EZ data shows the devastation of lockdown
ECB on tap
Nikkei 2.14% Dax -0.05%
UST 10Y 0.61%
Asia and the EU
EUR EZ Franch Consumer spending -17%
EUR EZ German Unemployment 5.8%
EUR EZ GDP
North America Open
EUR ECB Presser 8:30
USD Weekly jobless claims 8:30
USD Personal Income/Spending
Its been a quiet consolidative session in Asian and early European trade with little follow-through after yesterday’s massive risk-on rally in North American trade.
The Fed provided the proper monetary guidance yesterday essentially reaffirming that it stood ready to support the credit markets with unlimited funds and the supportive backdrop was enhanced by much better than expected results from tech heavyweights Microsoft and Facebook which reported little damage to their business despite the global lockdowns.
Today all eyes will be on Amazon which reports after the close and all expectations are that the company should outperform given the massive demand for delivery services in much of the advanced industrialized world. All of this positive news on high tech companies that profit from bits rather than atoms has made Nasdaq the strongest performer in overnight trade and the index is likely to show relative strength as the day proceeds.
In FX, the combination of the end of month flows and ECB meeting has proved mildly supportive for the EURUSD which look ready to push towards the 1.0900 figure as the day proceeds. Although the ECB is expected to maintain its accommodative stance its is not anticipated to offer any new expansionary policy initiatives so the dilutive pressure on the currency is likely to be minimal.
The data from the region is as horrid as you would expect given the near full suppression of both demand and supply during the lockdown with French consumer spending dropping by -17% and Geman unemployment quadrupling to 373K but the markets are clearly looking past that as most of the governments in the region make plans for a slow re-opening of their economies. It will be interesting to see if the European model of economic relief which focused on preserving 80% of workers’ salaries versus the US model which mostly focused on business loans and grants will prove to be more supportive coming out of the lockdowns
For now, investors are simply relieved that the COVID infection rates have flattened, that G-3 central banks are in a near-universal stance of unlimited accommodation and that at least the high tech sector has managed to weather the storm, so the immediate impulse remains pro-risk.