Weekly Market Recap
Asia Pacific
16/03/2020
Week in review
- Australian $17,6bn COVID stimulus package
- BoE cuts rates 50bps, GBP7bn financial stimulus
- ECB extends QE by EUR120bn and cheaper financing for banks
Week ahead
- U.S. Federal Reserve meeting
- Bank of Japan policy rate meeting
- Australia labourmarket report
Thought of the week
Policy actions to date have not eased anxiety about the economic impact from the spread of COVID-19 as equities plunge into bear market territory. What markets really need is a clear sign of a large and coordinated fiscal stimulus plan by the world’s largest economies, but that appears slow in coming. In the meantime, the announcement of further containment measures in Europe and the U.S. only deepen the market slide. The risk is that credit becomes squeezed and liquidity dries up. Higher funding costs through rising corporate bond yields, combined with a reduction in bank lending, could make the situation very much worse. The TED spread is one way to look at this. So far the spike is moderate compared to history. During the GFC the spread was 450bps.
So far limited signs of stress in the interbank market
TED spread, basis points
Source:IHS Markit, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr,AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
For more information, please call or email us. You can also contact your J.P. Morgan representative.
1800 576 100 (Application enquiries)