• Joel

Markets Stabilise As Central Banks Ease

At the time of writing (1545GMT/1045EST), markets have up until now shown signs of stabilisation following yesterday’s rout. (They have been gradually falling since I recorded the video, at which time S&P500 futures were up around 5%, they are now up just 2%).

As a reminder, US and European equities fell north of 10% yesterday and traditional safe havens such as bonds and gold were also hit as investors flocked into cash in panic.

In my blog yesterday, I outlined how a lack of effective global leadership from the fiscal and monetary authorities was causing panic; the leader of the free world Trump’s best suggestion was to point the finger of blame at China and Europe and ban flights from Europe. Later, the ECB effectively put their hands up and said “we’ve got nothing left” when they chose not to cut rates and begged Eurozone fiscal authorities for fiscal stimulus.

However, since then the Fed has stepped in with the announcement of a huge repo operation ($5trln to be injected over the coming weeks), the PBoC has cut RRR rates in China and the Norges Bank has become the third major central bank to implement an emergency 50bps rate cut.

Moreover, the European Commission unveiled a larger than expected Covid-19 fiscal response package, some EUR 37bln, which was larger than expected (but still not that big considering the size of the Eurozone).

In terms of a fiscal response from the US, it appears the Republican and Dems are at least trying to thrash out a deal over a package. That it better than hurling insults like they were yesterday.

Additionally, the G7 will hold another emergency call on Monday and Trump is reportedly on board with a big coordinated fiscal response, said French President Macron’s office.

So we are not their yet with the globally coordinated fiscal response that I spoke about yesterday. But it appears the sense of urgency is picking up, which seems to have given risk appetite a boost on Friday.

The big question now will be: can the G7 deliver after their call on Monday?


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