Rate cuts

The Bank of England cut its main rate by 50 basis points to 0.25% this morning in its first emergency move since the financial crisis. The announcement was accompanied by a package of measures including a new lending scheme and the reduction of the countercyclical capital buffer for commercial banks to 0%. Governor Mark Carney described it as a “big package” and said that QE remains part of their policy toolkit. Iceland also reduced rates by 50 basis points this morning, and the European Central Bank is expected to announce its own targeted measures alongside its scheduled policy decision tomorrow.

Stimulus

Also in the United Kingdom today, Chancellor of the Exchequer Rishi Sunak is expected to announce fiscal measures to help the economy as part of his first budget at 8:00 a.m. Eastern Time. European Union leaders got a stark warning from ECB president Christine Lagarde in a conference call yesterday where she said failure to act on fiscal stimulus risked the “collapse” of part of their economies. In the U.S., details of a promised fiscal response have yet to emerge, with President Donald Trump saying he wants a payroll tax holiday extended through November so taxes don’t go back up before the election.

Up and down again

The volatility that has dominated global markets recently shows no signs of slowing down. Yesterday’s rally into the close in U.S. markets was not repeated in Asia where both the MSCI Asia Pacific Index and Japan’s Topix index dropped by more than 1.5%. In Europe, the Stoxx 600 Index was 1% higher at 5:40 a.m. as stimulus hopes in the region rise. S&P 500 futures dropped 2%, the 10-year Treasury yield fell to 0.713% and gold was higher.

Biden wins

Joe Biden’s sweeping victories in Democratic primaries mean he now holds an almost insurmountable lead in the race for the party’s nomination. Friday sees similar contests in Florida, Ohio, Illinois and Arizona that could effectively end the race. The worsening coronavirus outbreak is hitting campaigning, with both sides scrapping rallies and Sunday’s scheduled face-to-face debate now going ahead without a live audience.

Coming up…

Headline U.S. inflation for February is expected to be shown to have slowed to 2.2% when the data is released at 8:30 a.m. Core inflation, which strips out volatile fuel and food costs, is forecast to remain unchanged at 2.3%. Speaking of volatile fuel prices, the oil market continues to have wild swings based on Saudi Arabian production news, so today’s U.S. crude inventories data at 10:30 a.m. will be closely watched. The February budget statement will be published in Washington at 2:00 p.m.