After copious amounts of speculation, it’s now official – the UK is on lockdown. Last night, in a pre-recorded video, Boris Johnson announced that more was required from the public to ensure the virus is contained. He went on to announce a full UK lockdown for a minimum of 3 weeks before the situation will be reassessed. The news had little impact on financial markets, the prospect of a full lockdown would have already been priced into various UK assets.
Yesterday saw more action from the Federal Reserve. This is their 3rd major policy move in the last 3 weeks and now takes the level of stimulus provided to well past that of the 2008 financial crisis. In summary, the Fed has promised to purchase an unlimited amount of treasury and mortgage-backed securities. In addition, it has established funds to provide credit to large companies through a system of loans and the purchase of corporate bonds. Finally, it has put aside a provision to assist consumers, small businesses and the money markets. They’ve gone to unprecedented levels to ease concerns. Stock markets reacted positively to yesterday’s announcement while the greenback sold off. However, all of these moves were reversed in the afternoon as fear reigns king.
Today is fairly important in the context of economic data. This morning sees flash (reflecting the current month – March) purchasing manager index reports. These are the most up to date reflections of current business activity from the manufacturing and service sectors. The UK numbers will be released at 0930 while eurozone figures will be scattered across the morning with most notably, German reads crossing the wires at 0830. Across the pond, our friends in the US will print their numbers at 1345. These data-points are the first true gauge of how significant the impact could eventually become. No doubt, financial markets will be ready to react depending upon the various outcomes. Positive news would see a weaker US dollar mixed with a move higher in global equities; negative surprises would see the opposite.
8:30am, March 24th 2020
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