(Reuters) - The Reserve Bank of Australia kicked off the new rate-cutting cycle with a 50bp cut and left open the possibility of more easing. Remember, at this time last week the chances of an Aussie rate cut were at 10%. Malaysia too cut rates to a 10-year low.
Just as swift has been the repricing of interest rate expectations elsewhere - so much so that bets are on for a coordinated Big Bang-type move of the kind last seen in 2011, never mind that Reuters reported the draft G7 communique so far excludes direct calls for new government spending or coordinated central bank rate cuts.
Instead it merely commits to work together to mitigate the damage to economies from the coronavirus epidemic. G7 finance ministers and central bank governors will hold a conference call at 1200 GMT on Tuesday, led by U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell.
But the Reuters report on the communique has somewhat dampened markets enthusiasm – the yen is back up today and gold is down.
The yield on the benchmark 10-year U.S. Treasury note is up 4 bps this morning after hitting an all-time low of 1.03% yesterday, while the 10-year German yield is flat after sliding to a six-month low of -0.67%. Essentially the message to central banks seems to be: deliver or else.
On the whole, hopes remain that stimulus of some kind is still on the way, with markets still assigning 100 bps of cuts in the United States (U.S. President Trump chipped in with a demand for the Fed to "ease and cut rate big") and policy easing of some kind in the euro zone, Japan and Britain. Canada is expected to cut rates by a quarter point on Wednesday.
All that is helping European shares to open firmer following a stonking close in New York on Monday -- the Dow Jones' 5% rise means it recouped almost half what it lost last week and posted its biggest one day gain since March 2009. But U.S. equity futures are flat this morning.
Earlier in Asia, Shanghai shares rose around 0.7%, coming off their highs after the Reuters report on the G7 while the yuan retreated from 6-week highs.
Japanese shares reversed earlier gains as the yen firmed and investors got a reminder of the growth risks that are underlying markets’ paranoia - data showed Japan’s consumer confidence fell in February to the weakest since October.
We get more data today, with flash inflation in the euro zone the most closely watched after inflation expectations in the bloc fell to record lows yesterday.
The euro has pulled back after surging yesterday to two month highs against the dollar, while the greenback index is marginally firmer. The Aussie has firmed despite the rate cut.
Finally, lets not forget it is 'Super Tuesday' today in the Democratic primaries where one-third of delegates are in play to nominate the candidate who will face off against Trump in November.
Meanwhile the coronavirus continues to spread, with 3,000 deaths worldwide and cases in at least 60 countries. So it's unsurprising that almost every single earnings update in Europe mentions coronavirus and some warn it will impact 2020 results.
To mention just a few, Swiss computer mice and keyboards maker Logitech and the UK's Intertek warned of supply problems from the coronavirus outbreak in China. Robert Walters and Beiersdorf highlighted coronavirus concerns, but were not precise about the impact from the virus.
Greggs shares for once could likely disappoint with muted reaction after the British baker said it saw a significant slowdown in February due to widespread storms.
Other potential moves: Wirecard negative read-across from Visa warning; semis on watch after Microchip Tech has withdrawn prior guidance; HelloFresh seen jumping after it confirmed better-than-expected 2019 results and forecast strong growth in 2020.
In emerging markets, the main equity index gained nearly 1%. All major Asian markets are up; Taiwan rose 1.4% lifted by Apple supplier Foxconn which said it would resume normal production in China by end March and that it saw no large impact on production or supply chains.
China’s finance ministry announced it would funnel some $15 billion towards preventing the further spread of the virus and further reducing the tax burden on stricken enterprises. Indonesian stocks jumped more than 3% in their biggest daily gains in nearly three years.
But emerging currencies weakened against a tepid dollar, with the yuan snapping a seven day winning streak and the central bank guiding the midpoint lower for the second straight day. South Africa’s rand and Turkey’s lira both weakened 0.6%.
— A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own —