OVERNIGHT NEWS
* Risk assets and bond yields rise in Asia, ignore China 1Q GDP; US unveils plan to re-open economy, lift social distancing restrictions in 4 weeks; Gilead Sciences reports success in trial of coronavirus drug; Saudi/Russia ready to cut output further
* China 1Q GDP contracted 6.8% yoy (-9.8% qoq), worst since at least 1992; March industrial production fell 1.1% yoy, retail sales slumped 15.8% and FAI ytd fell 16.1%; USD/CNY unch at 7.0790
* EU March car sales fall record 52% yoy, French President Macron says EU has ‘no choice’ but to set up a fund that could issue common debt with a common guarantee based on member country need, not size; 10y BTP -8bp to 1.75%
* India: RBI cuts reverse repo rate by 25bp to 3.75%, announces liquidity enhancing measures including INR500bn TLTRO
* Argentina offers to restructure $83bn debt, including suspension of repayments for 3 years and 62% haircut on interest payments to avoid 9th default (FT )
* Nikkei +3.15%, EUR 10y IRS +1bp at -0.08%, Brent crude +2.7% at 28.57/b
China 1Q GDP contracted by 6.8% yoy
Crises and the (real, trade-weighed) dollar
Markets are taking it one step at a time as we head into the weekend. US equity futures rallied 3% and gold is back below $1700 as news from the US was positive: reports of potential effective treatment of Gilead Science’s remdesivir for coronavirus patients wile Trump unveiled guidelines to reopen the US economy. However, we do highlight caveats on both these developments. Meanwhile WTI crude prices have slipped below $20 but G10 commodity currencies are higher vs USD. CitiFX Technicals are watching the WTI close. For ARS, the government unveiled a proposal for a new debt restructuring although full details to be revealed today.
On more negative developments, China Q1 GDP was as bad as expected – a -6.8%YoY fall, the worst performance since at least 1992. BRL saw the removal of its health minister while Bolsonaro criticized the Speaker of the Lower House. Wuhan saw a significant revision in fatalities data pointing to broader data difficulties.
Latin America: Currencies in the region continued weakening, led by high betas such as COP and MXN, which depreciated by 1.6% and 1.1% to 3980 and 24.2435, respectively. Part of Thursday’s move was driven by a recent rebound in dollar strength which coincided with lower commodity prices including oil.
The currency market has taken a more sceptical view on the rise in risk
appetite overnight, with FX perhaps buffeted by a further drop in oil prices this
morning. The financial market mood has been boosted by the release of the US plan
for exiting lockdown measures, and news of progress in finding a treatment for
COVID-19. This allowed the market to ignore worse than expected Q1 GDP data
from China and evidence of a very uneven recovery in March. European equities are
sharply higher this morning. But while the “risk on” FX barometer of AUD-JPY initially
moved higher overnight alongside equities, the bulk of those gains were surrendered
as the European session progressed. The retreat largely coincided with a renewed
dip in oil prices, with WTI falling to challenge USD18bbl. The fickle price action in FX
underlines the struggles in the market to find a clear path for risk appetite after the
plunge in March and the partial retracement thereafter.
GLOBAL
*U.S. stock-index futures jump with global markets as investors turn their attention to plans for restarting locked-down economies
*The Trump administration issued guidelines that could allow states and employers to abandon most social distancing practices within a month
*China’s gross domestic product shrank 6.8% from a year ago, the worst performance since at least 1992
*China Revised Its Death Toll By 39%, Adding More Than 1,000 Fatalities in Wuhan
*Russia reported another record daily increase in new infections. Cases also increased in Germany at a faster rate, while Singapore reported its biggest jump in infections after an outbreak at dormitories
*The Italian government may set up a 70 billion-euro ($76 billion) package of spending measures in a decree
*More than 15,000 U.K. companies fell into “significant distress” in the first three months of 2020
*Oil Extends Slump Below $19 Following Persistent Gloomy Demand
COLOMBIA
*2pm: (CO) Feb. Economic Activity NSA YoY, est. 3.3%, prior 3.5%