News over the weekend that the Chinese manufacturing sector slipped to its lowest level of activity ever has ensured financial markets begin the fresh week and month on an exceedingly cautious note. As stock futures and FX markets reopened on Sunday evening they were greeted by a significant fall that has since been brought back up. Hopes and expectations have built for further stimulus from a range of global central banks. Many are sceptical over the efficacy of looser monetary policy in response to addressing a potential pandemic. However, after years of providing stimulus to markets to prevent any unwanted adverse movement, central banks have created a market addicted to low rates and excess liquidity. As a result, it’s almost certain risk assets would react positively to new attempts to prop them up.
The pound will remain in focus this week as negotiations begin between the UK & EU regarding the future trading relationship. The main area of contention arrives when considering the European Court of Justice’s role between the 2 regions when the transition period is over at the end of the year. The EU wishes that the UK applies its state aid rules, and therefore accepts the jurisdiction of the court. However, the British government wants to have its policy.
Elsewhere, the week sees official global PMIs for February. Many are anxious about what these may reveal. Additionally, it’s another US jobs week with the latest non-farm payrolls report scheduled for Friday. The Bank of Canada will hold a monetary policy announcement on Wednesday where they may choose to lower interest rates as a partial response to weakness derived from the Coronavirus outbreak.
Written by Viv Savani. 9:26am, March 2nd 2020
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