In the first week of March, as in the last week of February, the market and investors can still react to reports of new cases of coronavirus infection or the increasing number of people who have recovered. The situation may develop in two directions, but probably in the first quarter, the global economy will definitely slow down.
Coronavirus along with macroeconomic data and central bank decisions as well as the OPEC+ meeting — is a mix of events that can again provide a lot of excitement and potential volatility in many markets. On the 29th of February, the first key data from the Chinese economy will be published. These will be readings of PMIs for services and manufacturing. The market consensus assumes a solid fall below 50 points, which may indicate a recession in these sectors in February. On Monday, March 2, another PMIs will be published throughout the day from Japan through the eurozone to the United States. They may indicate whether the virus has caused major damage to the economies of individual countries in February.
Central bankers from Australia, Poland, and Canada will present the approach to the current market and economic situation. On Tuesday, March 3rd at 4:30 the decision on interest rates in Australia will be published. Market consensus does not imply changes, but RBA statements may be dovish. Traders in the options market are preparing for increased volatility during this event. The Polish Monetary Policy Council will publish its decision on Wednesday, 4 March. The interest rate market for PLN indicates that the chances for monetary easing in the country have increased. Therefore, it will be crucial to listen to the statements of the Council representatives during a press conference. There may also be a discussion on reducing the pace of interest rate changes in Poland from 25 basis points to 15. Also, on Wednesday, at 16:00, a decision on interest rates in Canada will be published. The market consensus does not assume interest rate changes, but the tone of the Bank of Canada statement may be crucial.
It seems that the OPEC + meeting on 5-6 March may also be very interesting. After the recent huge drop in oil prices on global markets, investors can expect specific decisions after this meeting. OPEC, in turn, needs to analyze how much the drop in oil demand could have been caused by the coronavirus epidemic and whether and when demand increases. The media says that Saudi Arabia wants an additional production cut of 1 million barrels a day. On the other hand, the consensus now assumes extending the deal for reducing production until the end of the year and reducing production by another 600 million barrels per day.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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