- 80% of patients have mild symptoms
- 14% suffer complications such as pneumonia
- 5% are critical, the disease being fatal to 2%
Reporters in Geneva were told that COVID-19 appears to be “not as deadly as other coronaviruses including SARS and MERS,” with a clearer picture emerging as to the details and scope of the problem.
Outside China, the WHO has received reports of 694 cases from 25 countries, including 3 deaths. Children are apparently not suffering from COVID-19 in the same way adults are, the risk of fatality increasing with age.
Epidemic or Pandemic?
When asked to clarify whether the world was now facing a pandemic, Dr Mike Ryan, head of the WHO Emergencies Programme, explained the issue was really “whether we’re seeing efficient community transmission outside of China, and at the present time we’re not observing that”.
Dr Sylvie Briand, speaking as one of the three WHO panel experts, explained the organisation was working with the Japanese and that their focus was “on our public health objective that we contain the virus and not contain the people”.
As of earlier today, there has been a total of 70,635 cases of COVID-19 together with 1,772 deaths. In the past 24 hours, China has reported 2,051 new infections which includes clinically and lab confirmed cases. More than 90% of all new case reports come from the Chinese province of Hubei, the capital city of which is Wuhan.
- Fed cuts by 25bp
- SP500 hits another all time high and falls post conference
- ‘Uncertainties about this outlook remain’ with regards to economic expansion
The FOMC met today to discuss monetary policy going forward.
The committee revised the target rate down from 175-200bp to 150-175bp citing ‘uncertainties’ about sustained economic expansion, inflation and labour market conditions showing strength.
Speaking in the post decision press conference, Chairman Jerome Powell said, ‘If something causes us to materially reassess that outlook, that is what will cause us to change our view.’
The Fed are taking a data dependent policy stance amid recent rate market stress and the extension of the repo window from overnight to 14-days which has increased the Fed’s balance sheet.
The market could view this as there being a restart of large scale asset purchases since overnight, the likelihood of a 25bp cut at the December meeting has increased from 18.7% to 22.9%.
The SP500 rallied to another all time high through the press conference, however fell off after which was most likely die to the pricing in of the cut.
You can read the official statement here.
- Fed expected to cut the bank rate by 25bp
- Fed balance sheet has been increasing of late via the repo market showing signs of easing
- SP500 hit all time highs last week off of the back of expected cut
The FOMC meets today to set the Fed Funds target range.
It currently sits at 175-200bp with the expected cut to take the range down to 150-175bp.
This comes after more presidential pressure from Trump last week, but with the Fed introducing longer term repo programmes, firstly going from overnight and extending now to 14-day, the market is expecting the Fed to cut and probably announce more large scale asset purchases in the current months.
With US inflation currently sitting at 1.7% and unemployment remaining steady, there are few real reasons for this cut if the Fed is looking at data dependence only, which would leave the only case remaining that they are looking for downside insurance for further global market stress.
With Brexit looming, no resolution to the trade talks, more geopolitical instability in the Middle East, South America and Hong Kong and European banking issues, it is likely that this is the case.
- Fed cuts by 25bps
- Has provided overnight liquidity injections in the repo market
- ‘Job gains have been solid, on average, in recent months’
The Fed today cut by 25bps amidst turmoil in the oil markets during the front part of the week and the overnight repo spike just yesterday.
Jerome Powell spoke and argued that economic conditions were solid but that there were some ‘uncertainties’ to this outlook.
There was however a split amongst FOMC members.
Bullard, George and Rosengren preferred a different outcome, with the latter two wanting to maintain Fed Funds at 200-225bp and the former wanting to lower to 150-175bp.
It is of concern to some in the market that Trump potentially has some political sway over the Fed, especially with the election coming up next year.
Of more concern though is if data globally does begin to deteriorate further, especially out of China since the USDCNY is > 7.00 – a potentially deflationary problem for global central banks who have been trying to stoke inflation.
EURUSD fell over the course of the announcement and press conference.
You can read the official statement here.
- Fed is expected to cut by 25 basis points
- Market has started to reprice the likelihood of a 50bps cut by December
- Oil spike may have some bearing on the committee’s decision
The FOMC meet today to discuss monetary policy going forward.
Currently EFFR is indicating that that the Fed will no longer cut by 25bps with Fed Funds showing that, since yesterday, the odds have dropped to 45% from 63%.
This comes, however, after the spike in the overnight repo rate which is distorting the probability data (Fed still likely to cut).
The Fed will, though, likely look to see whether the rise in the oil price during the front part of this week will be sustained and whether this will feed through to headline inflation.
5y5y inflation swap prices have spiked and its likely the Taylor Rule will be reflecting higher rates at the moment (yet this does not mean the Fed will act upon this).
- The ECB cut the deposit rate by 10 basis points
- EURUSD traded higher initially and then traded relatively flat through the remainder of the session
- Governing Council decided to restart their Quantitative Easing programme from November the first (€20bn per month)
The Governing Council met today to inform the market as to their decision over monetary policy.
They decided to lower the deposit rate to -0.5% (from -0.4%).
This comes just as the ECB begin Targeted Long Term Refinancing Operations again to help support the Eurozone Banks (for the third time).
Draghi also said that, ‘in order to support the bank-based transmission of monetary policy the Governing Council decided to introduce a two-tier system for reserve remuneration in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate.‘
He added, ‘The Governing Council reiterated the need for a highly accommodative stance of monetary policy for a prolonged period of time and continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.‘
Speaking on fiscal matters, Draghi mentioned that, ‘in countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilisers to operate freely. All countries should reinforce their efforts to achieve a more growth-friendly composition of public finances.‘
The market may take this as being a negative, in that Draghi could be admitting the ECB’s policies have failed to stimulate growth.
Below is a chart of EURUSD.
The market traded lower just before the announcement and ended higher after the presser.
You can read the official statement here.
- ECB are expected to cut rates at today’s meeting
- Inflation expectations not picking up
- Talk at last meeting of ECB wanting the EuroOne governments to do more to boost growth
The ECB today are likely to announce a cut in the deposit rate across the Eurozone.
With poor data out of Germany of late and headwinds to global growth seemingly not alleviating, it’s likely that the Governing Council will be forced to act.
With Targeted Long Term Refinancing Operations kicking in later this month and bank profitability under the radar, the ECB are likely to be cautious here since it has already been questioned as to whether negative rates could spur another bank collapse.
Brexit is likely to remain at the forefront and with the 31st October proposed leaving date, the ECB may wish to try to ease ahead of any potential disruption.
- Mexican Central Bank expected to hold rates at 8.25% according to Reuters polls
- However, analysts are thinking that they could cut to reinvigorate a slowing economy
The Mexican Central Bank meet Thursday to assess the interest rate path going forward.
It is likely that they will keep rates on hold as the peso has been slipping against the dollar of late.
However, the poor growth seen in the second quarter could be cause of some concern as the Mexican economy grew only 0.1%.
On the flip side, the pace of inflation has slowed of late which raises the likelihood of a rate cut – that, coinciding with the poor growth numbers could make the weakening peso a secondary factor for the Mexican policymakers to consider.
The strengthening dollar could possibly be another factor to consider since importers could be hit hard by the possible added costs of unhedged currency flows.
- The Bank kept rates on hold at 0.75%
- UK Government bond purchases kept at same rate, as well as corporate bonds
- GBP headed lower through the session but was relatively subdued on the decision
The BoE today kept rates on hold.
Their main reasoning was Brexit based, citing ‘assuming a smooth Brexit and some recovery in global growth, a significant margin of excess demand is likely to build in the medium term. Were that to occur, the Committee judges that increases in interest rates, at a gradual pace and to a
limited extent, would be appropriate to return inflation sustainably to the 2% target.’
In the Inflation Report, the Bank said that global growth was constrained by trade tensions and that the manufacturing sector was the worst hit, while inflation in the EU and US had been subdued.
The maintenance of the 0.75% rate was largely dovish as the following extract from the Inflation Report says:
Growth is expected to remain subdued in coming quarters, as those uncertainties have intensified over the past few months and are assumed to remain elevated in the near term. CPI inflation is projected to fall temporarily below the MPC’s 2% target over the second half of 2019 as energy prices decline. Conditioned on a smooth withdrawal of the UK from the EU, Brexit-related uncertainties are assumed to subside over the forecast period. Together with a boost from looser monetary conditions, the decline in uncertainties leads to a recovery in demand growth to robust rates. As a result, excess demand and domestic inflationary pressures build. CPI inflation picks up to materially above the MPC’s 2% target by the end of the forecast period.
Sterling remained flat through the press conference but pushed lower in the hours after.
You can read the full inflation report and official statement here.
- The market expects the BoE to hold rates steady at 0.75%
- Mark Carney is likely to express continued concern over Brexit and global growth headwinds
- The market believes that this will be a dovish hold on the base rate
The Bank of England will today decide on whether to cut or hold rates.
It’s widely believed that the Bank will hold as UK data has largely held up well whilst other economies have faced contraction amongst manufacturing and services.
Labour data is largely still strong whilst the falling pound has kept UK exports strong in the face of falling global demand – the UK is largely an exporter of services globally and this has been a main beneficiary from lower Sterling with the last services PMI reading 51.40.
There could be some talk of what will happen to the BoE’s balance sheet, but the market thinks that the Bank will maintain its current policy of rolling over maturing debt held rather than add or look to contract its holdings.