The average loss for European Indices was an enormous -8.09%, the US Indices average fall was -7.21%, and US Oil also fell over 28% on Monday. Oil falls was due to tensions between Saudi Arabia and Russia resulting in the end of OPEC’s agreed production cuts from April 01. On Wednesday, the World Health Organisation declared the coronavirus a global pandemic this week and that prompted further extensive and heavy waves of equity selling across global markets. It’s been a terrible week for equity markets. The Bank of England was the latest bank to cut interest rates cutting by 50 bps last week. The bad news is that the peak of the coronavirus has not been reached yet and more shocks are still to come.

Key events from the past week

  • GBP: BoE cuts by 50bps, Wednesday, March 11. The Bank of England cut interest rates by 50 bps last week resulting in immediate GBP selling. The GBPUSD ultimately sold off helped by the strong dollar and EU-UK Trade pessimism.
  • US Oil: Oil markets plunge, Monday, March 09. The fall in the crude complex saw double digit falls as Saudi Arabia reminded the market of how low oil prices can be without the work of OPEC to prop up prices. Falling demand for oil, over-supply, and reluctance for Russia to cut, all point to further oil selling.
  • ECB: European Central Bank holds rates, Thursday, March 12. The ECB kept their interest rates unchanged, but announced a €120 billion package of quantitative easing. The EURUSD weakened on the action from the ECB sending the Dollar Index higher on Thursday and impacting the major pairs.

Key events for the coming week

  • USD: Fed rate decision, Wednesday, March 18. The expectations are that the Fed will cut rates by another 50 bps on Wednesday with the market odds of a 100 bps rate cut now at 85%. The main driver of the USD at the moment is the Fed’s monetary policy and hopes of further fiscal stimulus to the US economy.
  • CAD: Core CPI (Inflation), Wednesday, March 18. The expectations are that the BoC will cut rates even further after their surprise 50 bps rate cut last week. Weak inflation data this week will only strengthen bearish expectations.
  • Coronavirus: Watch out for the latest virus news. The impact of the coronavirus is once again felt this week as behavioural changes start to further impact markets. Expect profit warnings, falling equities, more enforced quarantines, and falling oil demand to all weigh on the market again this week.

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