Daily summary: FED to the rescue

 

The number of infected cases in the US increased over 30% over the last few days to 39,371 as testing capacity expands. Death toll in the US increased to 467. New York City is the region’s epicentre with over 9,000 cases. Other states including Ohio, Louisiana, Delaware and Philadelphia joined New York, California, Illinois, Connecticut and New Jersey ordering their citizens to remain at home.

Today FED announced that will start unlimited bonds purchase in order to support the economy as number of infections is rising across the country.  Federal Reserve is planning to provision of up to $300 billion in new financing for employers, consumers, and businesses; continuing purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning; purchases of agency commercial mortgage-backed securities; establishment of two facilities to support credit to large employers; establishment of a third facility to support the flow of credit to consumers and businesses; and facilitating the flow of credit to municipalities. On March 15th, the Fed lowered the target range for its federal funds rate by 100bps to 0-0.25% and launched a massive $700 billion quantitative easing program during an emergency move.

The US stock indices opened in a green zone  as investors welcomed Fed's new extensive measures to support the economy although the improvement proved temporary and stocks continued to fall. Investors also await the Senate to pass the coronavirus stimulus plan after the Democrats failed to approve it on Sunday. The European indices finished session lower. Dax dropped 2.10%, CAC 40 lost 3.32% and FTSE 100 went down 3.79%. The US stocks are also trading in red. The Dow Jones is down 2.16%, the S&P 500 fell 2.38% and the Nasdaq went down 0.28% .

 

The US dollar briefly fell after the Federal Reserve announcement,  however  later in the session American currency managed to strengthen against most of other major currencies.

Oil Prices Struggle to hold gains after Fed stimulus. Both WTI crude and Brent prices have been under pressure due to the concerns about the spread of the pandemic and increased oil production from Saudi Arabia. Global crude consumption is now expected to contract this year for the first time in over a decade, dragged by countries slowing economic activity to combat the coronavirus outbreak. US crude oil went down 0.3%  and the Brent crude lost 1.82%.

Gold prices climbed 5.43% to $1,568 an ounce after FED’s announcement and managed to recover previous losses as investors welcomed further stimulus to face the coronavirus-crisis.

On the data front, Flash Manufacturing and Service PMI data from Europe and US will be the key points in tomorrow’s calendar.

Recent actions from central banks and governments all around the world failed to shore up sentiment and stock markets remain under pressure. Investors seem to be still concerned about the impact of coronavirus, as the number of cases is still increasing and more countries are introducing new restrictions.