Weekly Market Update: Coronavirus spread swats stocks into bear market and drives G7 government officials into action
Fri, 13 Mar 04:06 PM EST/09:06 PM GMT
It was a historic week for markets as volatility exploded in the midst of the global coronavirus pandemic. The epicenter of the crisis moved to Europe while cases in the US continued to rise rapidly along with expanded testing. Italy went into complete lock down to fight the spread of the virus while dramatic measures were taken in other EU nations and the US as well. Many European nations restricted their borders, and many schools and universities shut down along with nearly all professional sports leagues. The VIX jumped above 70 and Thursday saw double digit percentage declines for stock markets in Europe and the US for the first time since 1987’s Black Monday. The correlation between lower Treasury yields and stocks seemed to erode as US rates started to firm up despite multiple down 1,000 point days in the Dow. Treasury market functionality was bolstered when the NY Fed injected $1.5T into overnight lending markets on Thursday. Friday’s trade saw some modicum of stabilization after Germany and the European Commission announced significant fiscal measures and promised even further support if necessary. US Treasury Sec Mnuchin and House Speaker Pelosi remained in close contact in an effort to hash out an agreement for a major stimulus package announcement before the weekend. Friday also saw President Trump invoke the Stafford Act to declare a national emergency and loosen up tens of billions in funds to fight the coronavirus outbreak. Gold prices slumped and the US dollar firmed broadly. Emerging markets were hit particularly hard as Central Banks were forced step in on multiple occasions to proper up their currencies. For the week, the S&P fell 8.9%, the DJIA dropped 10.4%, and the Nasdaq lost 8.2%.
In corporate news this week, as the coronavirus spread ravaged the travel industry, major US airlines such as American, Southwest, Spirit, JetBlue, and Delta withdrew guidance and took capacity reductions, grounding hundreds of planes. Lufthansa said it will speak with the German government about potential state aid. Boeing instituted a hiring freeze for most of its divisions and reportedly plans a full drawdown of its $13.8B loan to bolster cash on hand amid declining jet demand. Carnival decided to issue a temporary pause of its global ship operations for 60 days on its Princess Cruises line, and Norwegian Cruise Lines and Royal Caribbean each announced a one month suspension of voyages. Royal Caribbean also withdrew its guidance and cut its expected FY21 capex spend. On the earnings front, Oracle shares rose after beating expectations on its top and bottom line. Broadcom stock slumped to a 52-week low after withdrawing its guidance, noting intensifying demand uncertainty. Slack investors fled after the company posted slower growth and weaker guidance than anticipated, though the messaging platform saw a significant spike in new free users due to the coronavirus outbreak. Stitch Fix missed on revenue estimates and guided below consensus, pointing to lower order values due to new clients that spend less per quarter on average. Pepsi reportedly neared a deal to acquire Rockstar Energy Beverages for $3.85B, as the beverage giant further broadens its portfolio. Twitter announced a cooperation agreement with Elliott Management and said Silver Lake would invest $1B into the company, staving off activist efforts to oust CEO Jack Dorsey.
SUNDAY 3/8
(IT) Italy government confirmed imposing 17M person quarantine in the North to fight spread of coronavirus - press
BA FAA may request Boeing make electrical wiring fixes before 737 Max flies again - financial press
MONDAY 3/9
US equity markets halted for 15 minutes on S&P hitting 7% circuit breaker
(IT) Italy PM Conte: Confirms movement will be restricted throughout the country in effort to combat the spread of the coronavirus
(US) President Trump: Will discuss possible payroll tax cut with Congress and support for hourly wage earners so they dont miss paychecks; New conference tomorrow on "major" economic measures
TUESDAY 3/10
DPW.DE Reports Q4 Net €858M v €813M y/y, EBIT €1.26B v €1.29Be, Rev €17.0B v €16.9B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.1% V 0.1% PRELIM; Y/Y: 1.0% V 0.9% PRELIM
(DE) Germany reportedly weighing Bank capital relief to counter COVID-19 effect
WEDNESDAY 3/11
PEP Reportedly nears deal to acquire Rockstar Energy Beverages; said to pay $3.85B - US financial press
*(US) FEB CPI M/M: 0.1% V 0.0%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.2%E; CPI NSA: 258.678 V 258.455E
(UK) Chancellor of the Exchequer (Fin Min) Sunak: Total fiscal stimulus of £30B; doing everything to keep the country healthy; will get through the virus outbreak together - Budget Speech
*(UK) OFFICE OF BUDGET RESPONSIBILITY (OBR) UPDATES FORECASTS
DD Affirms FY20 $3.70-3.90 v $3.75e, cuts FY20 Rev $21.3-21.8B v $21.4Be (prior Rev $21.5-22.0B) updated to reflect $0.04 Q1 headwind from COVID-19
BA Reportedly planning full drawdown of $13.8B loan as a precaution, plan to bolster cash-on-hand on declining jet demand due to COVID-19 - press
(US) Institute for Supply Management coronavirus study: 75% of companies report supply chain disruptions
(US) Association of American Railroads weekly rail traffic report for week ending March 7th: 462.3K, -9.1% y/y
(RU) Russia Dep Energy Min Sorokin: OPEC had asked Russia to cut by 300K bpd but doubling exisiting cuts is technically difficult, OPEC+ could not cut oil output indefinitely
(US) Fed increases size of overnight repo operations through Apr 13
(IT) Italy PM Conte: orders closure of "all" shops except for groceries and pharmacies for the entire country, bars and restaurants must close unless they can keep 1 meter distance between customers; factories can continue to work with precautions
(AU) Australia Treasurer Frydenberg: Stimulus package could add 1.5% to GDP in Q2; too early to judge full impact of coronavirus on economy
*(US) PRESIDENT TRUMP ANNOUNCES TRAVEL BAN FROM EUROPE TO US FOR THE NEXT 30 DAYS; effective at midnight Friday, Mar 13th - NATIONWIDE SPEECH
THURSDAY 3/12
(DE) GERMANY REPORTEDLY READY TO ABANDONED ITS BALANCED BUDGET TO COMBAT COVID-19 - financial press
*(US) FEB PPI FINAL DEMAND M/M: -0.6% V -0.1%E; Y/Y: 1.3% V 1.8%E
CCL Princess Cruises announces a voluntary and temporary pause of its global ship operations for 60 days; Affects 18 ships
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(NO) Norway Central Bank (Norges): to offer extraordinary loans to banks
(EU) ECB chief Lagarde COVID-19 is a major shock to growth prospects - Prepared Remarks
(CA) Toronto Stock Exchange halted after 9.2% decline
(EU) ECB chief Lagarde: General Council was unanimous on the package announced today - Q&A
*(US) FED REPORTS Q4 FINANCIAL ACCOUNTS: HOUSEHOLD CHANGE IN NET WORTH: $3.15T V $0.8T PRIOR
*(US) New York Fed announces new $1.5T in Treasury reserve management purchases and repurchase operations to address "highly unusual disruptions" in Treasury financing markets associated with the coronavirus outbreak; to offer $500B in 3-mo repo today, and two $500B repos tomorrow; will continue $1T in repos each week for the rest of the monthly schedule; expands repo purchases beyond bills to a 'range of maturities'
(US) NY Gov Cuomo: orders Broadway closed immediately in NYC; bans gatherings of more than 500 people, effective Friday
ORCL Reports Q3 $0.97 v $0.96e, Rev $9.80B v $9.77Be
GPS Reports Q4 $0.58 v $0.41e, Rev $4.67B v $4.52Be; Katrina O’Connell named CFO; intends to suspend share repurchases in FY20
AVGO Reports Q1 $5.25 v $5.22e, Rev $5.86B v $5.93Be; withdraws FY20 oultook due to coronavirus
FRIDAY 3/13
*(CN) CHINA PBOC CUTS RESERVES RATIO REQUIREMENT (RRR) BETWEEN 50-100BPS IN A TARGETED RESPONSE; effective Monday, Mar 16th
(DE) German Fin Min Scholz: To use all means possible to address coronavirus effects including NO LIMIT on credit program to help companies; plan to set up safety net form companies impacted by outbreak
(EU) EU Commission President Von der Leyen: Virus is a major shock to region and look to address strategies to avoid any permanent damage
(US) Fed updates current monthly schedule of Treasury purchase operations to address temporary disruptions in the market for Treasury securities; conducting $33B of purchases today
(US) Pres Trump confirms he will invoke Stafford Act and declare national emergency over coronavirus
In corporate news this week, as the coronavirus spread ravaged the travel industry, major US airlines such as American, Southwest, Spirit, JetBlue, and Delta withdrew guidance and took capacity reductions, grounding hundreds of planes. Lufthansa said it will speak with the German government about potential state aid. Boeing instituted a hiring freeze for most of its divisions and reportedly plans a full drawdown of its $13.8B loan to bolster cash on hand amid declining jet demand. Carnival decided to issue a temporary pause of its global ship operations for 60 days on its Princess Cruises line, and Norwegian Cruise Lines and Royal Caribbean each announced a one month suspension of voyages. Royal Caribbean also withdrew its guidance and cut its expected FY21 capex spend. On the earnings front, Oracle shares rose after beating expectations on its top and bottom line. Broadcom stock slumped to a 52-week low after withdrawing its guidance, noting intensifying demand uncertainty. Slack investors fled after the company posted slower growth and weaker guidance than anticipated, though the messaging platform saw a significant spike in new free users due to the coronavirus outbreak. Stitch Fix missed on revenue estimates and guided below consensus, pointing to lower order values due to new clients that spend less per quarter on average. Pepsi reportedly neared a deal to acquire Rockstar Energy Beverages for $3.85B, as the beverage giant further broadens its portfolio. Twitter announced a cooperation agreement with Elliott Management and said Silver Lake would invest $1B into the company, staving off activist efforts to oust CEO Jack Dorsey.
SUNDAY 3/8
(IT) Italy government confirmed imposing 17M person quarantine in the North to fight spread of coronavirus - press
BA FAA may request Boeing make electrical wiring fixes before 737 Max flies again - financial press
MONDAY 3/9
US equity markets halted for 15 minutes on S&P hitting 7% circuit breaker
(IT) Italy PM Conte: Confirms movement will be restricted throughout the country in effort to combat the spread of the coronavirus
(US) President Trump: Will discuss possible payroll tax cut with Congress and support for hourly wage earners so they dont miss paychecks; New conference tomorrow on "major" economic measures
TUESDAY 3/10
DPW.DE Reports Q4 Net €858M v €813M y/y, EBIT €1.26B v €1.29Be, Rev €17.0B v €16.9B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.1% V 0.1% PRELIM; Y/Y: 1.0% V 0.9% PRELIM
(DE) Germany reportedly weighing Bank capital relief to counter COVID-19 effect
WEDNESDAY 3/11
PEP Reportedly nears deal to acquire Rockstar Energy Beverages; said to pay $3.85B - US financial press
*(US) FEB CPI M/M: 0.1% V 0.0%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.2%E; CPI NSA: 258.678 V 258.455E
(UK) Chancellor of the Exchequer (Fin Min) Sunak: Total fiscal stimulus of £30B; doing everything to keep the country healthy; will get through the virus outbreak together - Budget Speech
*(UK) OFFICE OF BUDGET RESPONSIBILITY (OBR) UPDATES FORECASTS
DD Affirms FY20 $3.70-3.90 v $3.75e, cuts FY20 Rev $21.3-21.8B v $21.4Be (prior Rev $21.5-22.0B) updated to reflect $0.04 Q1 headwind from COVID-19
BA Reportedly planning full drawdown of $13.8B loan as a precaution, plan to bolster cash-on-hand on declining jet demand due to COVID-19 - press
(US) Institute for Supply Management coronavirus study: 75% of companies report supply chain disruptions
(US) Association of American Railroads weekly rail traffic report for week ending March 7th: 462.3K, -9.1% y/y
(RU) Russia Dep Energy Min Sorokin: OPEC had asked Russia to cut by 300K bpd but doubling exisiting cuts is technically difficult, OPEC+ could not cut oil output indefinitely
(US) Fed increases size of overnight repo operations through Apr 13
(IT) Italy PM Conte: orders closure of "all" shops except for groceries and pharmacies for the entire country, bars and restaurants must close unless they can keep 1 meter distance between customers; factories can continue to work with precautions
(AU) Australia Treasurer Frydenberg: Stimulus package could add 1.5% to GDP in Q2; too early to judge full impact of coronavirus on economy
*(US) PRESIDENT TRUMP ANNOUNCES TRAVEL BAN FROM EUROPE TO US FOR THE NEXT 30 DAYS; effective at midnight Friday, Mar 13th - NATIONWIDE SPEECH
THURSDAY 3/12
(DE) GERMANY REPORTEDLY READY TO ABANDONED ITS BALANCED BUDGET TO COMBAT COVID-19 - financial press
*(US) FEB PPI FINAL DEMAND M/M: -0.6% V -0.1%E; Y/Y: 1.3% V 1.8%E
CCL Princess Cruises announces a voluntary and temporary pause of its global ship operations for 60 days; Affects 18 ships
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(NO) Norway Central Bank (Norges): to offer extraordinary loans to banks
(EU) ECB chief Lagarde COVID-19 is a major shock to growth prospects - Prepared Remarks
(CA) Toronto Stock Exchange halted after 9.2% decline
(EU) ECB chief Lagarde: General Council was unanimous on the package announced today - Q&A
*(US) FED REPORTS Q4 FINANCIAL ACCOUNTS: HOUSEHOLD CHANGE IN NET WORTH: $3.15T V $0.8T PRIOR
*(US) New York Fed announces new $1.5T in Treasury reserve management purchases and repurchase operations to address "highly unusual disruptions" in Treasury financing markets associated with the coronavirus outbreak; to offer $500B in 3-mo repo today, and two $500B repos tomorrow; will continue $1T in repos each week for the rest of the monthly schedule; expands repo purchases beyond bills to a 'range of maturities'
(US) NY Gov Cuomo: orders Broadway closed immediately in NYC; bans gatherings of more than 500 people, effective Friday
ORCL Reports Q3 $0.97 v $0.96e, Rev $9.80B v $9.77Be
GPS Reports Q4 $0.58 v $0.41e, Rev $4.67B v $4.52Be; Katrina O’Connell named CFO; intends to suspend share repurchases in FY20
AVGO Reports Q1 $5.25 v $5.22e, Rev $5.86B v $5.93Be; withdraws FY20 oultook due to coronavirus
FRIDAY 3/13
*(CN) CHINA PBOC CUTS RESERVES RATIO REQUIREMENT (RRR) BETWEEN 50-100BPS IN A TARGETED RESPONSE; effective Monday, Mar 16th
(DE) German Fin Min Scholz: To use all means possible to address coronavirus effects including NO LIMIT on credit program to help companies; plan to set up safety net form companies impacted by outbreak
(EU) EU Commission President Von der Leyen: Virus is a major shock to region and look to address strategies to avoid any permanent damage
(US) Fed updates current monthly schedule of Treasury purchase operations to address temporary disruptions in the market for Treasury securities; conducting $33B of purchases today
(US) Pres Trump confirms he will invoke Stafford Act and declare national emergency over coronavirus
