THE RISE: THE ECB IS STILL FOR NOW
The euro goes to 1 (+1054%). The ECB is not moving for now. Christine Lagarde dashed hopes for a Frankfurt intervention on Friday. Bundesbank President Jens Weidmann also said there is no need to take immediate monetary policy measures due to the coronavirus outbreak.
Today, however, new signals will arrive on the state of health, however shaky, of the economies. The impact of the coronavirus will be the focus of the OECD analysis. The PMI indices of Germany, France and the Eurozone will also be released. In the afternoon it will be up to US data.
On the subject of Italian public finances, the data on growth in 2019 is arriving today, together with the related public finance parameters, such as the deficit/GDP and debt/GDP ratio. Tomorrow Istat will release data on the labor market in January, while Friday will be the turn of those on retail trade. Finally, the final data on GDP for 2019 will arrive, expected to drop by 0,3%.
THE AGENDA: PIRELLI BOD, BANCO BPM BUSINESS PLAN
On the agenda of Piazza Affari, the meeting of the board of directors of Pirelli and that of Saras should be mentioned today.
Two key appointments during the week: the presentation tomorrow of Bpm's 2023 strategic plan and the presentation in Milan of the Luxottica/Essilor accounts a few days before the perhaps decisive confrontation between Leonardo Del Vecchio and the French shareholders.
The data on car registrations in Italy in February will also be released tonight.
