Top 5 Things to Know in the Market on Tuesday, March 31st

© Reuters.  © Reuters.

By Geoffrey Smith — There’s a new U.S. economic support bill in the offing already, only days after the last one was passed. Europe’s Covid-19 outbreak may peak soon, the World Health Organization says, and China’s economy shows first signs of rebounding. That’s all helping global stock markets higher, but there’s still tension in foreign exchange markets, especially in central Europe as authoritarian rulers in Hungary and Poland use the Covid-19 emergency to consolidate their hold on power. Here’s what you need to know in financial markets on Tuesday, March 31.

1. Phase 4 is on the way as virus and lockdowns spread in U.S.

The White House and Congress are already working on a ‘phase 4’ economic support package, less than a week after President Donald Trump signed the $ 2.2 trillion ‘phase 3’ deal into place, according to Bloomberg.

The news agency reported that White House officials have compiled lists of requests from government agencies totaling roughly $ 600 billion. House Speaker Nancy Pelosi told reporters that more support for local government could be necessary, along with further direct payments to households.

The U.S. is rapidly taking over from Europe as the global epicenter of the Covid-19 pandemic, with 164,610 confirmed cases and a death toll of 3,170 that is still rising quickly. New York City alone has 67,000 cases and has registered 1,342 deaths, according to Johns Hopkins.

Maryland, Virginia and Washington D.C. all enacted tighter restrictions on non-essential movement and business on Monday.

2. WHO sees Europe hitting peak Covid-19 soon; data calm before the storm

The World Health Organization said the Covid-19 outbreak may peak soon in Europe, but fatalities continued to rise in Spain, France and Italy. In Italy, at least, the figures show a clear slowdown in growth.

The virus already appeared to be showing in the region’s hard economic data, with eurozone inflation falling to 0.7% on the year in March, from 1.2% in February, chiefly due to lower oil prices.

However, the labor market apocalypse will have to wait another few weeks, as Germany’s jobless number rose by only 1,000. ING analyst Carsten Brzeski noted that the cut-off point for the data was before the nationwide lockdown began 9 days ago.

3. China PMI rebounds strongly

The Chinese economy showed signs of stabilization after its record contraction in the first two months of the year. The official Purchasing Managers Index rose to 52 in March, back above the line that indicates economic growth, from 35.7 in February.

The news tallies with reports of individual countries reopening factories as lockdowns across the country are eased. However, most of those companies reporting have simultaneously said that their facilities are working well below capacity due to ongoing operational constraints.

The was left little changed against the dollar.

4. Stocks set to open higher, dollar strengthens again

U.S. stock markets are poised to open higher, as market price in reports of further U.S. stimulus and a faint light at the end of the virus tunnel for Europe. End-of-quarter portfolio rebalancing also appears to be playing a role.

By 6:35 AM ET (1035 GMT), the Jones 30 futures contract was up 27 points, or 0.1%, at 22,193. The S&P 500 futures contract was up 0.1% and the contract was up 0.4%.

European markets were also broadly higher, with the benchmark rising 0.7% to 316.94.

China and most other Asian markets, with the exception of Japan, had also closed higher in a broad risk-on move.

The dollar, however, was on the march again, rising 0.5% as Japanese banks in particular chased greenbacks for their year-end accounting.

5. Democracy, currencies in trouble in Central Europe

The euro hit a new all-time high against the Hungarian forint, after Hungary’s parliament voted through a radical new law that effectively suspends constitutional law and raises grave doubts about its long-term place in the European Union.

The law extends a state of emergency declared by Prime Minister Viktor Orban earlier this month I the context of the Covid-19 pandemic. It allows him to rule by decree for an unlimited period. It also makes the spreading of ‘fake news’ punishable by up to five years in prison.

By 6:35 AM ET, the euro was at 359.115 , down fractionally from an earlier high of 360.41.

The euro has now risen some 7% against the forint in the last month, and by 5.5% against the Polish , which is also under pressure from concerns about a drift to authoritarian rule. Poland’s nationalist right-wing government is currently pressing ahead with plans for an election on May 10, despite the obvious public health risks. 

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