Three Key Market Events From This Week
ONE: FOMC MEETING (Wednesday) & ECB MEETING (Thursday)
The Fed on Wednesday did not opt to change any of its monetary policy tools. However, they did deliver a VERY dovish tone, pretty much saying they do not think there will be a V-shaped recovery in the US. and they will have to do more (which markets took as a hint that they are considering Yield Curve Control)
The ECB opted not to tweak their current QE programme or rates, but did introduce a new incentive scheme to get banks lending called the PELTRO (Pandemic Emergency Long-Term Refinancing Operation). After initial disappointment, markets have concluded that the ECB came across as dovish enough on QE (they said they will pretty much expand the PEPP as much as necessary), and EUR has strengthened.
TWO: GILEAD’S REMDESIVIR BREAKTHROUGH?
Earlier on in the week, the NIAIH and Gilead announced promising early data; Remdesivir appears to have a substantial positive effect on recovery times and in reducing the death rate of those infected with Covid-19.
Already, Japan, the US and other countries are rushing to authorise the use of the drug in treating their sickest Covid-19 patients. Over the next few weeks, we will know how well this drug works… could it be a game-changer?
Stock markets certainly rallied as if it would be at the time.
THREE: US/CHINA TRADE TENSIONS RISING
Over the past two days, an incoming ratcheting up of US/China trade tensions has become increasingly apparent. Trump is reportedly fuming at the way China handled the initial stages of the outbreak (lying about numbers, covering it up, refusing to cooperate internationally etc.). In reality, he is upset about the effect the Covid-19 outbreak is having on the US economy and his election chances.
US Officials are already drawing up ways to hit China; tariffs are certainly back on the menu. Risk assets such as stocks, AUD and also CNY face serious downside risk.
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