By Geoffrey Smith
Investing.com — Joe Biden swept the South on Super Tuesday, turning the Democratic presidential nomination campaign into a straight two-way fight with Bernie Sanders. The news turned U.S. stock futures positive, and further gains look possible as the market reassesses the emergency interest rate cut from the Federal Reserve. The Bank of Canada is set to follow the Fed’s lead later, and the Indian rupee fell after the country’s central bank governor said he saw room for further rate cuts. Nordstrom (NYSE:) and HPE are both set to open under pressure after weak earnings late on Tuesday, and Saudi Arabia is pushing for an oil output cut of over 1 million barrels a day at this week’s OPEC+ meeting. Here’s what you need to know in financial markets on Wednesday, March 4th.
1. It’s Biden vs. Sanders
Joe Biden triumphally resurrected his campaign for the Democratic Party’s presidential nomination, winning the primaries in all but one of the biggest states to declare on Super Tuesday.
The exception was, predictably, California, which was carried by Vermont Sen. Bernie Sanders. However, the results propelled Biden – whose campaign was seen as dead in the water after weak showings in Iowa and New Hampshire – above Sanders in the tally of convention delegates for the first time. Biden now leads by 397 to Sanders’ 356.
The campaigns of media mogul Mike Bloomberg and Sen. Elizabeth Warren – who lost to Biden in her home state of Massachusetts – are now over in all but name.
2. U.S. stocks turn sharply higher
U.S. futures turned positive overnight, after the results of Super Tuesday sharply reduced the chance of a Sanders presidency, an outcome not favored by Wall Street.
By 6:40 AM ET (1140 GMT), the contract was up 575 points or 2.2%, while the contract was up 2.0% and the contract was up 2.1%.
In part, that also reflects the more considered response to the Federal Reserve’s emergency half-point interest rate cut on Tuesday. Stocks had sold off aggressively in the wake of a move that smacked of panic, although many analysts agreed with Fed Chair Jerome Powell’s assessment that – while it couldn’t stop the virus itself – it would provide a “meaningful boost” to the economy.
Looser financial conditions globally should reduce the risk of viable companies going bankrupt due to essentially short-term problems with cash flow due to the virus.
3. Follow the leader
The is expected to follow the Federal Reserve’s lead and cut its key rate by 50 basis points at its policy meeting, after keeping it steady at 1.75% for the last year and a half.
The bank will announce its decision at 10 AM ET (1500 GMT). Until the Fed’s move on Tuesday, expectations had been only for a 25 basis-point cut.
Elsewhere, the Reserve Bank of India signalled it could cut interest rates further to support its economy, sending the rupee back towards its record low against the dollar.
The Fed’s move has also put a harsh spotlight on the European Central Bank, which has much less room to ease policy than the Fed. Market prices reflect expectations that it will cut its deposit rate by 10 basis points at its meeting next Thursday. However, that may not be enough to stop a narrowing interest rate differential with the U.S. pushing the higher: it’s already up 2.4% against the dollar in the last week.
4. Nordstrom’s new leadership fails to reassure
Hewlett Packard Enterprise (NYSE:) and retailer Nordstrom (NYSE:) are set to open sharply lower after reporting weaker-than-expected results after the close on Tuesday.
Nordstrom stock fell 7.2% – after already falling 2.9% in normal trading – after saying earnings per share fell some 3% from a year earlier in the fourth quarter. The market had expected it to defend 2018’s level. The market wasn’t reassured by the announcement that Erik Nordstrom will become sole CEO of the company, while his brother Pete will become President and chief brand officer.
HPE, meanwhile, slumped 5.8%, after a 2.3% drop in normal hours after reporting a sharp drop in server sales in the three months through December.
5. Saudi Arabia seeks massive OPEC+ cut
Saudi Arabia is reportedly pushing its allies inside and outside OPEC to cut over 1 million barrels of oil a day from their already-reduced output levels, in what looks like an increasingly desperate effort to stabilize the world oil market.
OPEC’s Joint Ministerial Monitoring Committee meets in Vienna on Wednesday ahead of a two-day meeting of ministers that is expected to sign off on some form of additional output restraint to avoid another catastrophic glut. As ever, the most difficult part of the talks will be apportioning the burden of those cuts.
futures, which have rebounded from below $45 at the depth of the market panic, were up 0.6% at $47.47 a barrel, while global benchmark was up 0.7% at $52.22 a barrel.
At 10:30 AM ET (1530 GMT), the U.S. government will release its weekly report. The American Petroleum Institute’s report of a 1.6 million-barrel build in crude inventories on Tuesday was somewhat below expectations for a build of 2.64 million barrels in today’s EIA data.