US Briefing - Monday 09.03
Headlines
  • Global Financial Markets In Turmoil After Oil Prices Collapse
  • US Crude Futures Down 20Pct As Saudi Arabia Instigates Price War
  • US Equity Futures Halted Limit Down; Yield Curve Inside 1.0 Pct
  • COVID-19 Cases In US Top 500; Oregon Latest To Declare Emergency
  • Trump’s Aides Drafting Economic Measures To Combat Virus Fallout
  • Euro Zone Investor Confidence Slumps To 7-Year Low In March
  • Germany Boosts Investment To Protect Economy From Virus Hit
  • French Finance Minister: Europe Needs Massive Stimulus Plan
  • UK Chancellor Signals Huge Response To Virus Crisis In UK Budget
  • European Stocks Post Biggest Drop Since 2016, Enter Bear Market
  • UK Joins The Negative-Yield Club As Gilts Follow Global Bond Rally
  • Yen Soars As Investors Rush To Safety; Oil-Exposed Currencies Tank
Commentary
Global Markets In Turmoil As Oil Prices Plunge

Oil plunged more than 25%, 10-year Treasury yields dipped below 0.4%, stocks dropped, and currencies swung as the prospect of an energy glut ratcheted up turmoil across markets world-wide.

 

Investors are responding to Saudi Arabia’s decision over the weekend to cut most of its oil prices and boost output, despite existing threats to demand from the coronavirus epidemic. The move escalates a clash with another major oil producer, Russia.

 

“The fear today is about a global recession,” said Thomas Hayes, chairman of Great Hill Capital, a hedge fund-management firm based in New York. He said lower oil prices make it more likely some companies would default on their debts. (WSJ - Contiue Reading)

Traders Flying Blind In S&P Futures After CME Limits Hit

Circuit breakers put a limit on a harrowing plunge in U.S. stock futures, but they’re also leaving traders in the dark as to how big losses may eventually get. Trading in other index price proxies suggested American stocks are at risk of the worst plunge since 2011.

 

In the midst of financial-market spasms as the day began in Asia Monday, trading in some of the world’s most popular equity contracts went quiet when declines reached 5%, setting off Chicago Mercantile Exchange limits that keep prices from falling further.

 

“These things are all designed to stop a market panic and cause a bit of a pause in trading,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors. “It can have the perverse effect of increasing the downward pressure on other markets, particularly until the U.S. market opens.” (Bloomberg - Continue Reading)

2008, Redux?

A collapse in stock markets, co-ordinated policy statements and emergency interest rate cuts: the events of the past week have inevitably led to comparisons to October 2008. But the differences are as significant as the similarities. To understand why it’s helpful to think about the underlying economic forces that are at play.

 

The crisis of 2008 was, in essence, what economists term a “balance sheet” recession. House price bubbles inflated earlier in the decade and when they subsequently burst, the hole in households’ balance sheet forced a collective shift towards saving (i.e. paying down debt) rather than spending. This in turn exposed vulnerabilities in a highly-leverage banking system. As counter-party confidence collapsed, the financial plumbing froze up. All of this manifested itself in a collapse in aggregate demand. (Capital Economics - Continue Reading)

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