- Extreme Fed easing measures to soften credit-risk saturated markets
- U.S. futures hit daily up-limit as global stocks surged
- Gold rose for the third day, regaining its previous luster
- The U.S. releases New Home Sales for February on Tuesday.
- Germany's IFO Business Climate Index figures are published on Wednesday.
- Oil traders will be keenly watching Wednesday’s Crude Oil Inventories weekly update.
- U.S. Q4 GDP is released on Thursday.
- Futures on the S&P 500 Index increased more than 5.0%.
- The Stoxx Europe 600 Index surged 5.06%.
- The MSCI Asia Pacific Index advanced 4.8%.
- The Dollar Index sank .5% for a total of 1.3% in the last three sessions.
- The euro increased 1% to $1.0832.
- The British pound climbed 0.9% to $1.1643.
- The Japanese yen advanced 0.6% to 110.61 per dollar.
- The yield on 10-year Treasuries climbed three basis points to 0.82%.
- Germany’s 10-year yield increased three basis points to -0.34%.
- Britain’s 10-year yield advanced two basis points to 0.447%.
- Gold climbed more than 6.5% to $1,675 an ounce.
- West Texas Intermediate crude climbed 5.2% to $24.57 a barrel.
Key Events
On Tuesday, U.S. futures for the Dow, S&P 500 and NASDAQ, along with global shares, all rallied from multi-year lows.
Oil pushed higher, the dollar extended a new decline, Treasurys were flat.
Global Financial Affairs
After $26 trillion in value was erased from markets in just over a month, some investors are currently sifting through the wreckage for bargains. There are those who now argue that liquidations are near and will end with real-money investors such as pension funds ready to step in. As well, there are signs of improvement in some of the world’s regions that were hardest hit by COVID-19.
On the other hand, the number of infections globally continues to accelerate and many of the world's largest economies are grinding to a halt.
Nevertheless, risk appetite returned to markets yesterday, albeit in a limited fashion, after the Fed's unprecedented move to backstop large swaths of the U.S. financial system. However, the U.S. fiscal aid package to American workers and businesses remains gridlocked as congressional Democrats and Republicans continue to disagree on the specifics of the bill.
Still, contracts on the S&P 500 Index, the Dow and NASDAQ all hit their daily up-limits as we write this. That's more than double what was lost yesterday on the underlying benchmarks.
The pan-European Stoxx 600 Index rallied, led by energy and mining shares, after yesterday reaching its lowest level since late-2012.
From a technical perspective, the European gauge found support by the bottom of a rising flag, bearish after the preceding 30%, heart-stopping plunge which took place during the course of only 8 sessions. Another negative sign: a death cross was triggered as the bearish pattern developed.
Asian indices all flashed green this morning. The minimum gain for the regional benchmarks was +2.38% by China’s Shanghai Composite. After falling less than other local indices during the height of the Wuhan-induced pandemic breakout, it was out of character for the Sino index to lag regional peers.
South Korea’s KOSPI outperformed, (+8.6%), as the government announced measures to stabilize financial markets. Also, the Seoul index provided bargain hunters with the best deals, after having fallen to the lowest since 2009.
Yesterday on Wall Street, U.S. stocks slumped. Gains on the Dow made since President Donald Trump won the White House have almost been totally wiped out. Measures of corporate credit risk eased after the Federal Reserve announced its massive second wave of initiatives to support the shuttered American economy caused a late-session surge, but shares still ended lower.
Yields gave up their highs. But the 10-yearTreasury note still rose for the first time in four sessions, as investors moved into riskier assets.
Rates may have completed a bearish flag on the daily chart.
The dollar fell for the third day, after the global reserve currency surged for 7 out of 8 sessions, adding 8.5%.
Friday’s extremely bearish hanging man was confirmed on Monday by a lower close. Today’s decline follows the pattern. Dollar bears will have to contend with dollar bulls at the 101.00 area, above a rising channel since the February 2018 bottom.
Gold rose for the third day, showing signs of a reversal.
Oil extended a rally after the Fed launched its support measures.
The commodity is heading back to $25, toward our $30 return-move target based on the current rising flag.