The market is wearing masks and keeping its distance

The virus dictates the agenda, and even FOMC began to be held remotely scheduled meetings. So …

• FRS

Still, Bernanke 's ideas are eternal: Powell has again launched a «helicopter» loan program, in which for $1 allocated by the US Ministry of Finance, the FRS is ready to issue $10 of borrowed money. The printing press has been launched indefinitely, there is no rigid volume of the new QE, but the FRS promises to stop financial aggression at any time after the U.S. quarantine is lifted and markets normalize. The FRS's balance sheet rose to $5.25 trillion (+$586 billion) in a week − a high after the 2008 crisis, the upper limit estimated by analysts at $6.5 trillion.

Note the synchronous actions of the Bank of Canada, which again reduced the rate to 0.25% (-0.50%), and in an accompanying statement, Poloz said that the range of the decline could be expanded into a negative zone. To stabilize its debt market, BOC also launched a QE program of up to $5 billion weekly.

Democrats in the U.S. Senate actively objected, but ultimately adopted an antiviral aid program: $500 billion for large companies, $350 billion for small businesses, $1,200 for every adult American with a low or middle income, $500 for every child. And at the same time, Trump claims that such a cure is worse than the disease itself and as the epidemiological environment improves, he proposes to stop social isolation and go to work. Trump intends to cancel the quarantine before Easter, that is, from April 12.

Congress passed a third fiscal incentives package, immediately reflected in the rise in U.S. CDS default swaps. The feud between the United States and China about who was to blame for the coronavirus calmed down this week almost as quickly as it began. Trump has promised to no longer use the term «Chinese virus.»

Although the number of infected and sick is rising rapidly around the world, the S&P500 flew up 20% on fiscal incentives from the FRS and pulled the euro. Speculators are optimistic, expecting that the dollar will not rise to the role of the world reserve asset.

• ECB

Cheap liquidity from the ECB, an agreement with the FRS to exchange payment flows, and lower demand for the dollar have inspired the euro's technical correction. But a change in the rules of the game have added the positive: coronavirus abolished the 33% quota to buy up the debt of the issuing country.

A teleconference between EU leaders on Thursday proved ineffective. The leaders were unable to agree on the launch of short-term Eurobonds to help troubled countries, especially Italy and Spain. Holland, supported by other northern countries, most notably Austria and Germany, opposed papers to saving «burning Rome».

As a result, Italy's prime minister Conte refused to sign the summit communiqué gave the EU a deadline of 10 days to find options, though he did not specify what would happen in the absence of a solution. Recall: Italy's public debt is the largest in the eurozone, and it is impossible to save Italy according to Greece's scenario. If the cost of servicing the papers of the most affected countries is not reduced now, Europe's new debt crisis is guaranteed. Moreover, the economic damage caused by the coronavirus to the eurozone may be generally far more severe than in other regions. EU leaders want to do without the IMF and solve the issue through the ESM stable fund, but the participation of the IMF is necessary to monitor the implementation of the program, and «own» money to save Italy without the IMF will not suffice.

The decision by EU leaders in two weeks will be a key driver for the long-term fate of the euro.

• Pound

Johnson, Barnier and Britain's chief negotiator Frost are in self-isolation: the two first due to coronavirus disease, the third on suspicion. The negotiation process is blocked, but London continues to dream of contacts through video conferences. Fitch cut Britain's rating by one step to AA- with a negative outlook due to excessive government spending and uncertainty on further relations with the EU. Attention should be paid to the PMI of Britain's industry and services in the final reading for March on Wednesday and Friday respectively.

• Oil

Among OPEC countries there were proposals of an extraordinary summit. Reports on US oil reserves are not bad, despite all the talk of falling demand. Despite the difficulties for American shale, Trump has not yet launched a large-scale offensive, although Secretary of State Pompeo has held telephone calls with Saudi Arabia's crown prince. Several American congressmen (threatened by sanctions, duties, and other heavenly punishments) proposed to Saudi Arabia to withdraw from OPEC and create a temporary alliance with the United States, the Arab reaction to this is unknown.

Russia has so far resisted dumping, although it allows resuscitating OPEC+ and claims current contacts with Saudi Arabia and several other players. Performances of the FRS and ECB figures are not scheduled, but that doesn't mean there won't be their verbal pressure. The ECB will hold an interim meeting on Wednesday, waiting for a traditional insider.

Probably, euphoria in the topic of monetary incentives becomes irrelevant, and macroeconomic statistics are unlikely to please fans of stock indices. The NFP is expected to fail, although rising unemployment is closely linked to quarantine and is a temporary phenomenon, the dollar has to respond. Apart from the NFP, this week we are interested in ISM industry and services, NFP and ADP; regarding the Eurozone − PMI of industry and services and consumer price inflation for March. China will publish fresh PMI during the next three days. In fact, this is the first data for a preliminary assessment of the consequences of the epidemic − it is worth studying carefully.

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