Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 3 Apr 2020, 8:59 AM

 

Wall Street Breakfast: Easing Heard Around The World

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As the number of confirmed coronavirus cases and deaths in Europe surpassed China on Wednesday, the ECB launched a €750B bond-buying program to stop a pandemic-induced financial rout shredding the eurozone's economy. The new policy brings this year's planned purchases to €1.1T, with the new round alone worth 6% of the bloc's GDP. Eurozone government bonds surged after the decision, with 10-year Italian bond yields dropping as much as 90 bps to 1.40%. Spanish and Portuguese 10-year bond yields slid around 30 bps each, while benchmark 10-year German Bund yields were down 12 bps at 0.35%.

It's not just the eurozone

Australia cut rates for the second time in a month (to an all-time low of 0.25%) and made a historic foray into quantitative easing. "We are clearly living in extraordinary and challenging times," RBA Governor Philip Lowe declared, adding the situation was "just too fluid" to provide an updated set of economic forecasts. The Bank of Japan followed up on the move by offering to buy as much as ¥1.3T ($12B) of its government bonds and supply another ¥4T of funds. "Markets are screaming for more, more and more," said George Boubouras of K2 Asset Management. "It's not enough. Fiscal policy needs to step up - the BOJ, ECB, RBA can't do everything."
 

Rush for cash

Investors in the U.S. sold nearly everything they could on Wednesday despite President Trump signing a $100B coronavirus relief bill and Congress turning its focus to broader economic stimulus. Stock index futures wavered between gains and losses overnight, while crude posted a big rebound as WTI futures soared 13% to $23.53/bbl. Weekly jobless claims will also be on investors' radars this morning (figures will be released at 8:30 a.m. ET), as well as the weeks ahead to gauge the depth of nationwide layoffs.
 

Need for liquidity

Another Fed bullet yesterday promised a liquidity facility for money market mutual funds, marking the second program in two days to use a $10B backstop from the Treasury Department’s Exchange Stabilization Fund. It's a repeat from the 2008-era playbook, offering loans to financial institutions for use in buying assets from prime money market funds, which themselves purchase non-Treasury debt. According to the Fed, the "MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy."

First case at U.S. Amazon warehouse

An employee working at one of Amazon's (NASDAQ:AMZN) shipping facilities in New York has contracted COVID-19, the first infection reported in a U.S. delivery network that's become a lifeline for consumers sheltering at home. "In addition to our enhanced daily deep cleaning, we've temporarily closed the Queens delivery station for additional sanitation and have sent associates home with full pay," said spokeswoman Rena Lunak. In related news, Amazon-owned Whole Foods Market is joining a growing rank of grocers in setting aside a special time for seniors to shop to minimize exposure to the virus.

ZOOM tops the charts

"ZOOM Cloud Meetings" topped the free charts yesterday across the Apple (NASDAQ:AAPL) and Google (GOOG, GOOGL) mobile app stores in the U.S., ahead of Facebook's (NASDAQ:FB) Messenger, Netflix (NASDAQ:NFLX) and TikTok. In fact, Zoom (NASDAQ:ZM) is one of the few technology stocks that investors have supported in the past few months, with shares climbing another 7% on Wednesday to $118.71 (up 73% YTD). In addition to beefing up its data centers, the company has also been raising its capacity with its two cloud infrastructure providers, AWS (AMZN) and Microsoft Azure (NASDAQ:MSFT).

'Arsenal of democracy'

Less than a day after the Detroit Three and the UAW union agreed to keep plants running with reduced shifts and staffing, the automakers said they would close their U.S. facilities to stop the spread of coronavirus. Despite shuttered production lines, GM (NYSE:GM) and Ford (NYSE:F) are in talks with the White House about how they could make ventilators and other medical gear to help fight the current pandemic. During WWII, automakers retooled their factories to build tanks, planes and other military equipment supporting the war effort, earning Detroit the nickname "arsenal of democracy."
 

E-trading

The New York Stock Exchange (NYSE:ICE) will temporarily close its trading floors and move fully to electronic trading from Monday after an employee and a trader were tested positive for COVID-19. "While we are taking the precautionary step of closing the trading floors, we continue to firmly believe the markets should remain open and accessible to investors," said NYSE President Stacey Cunningham. "All NYSE markets will continue to operate under normal trading hours despite the closure of the trading floors."

Bank closures begin

JPMorgan (NYSE:JPM) is the first of the U.S. megabanks to announce broad closures of branches because of the coronavirus. It's temporarily shuttering about 20%, or 1,000 branches, to protect employees, as well as deal with the escalating health crisis. Wells Fargo (NYSE:WFC) is meanwhile keeping the "vast majority" of branches open and operating normally, but is "implementing an enhanced cleaning program in all properties."

How much debt can the U.S. bear?

"We have to deal with debt and deficits at some point down the road, but during crises or wars, you have got to sort of not worry about borrowing," White House economic adviser Lawrence Kudlow told Fox News. What is unusual about this moment is that the debt was already so high before the current crisis, standing at $23.5T. Most analysts now see this fiscal year's deficit soaring well past the record $1.5T hit in 2009, with estimates ranging from $1.7T-$2.1T.

It's not just the eurozone

Australia cut rates for the second time in a month (to an all-time low of 0.25%) and made a historic foray into quantitative easing. "We are clearly living in extraordinary and challenging times," RBA Governor Philip Lowe declared, adding the situation was "just too fluid" to provide an updated set of economic forecasts. The Bank of Japan followed up on the move by offering to buy as much as ¥1.3T ($12B) of its government bonds and supply another ¥4T of funds. "Markets are screaming for more, more and more," said George Boubouras of K2 Asset Management. "It's not enough. Fiscal policy needs to step up - the BOJ, ECB, RBA can't do everything."
 

Rush for cash

Investors in the U.S. sold nearly everything they could on Wednesday despite President Trump signing a $100B coronavirus relief bill and Congress turning its focus to broader economic stimulus. Stock index futures wavered between gains and losses overnight, while crude posted a big rebound as WTI futures soared 13% to $23.53/bbl. Weekly jobless claims will also be on investors' radars this morning (figures will be released at 8:30 a.m. ET), as well as the weeks ahead to gauge the depth of nationwide layoffs.
 

Need for liquidity

Another Fed bullet yesterday promised a liquidity facility for money market mutual funds, marking the second program in two days to use a $10B backstop from the Treasury Department’s Exchange Stabilization Fund. It's a repeat from the 2008-era playbook, offering loans to financial institutions for use in buying assets from prime money market funds, which themselves purchase non-Treasury debt. According to the Fed, the "MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy."

First case at U.S. Amazon warehouse

An employee working at one of Amazon's (NASDAQ:AMZN) shipping facilities in New York has contracted COVID-19, the first infection reported in a U.S. delivery network that's become a lifeline for consumers sheltering at home. "In addition to our enhanced daily deep cleaning, we've temporarily closed the Queens delivery station for additional sanitation and have sent associates home with full pay," said spokeswoman Rena Lunak. In related news, Amazon-owned Whole Foods Market is joining a growing rank of grocers in setting aside a special time for seniors to shop to minimize exposure to the virus.

ZOOM tops the charts

"ZOOM Cloud Meetings" topped the free charts yesterday across the Apple (NASDAQ:AAPL) and Google (GOOG, GOOGL) mobile app stores in the U.S., ahead of Facebook's (NASDAQ:FB) Messenger, Netflix (NASDAQ:NFLX) and TikTok. In fact, Zoom (NASDAQ:ZM) is one of the few technology stocks that investors have supported in the past few months, with shares climbing another 7% on Wednesday to $118.71 (up 73% YTD). In addition to beefing up its data centers, the company has also been raising its capacity with its two cloud infrastructure providers, AWS (AMZN) and Microsoft Azure (NASDAQ:MSFT).

'Arsenal of democracy'

Less than a day after the Detroit Three and the UAW union agreed to keep plants running with reduced shifts and staffing, the automakers said they would close their U.S. facilities to stop the spread of coronavirus. Despite shuttered production lines, GM (NYSE:GM) and Ford (NYSE:F) are in talks with the White House about how they could make ventilators and other medical gear to help fight the current pandemic. During WWII, automakers retooled their factories to build tanks, planes and other military equipment supporting the war effort, earning Detroit the nickname "arsenal of democracy."
 

E-trading

The New York Stock Exchange (NYSE:ICE) will temporarily close its trading floors and move fully to electronic trading from Monday after an employee and a trader were tested positive for COVID-19. "While we are taking the precautionary step of closing the trading floors, we continue to firmly believe the markets should remain open and accessible to investors," said NYSE President Stacey Cunningham. "All NYSE markets will continue to operate under normal trading hours despite the closure of the trading floors."

Bank closures begin

JPMorgan (NYSE:JPM) is the first of the U.S. megabanks to announce broad closures of branches because of the coronavirus. It's temporarily shuttering about 20%, or 1,000 branches, to protect employees, as well as deal with the escalating health crisis. Wells Fargo (NYSE:WFC) is meanwhile keeping the "vast majority" of branches open and operating normally, but is "implementing an enhanced cleaning program in all properties."

How much debt can the U.S. bear?

"We have to deal with debt and deficits at some point down the road, but during crises or wars, you have got to sort of not worry about borrowing," White House economic adviser Lawrence Kudlow told Fox News. What is unusual about this moment is that the debt was already so high before the current crisis, standing at $23.5T. Most analysts now see this fiscal year's deficit soaring well past the record $1.5T hit in 2009, with estimates ranging from $1.7T-$2.1T.

Today's Markets

In Asia, Japan -1%. Hong Kong -2.6%. China -1%. India -2%.
In Europe, at midday, London -1.4%. Paris +0.3%. Frankfurt -0.9%.
Futures at 6:20, Dow -1.5%. S&P -1.5%. Nasdaq -0.5%. Crude +13% to $23.53. Gold +0.3% to $1481.70. Bitcoin +8.5% to $5598.
Ten-year Treasury Yield -1 bps to 1.15%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
8:30 Current Account
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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