Morning briefing: Five things you need to know before market opens

By: | Published: March 18, 2019 7:47 AM

Asian equity futures are all pointing higher after global shares had their best performance in almost four months last week.

Australia’s budget will surge back to surplus in fiscal 2020 as key revenue drivers dodge an economic slowdown, but a pre-election spending spree is a risk to the bottom line. (Representational photo/Reuters)

Troubled Deutsche Bank has abandoned attempts to turn the ailing firm around and agreed to explore merger talks with Commerzbank, a bunch of central banks in Asia meet this week as well as the Fed and the BOE, with all expected to stand pat on rates, and as the world reels from the New Zealand mosque massacre, Facebook faces a backlash. Here’s what’s moving markets.

Deutsche Bank, Commerzbank in Talks
Deutsche Bank AG threw in the towel on years of failed turnaround efforts and agreed to begin government-backed merger talks with Commerzbank AG. Both firms have struggled to restore revenue growth after deep cuts to their investment banking units. An economic slowdown that has pushed back expectations for higher interest rates has added urgency to the situation. It won’t be plain sailing. By bowing to officials’ desire to forge a durable German lender with global reach out of two troubled firms, Deutsche Bank’s leaders are hardly putting their woes behind them: massive job cuts, political turbulence, a weakening European economy, U.S. probes into its dealings with Donald Trump and a herculean integration – not to mention skeptical clients and investors — lie ahead if they reach a deal. Meanwhile, Allianz SE is exploring the possibility of a combination of its asset management arm with Deutsche Bank’s DWS Group.

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Markets Open
Asian equity futures are all pointing higher after global shares had their best performance in almost four months last week, with the MSCI World Index climbing 2.8 percent. Almost all G-10 currencies rose against the dollar on Friday, led by the Swedish krona. Ten-year Treasury yields fell four basis points on soft economic data. Oil ended slightly down, snapping a four-day rally, and gold gained. As the week unfolds, a clutch of Asian central banks meet. Philippine, Indonesian, Thailand and Taiwan policy makers are all expected to stand pat, according to surveys. Fed officials and the Bank of England also decide on rates, with both expected to keep borrowing costs unchanged. Australian jobs on Thursday will be a focal point for how the economy is traveling.

Black Box Similarities
The Ethiopian Air Boeing 737 Max crash had similarities to the Lion Air plane that went down off the coast of Indonesia about five months ago, the nation’s transport minister said, as scrutiny of one of the aircraft’s flight control systems continued to build. The Ethiopian Airlines plane crashed March 10 minutes after it took off from Ethiopia’s capital, killing all 157 people on board. The accident prompted most of the world to ground Boeing Co.’s 737 Max 8 aircraft on safety concerns. Much of the attention focused on a specific flight-control system known as MCAS that may have thwarted pilots’ efforts to keep the plane from falling into a catastrophic nose dive.

New Zealand Massacre
Footage of the New Zealand mosque shootings that was pulled down by Facebook, YouTube and other social media platforms has resurfaced as a campaign prop in Turkey. President Recep Tayyip Erdogan screened a montage of videotaped snippets from the attack on Muslim houses of worship in an apparent attempt to galvanize his pious, conservative base ahead of March 31 local elections. Meanwhile, Facebook is facing a backlash over the streaming of the video. AirAsia Group Bhd Chief Executive Officer Tony Fernandes closed his Facebook account, saying the live streaming of the mass shooting in New Zealand on the platform was too much for him.

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Back to Black
Australia’s budget will surge back to surplus in fiscal 2020 as key revenue drivers dodge an economic slowdown, but a pre-election spending spree is a risk to the bottom line, according to Deloitte Access Economics. The April 2 budget will show an underlying cash surplus of A$9.8 billion ($7 billion) in the 12 months through June 2020 from a A$2.1 billion deficit this fiscal year, Chris Richardson, a Deloitte partner and ex-Treasury official, said in a report released Monday. That’s despite a sharp deceleration in economic growth as tumbling property prices curb consumption and construction. Prime Minister Scott Morrison’s government is trailing in opinion polls ahead of a May election and is expected to use the improved fiscal position to try to push its way back into contention.

South Korea considering holding talks with the North. How China’s bond, stock markets can step up funding role. A rally in emerging-market debt may be on the cards. Thai election to test Asia’s strongest currency. Saudis urge OPEC+ to stick with oil cuts. PE firm eyes China’s malls after Hong Kong test run. The murky flood of money in India’s election.

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