Top 5 Things to Know in the Market on Wednesday, March 25th

By Geoffrey Smith

Investing.com -- The Senate agrees on its $2 trillion stimulus package and will vote on it later Wednesday. Global stock markets stalled, after rallying violently on Tuesday in anticipation of the measures being approved, while oil markets ran out of steam amid no sign of an end to the global price war. The euro zone moved closer to mobilizing its regional bailout fund, while the dollar continued to give up gains as global liquidity stresses eased. Here's what you need to know in financial markets on Wednesday, March 25th.

1. Senate agrees stimulus deal; Trump agitates to end lockdowns by Easter

The U.S. Senate finally agreed on the terms of a $2 trillion package of measures to support the economy through the Covid-19 crisis.

Majority Leader Mitch McConnell said the Senate will move to vote on the bill later Wednesday, although there still remains some doubt as to how quickly it can pass in the Democrat-controlled House of Representatives.

The final terms are still not known, but various officials have indicated they include direct payments to U.S. families and a big increase in unemployment insurance, as well as some $500 billion in support for larger companies and $150 billion for the health care system.

President Donald Trump said late on Tuesday he wanted to reopen the economy by Easter, on April 12 this year, minimizing the nationwide down time.

2. Markets pause for breath after epic (bear-market) rally

Global stock markets struggled to extend a two-day rally on news of progress on Capitol Hill.

By 6:45 AM ET (1045 GMT), the major U.S. indices were all running out of steam, after the Dow posted its biggest one-day gain since 1933 on Tuesday in anticipation of the agreement.

The Dow Jones 30 futures contract was up less than 0.1%, while S&P 500 futures were down 0.6% and the Nasdaq 100 contract was down 0.4%.

3. Dollar squeeze eases further

The global squeeze for dollar eased further, as the emergency liquidity lines set up by the Federal Reserve both at home and abroad addressed an acute shortage of ready cash.

The dollar index, which tracks the greenback against a basket of developed market currencies, fell 0.90% to 101.34, over 2.5% down from Monday’s high but still up more than 2% on the week.

Demand for seven-day dollars at the European Central Bank’s daily swap operation was down by over half from last week. The dollar also retreated against emerging currencies such as the South African rand, Mexican peso and Russian ruble, but rose another 0.4% against the Chinese yuan.

4. Euro zone inches toward activating ESM, as Ifo index falls further

The euro zone inched closer to deploying its regional bailout fund, the European Stability Mechanism.

A meeting of eurozone finance ministers indicated that member states could count on borrowing up to 2% of GDP through an ‘enhanced conditions credit line’, for which the usual tight conditions on fiscal and structural reforms would likely be waived or at least substantially relaxed.

However, there was no discernible progress toward the issuance of joint debt, as has been urged in the last week by the Prime Ministers of Spain and Italy, the two eurozone countries hit worst by the Covid-19 virus.

Elsewhere Wednesday, the scale of the coming European recession was underlined as German research institute Ifo revised down its closely-watched business climate index for March to 86.1, its lowest since August 2009.

5. Oil reverses as price war drags on

The bounce in crude oil prices topped out, as little of substance materialized to back up hopes of an early end to the global price war.

By 6:45 AM ET, U.S. crude futures were down 2.0% at $23.52 a barrel, while Brent was down 3.2% at $26.27 a barrel.

Norwegian major Equinor (NYSE:EQNR) joined Chevron (NYSE:CVX) and others in announcing a 20% cut in this year’s capital spending that now appears to be the industry-standard response.

Government data for oil inventories are due at 10:30. The figure for gasoline is likely to be as closely watched as that for crude stocks, given the record lows that gasoline futures have posted recently, and warnings of reduced U.S. refinery runs.

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