The dollar continued its relentless rise, stoking speculation of coordinated intervention to arrest the ascent, while Asian equities were volatile, tripping circuit breakers in Manila, Jakarta and Seoul.
The ECB’s new €750 billion pandemic emergency purchase program injected a bit of confidence into nervous markets in Europe, but the effect may well prove fleeting in the face of what is certain to be abysmal data on the economy and dour news on the spread of COVID-19.
German business confidence dove the most in nearly 30 years in March, a bad omen that adds urgency to the situation and further argues for massive fiscal stimulus from Berlin, where opposition to extra spending is crumbling as a deep recession beckons.
“In case anyone had not realized it yet, all European economies are going through an unprecedented turnaround within one month; from hopes for a rebound to complete standstill”, ING pseudo-chided after the Ifo release. “Today’s Ifo index, as well as other sentiment indicators in the coming weeks and months, are nothing more than a snapshot, giving some idea of the size of the economic plunge without being able to give the full picture”, the bank added. “Also, they won’t say anything about the future”.
Meanwhile, in what is perhaps a cautionary tale for nations pondering whether to shutter markets or otherwise curb trading, the The Philippine Stock Exchange Index reopened after a two-day shutdown to a bloodbath.
The gauge fell as much as 24% at one juncture, before eventually posting a record decline of 13.3%, leaving the benchmark at the lowest since January of 2012.
Again, that will serve to embolden those who have variously warned that shutting markets comes with considerable risks.
Central banks in the Philippines, Indonesia and Taiwan cut rates, while Australia moved the cash rate to the effective lower bound and launched asset purchases aimed at targeting 3-year yields.
The BOJ bought 201.6 billion yen of ETFs Thursday – that’s a new record.
Ultimately, the focus is likely to remain on the dollar in the near-term. Simply put, what you see in the following visual isn’t tenable – it has to be stopped.
“Perhaps the Treasury is… negotiating for a coordinated response with the rest of the world and seeks a new Mar–a–Lago accord”, Bloomberg’s Simon Flint mused on Thursday, before noting that the “problem is that some key players — like the Europeans and the Japanese – probably want weaker currencies to soften the blow of the sharp growth slowdown”.
“FX remains untradeable. Cross-currency basis is stretched again, and more stretched outside the currencies where there are swap agreements with the Fed”, SocGen’s Kit Juckes wrote. “There’ a clear link between this kind of stress and a stronger dollar, and indeed, the dollar remains bid”.