The Wednesday Market Minute
- Global stocks mixed as a surprise Bank of England rate cut supports stocks in Europe, but questions over tax cuts and fiscal stimulus in the U.S. hold down gains elsewhere.
- Trump administration is looking for payroll tax relief and small business support to combat the coronavirus hit to the economy, but Democrats are focused on sick leave and free testing.
- Bank of England cuts its key lending rate by 25 basis points, the first unscheduled move since 2008, to insulate economy from COIVD-19 impact.
- Benchmark 10-year bond yields retrace recent gains to trade at 0.70%, but VIX volatility levels remain elevated and market risk remains extreme.
- Former Vice President Joe Biden wins four of six states, including Michigan, in last night's primaries to cement his lead in the race for the Democratic Presidential nomination
- U.S. equity futures suggest another wild trading day on Wall Street, with the S&P 500 poised for a 110 point opening bell decline.
U.S. equity futures slumped lower Wednesday, while stocks in Europe gave back gains driven by a surprise interest rate cut from the Bank of England, as investors grow increasingly skeptical of near-term fiscal support from the Trump administration to combat the coronavirus.
Vice President Mike Pence, as well as Treasury Secretary Steven Munchin, met with lawmakers in Washington late Tuesday to find common ground on a government package they hope will include payroll tax cuts and support for small and medium-sized businesses. Democrats, however, were more focused on specifics such as paid sick leave and free coronavirus testing.
"We had a good reception on Capitol Hill. We're going to be working with Republican and Democratic leadership to move a legislative package," Pence said, although a promised press conference with President Donald Trump never materialized.
The lack of agreement, however, as well as headlines underscoring the rapid spread of the virus, which has infected more than 1,000 American and killed at least 28, put markets on the defensive in overnight trading and snuffed out any momentum from yesterday's 5% rally, the strongest gains on Wall Street since late 2018.
Futures contracts tied to the Dow Jones Industrial Average now suggest an 950 point opening bell decline, loping more than two thirds off last night's 1,167 point gain, while those linked to the S&P 500 are indicating a 111 point pullback for the broader benchmark.
European stocks gave back earlier gains following a surprise 50 basis point rate cut from the Bank of England -- the first unscheduled move since the global financial crisis of 2008 -- that comes amid the final days of Mark Carney's eight year tenure in London.
"Although the magnitude of the economic shock from COVID-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months," the BoE said in its emergency statement.
Britain's Conservative government is also expected to unveil some coronavirus-focusing spending plans when it presents its annual budget later today in Parliament.
The Stoxx 600 Europe was marked 0.05% lower by mid-day trading, wiping out the chance for its first session gain in five that would have taken the regional benchmark out of bear market territory, while Britain's FTSE 100 fell 0.22% by lunchtime in London.
The pound, however, reversed earlier declines following the rate cut, which takes the key Bank Rate to 0.25%, to trade at 1.2932 against the U.S. dollar.
Global oil markets were also on the back foot in the overnight session, after two consecutive days of 10% moves following the collapse of last week's OPEC production cut agreement and a burgeoning price war between Saudi Arabia and Russia, the world's second and third largest producers.
Brent crude futures contracts for May delivery, the global benchmark, were last seen $1.38 lower from their Tuesday close in New York and trading at $35.84 per barrel, while WTI contracts for April delivery were marked $1.30 cents lower at $33.06 per barrel.
Overnight in Asia, the momentum from Wall Streets' Tuesday rally was snuffed-out by confusion and questions with respect to the Trump administration's fiscal support plans, pulling the Nikkei 225 into a 2.27% session decline that pegged the benchmark at 19,416.06 points.
The region-wide MSCI ex-Japan index, meanwhile, was marked 1.1% lower heading into the final hours of trading , lead to the downside by stocks in Australia and South Korea.