Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Chief Investment Officer
Summary: Markets are coming back online in Europe this week for the first trading session after the Eurogroup emergency spending deal. After this agreed deal and the latest massive push from the Fed to provide support for small businesses and even junk bonds, markets are in a hopeful mood, even as visibility from here for the real economy remains poor. Despite the historic OPEC++ deal crude oil remains troubled by an overhang of supply as lockdowns continue to suppress demand.
What is our trading focus?
What is going on?
Recap – latest Fed bazooka last Thursday – this was another aggressive Fed moves that has likely provided a considerable portion of the market’s improved sentiment. The Fed last Thursday announced another $2.3 trillion in backstops for the economy in announcing, among other measures, purchases of junk debt (if downgrades were made to junk after March 22) as well as a lending program for small businesses and direct financing for states, municipalities and counties.
Covid19: talk in the US of a return to normalization, with few plans on the ground for what this looks like and a very divided opinion across the US depending on the region. Europe is on a more forward timeline than the US and many countries have extended lockdowns into early May, although some countries like Austria and Denmark will start a slow opening up this week.
Australia NAB Business survey saw confidence plummeting to -66 in March from -2 in February, an unheard of drop and compares with a financial crisis low of -31.
What we are watching next?
The mood in Europe – a late Eurogroup deal to provide EUR 540 billion in emergency funding across the EU was hammered out last Thursday after European markets closed, and today is the first day back from holiday for most EU markets after the Easter break.
Beginning of earnings season – the Q1 earnings season starts today and this week focus will be on financials which have been lagging the overall market. Earnings outlook from financials this week will be the first real test of sentiment in equity markets.
Economic Calendar (times GMT)
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