The Tuesday Market Minute
- Global stocks rebound from correction territory as investors bet on near-term fiscal and monetary support after a ten day, $10 trillion dollar market rout.
- President Donald Trump pledges to offer payroll tax cuts and unspecified support to American businesses amid the coronavirus outbreak, but Democratic lawmakers may prove difficult to convince.
- Support bets, however, lift Asian and European stocks, with markets pricing in at least a 10 basis points rate cut from the ECB on Thursday.
- Benchmark 10-year bond yields retrace recent gains to trade at 0.705%, but VIX volatility levels remain elevated and market risk remains extreme.
- Global oil price bounce from multi-year lows after yesterday's 20% crash, but Saudi plans to ramp-up production keep gains in check.
- U.S. equity futures suggest another wild trading day on Wall Street, where stocks are holding near bear market territory, with the S&P 500 poised for a 100 point opening bell gain.
Wall Street futures rebounded Tuesday, alongside a mini-rally for global stocks after yesterday's trillion dollar rout, as investors looked to governments and central banks to support beaten-down markets around the world.
With Wall Street in the throes of its worst single-day decline since 2008, and government bond yields suggesting little appetite for risk or real investment amid the ongoing coronavirus pandemic, President Donald Trump said yesterday that he would explore "a possible payroll tax cut or relief, substantial relief, very substantial relief" with Republican lawmakers later today.
That pledge -- while challenged by House Democratic leader Nancy Pelosi, who prefers a more targeted approach -- lead to expectations of fiscal support in both Asia and Europe, which continue to suffer from rapidly spreading infections and corresponding slowdowns in domestic and regional growth.
Central Banks, too, are expected to provide monetary relief in the form of tax cuts and liquidity support, with the European Central Bank meeting Thursday in Frankfurt, and markets pricing in at least a 10 basis point reduction in its overnight deposit rate.
CME Group futures, meanwhile, continue to suggest at least a 75% chance of a 50 basis point rate cut when the Federal Reserve finishes its two-day policy meeting on March 18.
The collective bets on support -- alongside some bargain hunting buyers enticed by an historic decline in U.S. stocks that has wiped more than $5 trillion in equity value from domestic markets over the past 10 days -- look set to boost Wall Street later today.
Investors pared earlier gains, however, after a CNBC report suggested the White House isn't ready to roll-out a package of detailed stimulus plans.
Contracts tied to the Dow Jones Industrial Average, which shed more than 2,000 points yesterday, are priced for an 850 point opening bell gain that would lift the 30-stock average back towards the 25,000 point mark.
Those linked to the S&P 500, which suffered its worst percentage decline since 2008 and is down 15% for the year, are indicating a 96 point opening bell comeback while Nasdaq futures suggest a 292 point rally at the start of trading.
Investors will need to be wary of both elevated levels of market volatility, including the CBOE's key VIX index, which is trading at the highest since 2008, and Treasury bond yields, which continue to gyrate, but at increasingly lower rates, as investors re-price growth while fleeing market risk.
Benchmark 10-year U.S. Treasury note yields, which touched and all-time low of 0.318% yesterday, were last seen changing hands at 0.64% in overnight trading, while 30-year bonds backed up over the 1% mark to 1.1%.
European stocks were also looking at a solid recovery Tuesday, with the Stoxx 600 climbing 2% by mid-day trading after falling into bear market territory amid Monday's global market rout.
Britain's FTSE 100, meanwhile, was marked 2.5% higher in London as energy stocks rallied and the pound dipped to 1.3022 against the U.S. dollar.
Global oil markets, too, were able to find bottom-feeding buyers after yesterday's historic crash, which saw prices fall the most since the first Gulf War in 1991, even as Saudi Arabia vows to ramp up production to the highest level in years.
In what many analysts see as a tactic designed to punish Russia for its failure to support OPEC's output limit proposal last week, Saudi Arabia is also slashing selling prices in order to win market share
Brent crude futures contracts for May delivery, the global benchmark, were last seen $2.97 higher from their Monday close in New York and trading at $37.33 per barrel, while WTI contracts for April delivery were marked $2.49 higher at $33.62 per barrel.
Overnight in Asia, a sharp slowdown in China infections and ongoing support from the country's central bank, including a weaker yuan, helped domestic stocks rally around 2%, lifting the MSCI Asia ex-Japan benchmark to a 1.16% gain heading into the final hours of trading.
Japan's Nikkei 225 closed 0.85% higher in Tokyo, but remains stuck under the 20,000 point mark at 19,867.12 points as the safe-haven yen continues to find bids at 104.41 against the greenback.