Market Report 4th March 2020

Market Report 4th March 2020 981 980 Realm

Markets fell back after the Fed emergency rate cut but U.S. futures rallying back this morning.

  • European stocks ended on a firm note, buoyed by an emergency rate cut announcement by the U.S. Federal Reserve, and on hopes other major central banks will follow suit and announce measures to counter the risks posted by the coronavirus outbreak.  
  • US stocks: After seeing considerable volatility early in the session, stocks moved sharply lower over the course of the trading day on Tuesday. With the pullback on the day, the major averages partly offset the strong gains posted in the previous session.
  • Asian stocks ended mixed as expectations that central banks will provide financial stimulus helped offset fears of the coronavirus becoming a global pandemic.  

Global Macro

  • The Jibun Bank Japan Services PMI declined to 46.8 in February 2020 from 51.0 in the previous month, pointing to the steepest contraction in the sector since April 2014, final data showed. The figure was revised slightly up from a preliminary 46.7. Respondents mentioned that the novel coronavirus outbreak has hit hard tourism industry, which was a key source of demand for services. Both new orders and export sales contracted, while employment stagnated. In terms of prices, output price inflation eased, while input prices rose at a faster pace. Lastly, confidence softened but stayed positive.
  • The Australian economy advanced a seasonally adjusted 0.5% in the December quarter of 2019, after an upwardly revised 0.6% growth in the previous period and beating market expectations of a 0.3% expansion. Both household consumption (0.4% vs 0.1% in Q3) and government spending (0.7% vs 1.1%) grew further. Meanwhile, gross fixed capital formation fell (-1% vs 0.6%) as private investment dropped (-1.1% vs flat reading), led by falls in non-dwelling construction and dwellings, and public investment was also down (-0.4% vs 3%), driven by falls in public corporations. Total inventories rose AUD 118 million, following a drop of AUD 743 million in Q3, mainly led by a build up in mining inventories. Exports of goods and services were flat (vs 0.5% in Q3). Imports of goods and services fell 0.5% (vs -0.3%). On the production side, most sectors grew except construction. Through the year to Q4, the economy grew 2.2%, following a 1.7% advance in Q3
  • The Hong Kong Monetary Authority/HKMA lowered its base rate by 50 basis points to 1.5% on March 4th, 2020, following a similar move by the US Federal Reserve as Hong Kong’s currency is pegged to the US dollar. The central bank sets its base rate at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBORs), whichever is the higher. The monetary authority mentioned that there were many uncertainties in future changes of the COVID-19 epidemic and there would still be very large fluctuations in the financial market. The HKMA also said it will continue closely monitoring the movement of the foreign exchange and local currency market, with a view to maintain the stability of Hong Kong dollar through the link exchange system.

Disclaimer:  ‘Where the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.