The Wednesday Market Minute
- Global stocks mixed as investors react to Tuesday's surprise rate cut from the Fed and look to regional central banks to follow suit.
- Coronavirus infections outside of China continue to rise, although most of the new cases are confined to Italy, Iran and South Korea.
- Joe Biden wins at least 9 states in Super Tuesday balloting, including Texas, reviving the moderate Democratic candidates Presidential campaign, as Bernie Sanders nurses a narrow lead in California.
- Benchmark 10-year U.S. Treasury yields touch an all-time low of 0.906% in overnight trading, while futures prices suggest a 63% chance of a June rate cut, as markets bet on further Fed easing.
- Global oil price add to recent gains amid reports that OPEC is mulling an additional 1 million barrels per day in production cuts.
- U.S. equity futures suggest sharp opening bell gains on Wall Street Wednesday, although market volatility gauges remain elevated, ahead of weekly employment data at 8:15 am Eastern time.
U.S. equity futures surged higher Wednesday, although markets around the world remained volatile, as investors re-priced risk assets in the wake of the Federal Reserve's surprise interest rate cut and the evolving economic impact of the coronavirus.
Early gains were pared, however, after a report from Italy's La Republicca newspaper that said the government will close all schools and universities across the country until at least mid-March, as officials attempt to stem Europe's most-serious coronavirus spread, where infections have topped 2,500 and 79 people have died.
The Fed's unscheduled 50 basis point cut, the first emergency move since the depths of the financial crisis in 2008, provided brief support for global stocks, but ultimately raised deeper concerns related to both the spread of the virus, which has now reached 60 countries and at least 94.000 people, and its impact on the global economy.
"We've come to the view now that it is time to act in support of the economy," Powell told reporters Tuesday. “I do know that the U.S. economy is strong and we will get to the other side of this; I fully expect that we will return to solid growth and a solid labor market as well.”
The Fed's front-running move has investors low looking for follow-up action from other central banks, including the ECB and the Bank of Japan, in the coming weeks, while U.S. bond markets suggest investors are also looking for another move from Powell and his colleagues, with futures pricing in a 63% chance of another rate cut in June.
Benchmark 10-year Treasury note yields traded at an all-time low of 0.906% overnight, before easing to 1.007% later in the session as stock markets rallied on the surprisingly strong showing in Super Tuesday balloting by moderate Democratic candidate Joe Biden.
Biden's haul of at least nine of the sixteen state races, including Texas, as well as strong showings in California and elsewhere, helped boost Wall Street futures during early European trading hours.
Contracts tied to the Dow Jones Industrial Average are indicating a 610 point opening bell gain, following last night's 800 point decline, while those linked to the S&P 500 suggest a 57 point advance for the broader benchmark, which is now down around 7% since the start of the year.
Global oil prices were also firmly higher, following reports that a committee of advisers to OPEC are recommending that cartel members cut oil production by another 1 million barrels per day when they meet later this week in Vienna, a move that would collectively take its output reduction -- including commitments from Russia and voluntary cuts from Saudi Arabia -- to around 3.1 million barrels per day.
Brent crude futures contracts for May delivery, the global benchmark, were last see seen 62 cents higher from their Tuesday close in New York and trading at $52.48 per barrel, while WTI contracts for April were seen 58 higher at $47.76 per barrel.
European stocks were volatile as trading kicked off in Frankfurt and London, with investors still assessing potential moves from regional central banks and keeping one eye on market volatility gauges such as the CBOE's VIX index, which held at a multi-year high of 36.82 points yesterday as the Dow swung by nearly 1,000 points between between the G-7's non-committal support statement and the Fed's emergency rate cut.
The Stoxx 600 benchmark was seen 1.4% higher by mid-day trading Wednesday, with a 1.38% gain for the DAX performance index in Germany, while Britain's FTSE 100 was 1.55% to the upside in early London trading.
Overnight in Asia, a planned stimulus package of around $9.8 billion from South Korea, where the cornoavirus is spreading at the fastest rate in the region, helped the KOSPI rise 2.24% in Seoul, while stocks in China booked modest gains even as data confirmed a plunge in February services sector activity in the world's second largest economy.
Japan's Nikkei 225 ended the session with a 0.08% decline as the yen held at 107.40 against the U.S. dollar while the region-wide MSCI ex-Japan benchmark was seen 0.39% higher heading into the final hours of trading.