Heads up: ECB speakers (including Draghi) coming up in the day ahead
0800 GMT – ECB president Draghi speaks in Frankfurt
Draghi will be delivering the opening address at the ‘ECB and Its Watchers XX’ conference. His speech is expected to last for 40 minutes. Given the backdrop of the event, he could touch on monetary policy and make some remarks on the economy so keep your eyes and ears peeled just in case.
0800 GMT – ECB’s Nowotny speaks in Vienna
Nowotny will be delivering the welcoming remarks at the anniversary conference celebrating the 10th year of the Vienna Initiative. I wouldn’t expect him to touch on monetary policy in that regard but he could mention a thing or two about the economy.
0845 GMT – ECB’s Praet speaks in Frankfurt
Praet will be participating in a debate on ‘Next Steps in Policy Normalisation’ at the same event as Draghi above. The debate is expected to carry on until 1015 GMT.
1000 GMT – ECB’s Lautenschlaeger participates in a panel discussion in Vienna
She will be at the same event as Nowotny above and the panel discussion will pertain to ‘New Challenges on Cross Border Banking’. Hence, I wouldn’t expect any material comments to come from the event here.
1045 GMT – ECB’s de Guindos speaks in Frankfurt
de Guindos will be participating in a debate on ‘International Spillovers of Monetary Policy and Financial Stability Concerns’ at the same event as Draghi above. The debate is expected to carry on until 1215 GMT.
1330 GMT – ECB’s Mersch speaks in Frankfurt
Mersch will be participating in a debate on ‘Challenges to Central Bank Independence’ at the same event as Draghi above. The debate is expected to carry on until 1500 GMT.
1730 GMT – ECB’s Villeroy speaks in Geneva
I can’t find any details on Villeroy’s appearance here but just take note in any case. However, I wouldn’t expect him to make any significant comments and deviate from the current ECB script if he does touch on any sensitive topics.
NZ central bank flags rate cut as likely next move, kiwi tumbles
- RBNZ surprises with shift to easing bias, NZ$ drops sharply
- Cites weaker global outlook, domestic spending
- Shifts in policy stances of other central banks were a factor
- Economist says rate cut could be as soon as May
New Zealand’s central bank unexpectedly said its next move in interest rates was more likely to be a cut, abandoning its neutral stance at a policy review on Wednesday and knocking the currency down sharply to two-week lows.
The Reserve Bank of New Zealand (RBNZ) held the benchmark rate at a record low 1.75 percent, as expected, though the shift to explicitly favour a cut stunned investors as its projections last month showed the cash rate increasing in early 2021.
“We now expect a 25 basis point rate cut in May, followed by another cut in August – largely depending on the performance of the currency,” said Kiwibank senior economist Jeremy Couchman, who had previously expected steady rates well into 2021.
The New Zealand dollar tumbled from above $0.69 before the policy decision to two-week lows just under $0.68, a move the central bank would welcome as it pointed to currency strength as a factor in its shift in bias.
“Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down,” RBNZ Governor Adrian Orr said in a statement.
Bond and bill futures also rallied sharply to leave yields at fresh all-time lows. Bill futures are now pricing in at least one quarter-point cut in rates.
The decision to hold rates steady was in line with the unanimous view in a Reuters poll. That poll also showed economists had removed expectations of a rate rise this year.
BALANCE OF RISKS SHIFTS
At its February policy review, the RBNZ had said it expected to keep the cash rate steady through 2020 and the direction of the next move could be up or down.
“The balance of risks to this outlook has shifted to the downside. The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending,” Orr said.
On the upside, if firms were more able to pass on cost increases, inflation could rise faster than expected, he said.
“We were very surprised by this change of stance, because the economic situation has not changed much since the RBNZ’s last missive in February,” Westpac chief economist Dominick Stephens said.
“Perhaps the main reason for the change of stance was the actions of other central banks.”
Since the RBNZ’s previous decision in mid-February, the U.S. Federal Reserve has abandoned projections for interest rate rises this year, and markets have been unsettled by movements in U.S. bond yields that have in the past signalled the risk of recession.
Orr noted the global economic outlook continued to weaken, particularly for some key trading partners including Australia, Europe and China, and said that had prompted central banks to ease their expected policy stances which in turn had put upward pressure on the New Zealand dollar.
Stock Market News
Dow Ends Higher, but Gains Capped by Weak Economic Data
The Dow ended higher as energy stocks jumped, but weak economic data added to concerns about global growth, keeping a lid on gains.
The Dow Jones Industrial Average rose about 0.55%. The S&P 500 was stronger and added 0.72%, while the Nasdaq Composite gained 0.71%.
Rising energy stocks powered the broader market higher as oil prices advanced 1.9% amid easing worries of a glut in global supplies following a power cut in Venezuela and expectations the Energy Information Administration will report a draw in crude inventories for the third-straight week on Wednesday.
Stocks gave up some of their bulky intraday gains as U.S. bond yields eased from session highs, though the United States 10-Year yield managed to hold above the key 2.40% level. The move arrived as U.S. data pointed to a slowdown in the underlying economy amid soft housing and consumer confidence numbers.
The Conference Board’s consumer confidence gauge fell to reading of 124.1 in March from 131.4 in February, well short of economists’ forecasts for a reading of 132.
Investor jitters on economic growth took a further hit as U.S. housing starts fell 8.7%, the second-biggest monthly decline since November 2016. Building permits, a key indicator of U.S. housing production, fell 1.6%, down for the second-straight month.
The weaker housing data triggered mixed performance in homebuilders.
DR Horton (NYSE:DHI) fell 0.91% and Lennar (NYSE:LEN), which reports results on Wednesday before U.S. markets open, rose 0.44%. KB Home (NYSE:KBH) rose 0.88%.
In tech, meanwhile, Apple (NASDAQ:AAPL) came under pressure, falling 1%, after a U.S. trade judge said that the iPhone maker had infringed a Qualcomm patent and ruled that some imported iPhones should be banned from the United States. Qualcomm (NASDAQ:QCOM) rose 2.40%.
Consumer discretionary stocks eked out a gain for the day despite an 8.7% slump in shares of Carnival (NYSE:CCL) as its above-consensus fiscal first-quarter results were overshadowed by weaker-than-expected earnings guidance.
The cruise line guided second-quarter fiscal earnings in a range of 56 to 60 cents per share, below current estimates of 73 cents per share, according to S&P Capital IQ.
In other company news, Viacom (NASDAQ:VIAB) surged after the broadcaster reaffirmed its full-year guidance for its media networks division. This comes amid reports the company has resumed merger talks with CBS (NYSE:CBS)
Top S&P 500 Gainers and Losers Today:
Viacom (NASDAQ:VIAB), Biogen (NASDAQ:BIIB) and CBS (NYSE:CBS) were among the top S&P 500 gainers for the session.
Carnival (NYSE:CCL), Abiomed (NASDAQ:ABMD) and WellCare Health Plans (NYSE:WCG) were among the worst S&P 500 performers of the session.
Nissan panel to propose bigger role for external directors in Ghosn scandal’s wake
A committee tasked with revamping corporate governance at Nissan Motor Co is expected to recommend on Wednesday a bigger role for external directors in overseeing the Japanese automaker following Carlos Ghosn’s arrest and ouster as chairman.
The independent panel will announce the results of its three-month audit of Nissan’s governance-related procedures, as the company seeks to draw a line under a near two-decade-long period during which Ghosn wielded outsized influence in his dual roles as its chairman and CEO for much of that time.
To decentralize the power structure at Japan’s second-largest automaker, the seven-member committee will likely also suggest that the company establish committees for board member nominations, auditing and for determining executive pay, according to a person familiar with the matter.
It may also recommend splitting the positions of company chairman, a role held by veteran top executives, and chairman of the board, who presides over board meetings, and that the latter position should be held by an external director.
The committee was not immediately reachable for comment, but has previously declined to comment on the matter. It will hold a briefing on Wednesday evening to release the recommendations.
Like executives at many Japanese companies, Ghosn held both chairmanship positions at Nissan, adding to his influence at the automaker.
Nissan has said that too much power had been concentrated on Ghosn, one of the most feted executives in the global auto industry who orchestrated Nissan’s financial recovery in the early 2000s and created the blueprint for the automaking alliance between Nissan and France’s Renault SA.
At the time of his arrest in Tokyo in November on financial misconduct allegations, Ghosn held the chairmanship at Nissan, Renault and Mitsubishi Motors Corp, which together form one of the world’s biggest automakers, while also serving as Renault CEO.
Ghosn is facing charges related to under-reporting his Nissan salary by around $82 million over nearly a decade, and for temporarily shifting personal financial losses onto Nissan’s books during the global financial crisis.
He denies the charges and has argued that his arrest and ouster from Nissan were orchestrated by executives at the company who were opposed to his plans for closer ties with Renault.
Nissan, Renault and Mitsubishi Motors are retooling their partnership to create a more equal footing between them. Bound by complex cross-shareholdings, the three companies aim to leverage their combined scale to reduce costs for development, procurement and production.
Earlier this month, the three automakers announced they would create an operating board headed by top executives from each of the companies which would oversee the partnership’s operations and governance – a role largely held by Ghosn alone in the past.
The newly appointed chairman of Renault, Jean-Dominique Senard, will serve as head of the alliance but – in a critical sign of the rebalancing – not as company chairman of Nissan, a position which could be left vacant for now, according to people with knowledge of the issue.
Nissan is considering asking ex-Toray Industries chief and Japan Inc heavyweight Sadayuki Sakakibara, who served on the reform committee, to take on the role of chairman of the board at the automaker.
Oil Holds Steady Despite Surprise Crude Build
The American Petroleum Institute (API) reported a build in crude oil inventory 1.93 million barrels for the week ending March 22, coming in under analyst expectations of a 1.1-million-barrel draw.
Last week, the API reported a large surprise draw in crude oil of 2.133 million barrels. A day later, the EIA reported a draw of a much larger amount, estimating that crude inventories had drawn down by 9.6 million barrels.
Including this week’s data, the net build of just 430,000 barrels for the twelve reporting periods so far this year, using API data.
WTI was trading up on Tuesday in the runup to the data release at $59.94, up $1.12 (+1.90%) on the day at 1:25pm. The Brent benchmark was trading up at $67.43, up $0.62 (+0.93%) at that time. While the WTI benchmark is trading up roughly $.70 week on week the Brent benchmark is trading down $.15 per barrel.
Oil prices are still near four-month highs, with WTI even breaking the $60 mark earlier on Tuesday, as Saudi Arabia reaffirms its commitment to hold fast to its production cuts and hints that it is looking for at least $70 oil. Still, economic worries that threaten future oil demand serve as the current barrier for further price gains.
The API this week reported a draw in gasoline inventories for week ending March 22 in the amount of 3.469 million barrels. Analysts estimated a draw in gasoline inventories of 2.900 million barrels for the week.
US crude oil production as estimated by the Energy Information Administration showed that production for the week ending March 15—the latest information available—resumed its 12.1 million bpd average—an all-time high for the United States.
Distillate inventories decreased by 4.278 million barrels, compared to an expected draw of 716,000 barrels for the week.
Crude oil inventories at the Cushing, Oklahoma facility grew by 688,000 barrels for the week.
The U.S. Energy Information Administration report on crude oil inventories is due to be released on Wednesday at 10:30a.m. EST.
By 4:39pm EST, WTI was trading up at $60.04 and Brent was trading up at $67.52.
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