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Stock Sell-Off Deepens After Powell Virus Warning: Markets Wrap


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Stock Sell-Off Deepens After Powell Virus...

Stock Sell-Off Deepens After Powell Virus Warning: Markets Wrap

(Bloomberg) — U.S. stocks tumbled and Treasuries surged as investors worried the Federal Reserve’s emergency cut won’t be enough to combat the economic impact of the coronavirus.

The S&P 500 headed for its eighth drop in nine days, falling more than 3%, following the Federal Reserve’s 50 basis-point cut of its benchmark rate. Fed chair Jerome Powell said during a press conference that the U.S. economy remains strong but the virus outbreak will weigh on activity “for some time.”

The two-year Treasury yield sunk to 0.65%, while the 10-year plunged below 1% for the first time ever. Banks led losses on equity benchmarks.

“Does a 50 basis point cut change things? That’s a tough one to answer,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “Fed cuts tend to be less effective in situations like this when there is a supply and demand shock.”

Investors had piled out of risk assets last week as the spreading virus threatened to derail global growth, only to pour back in Monday in anticipation of concerted action from Group of Seven officials. Oil pared its rebound Tuesday, approaching $46 a barrel, while gold rose. The yen was higher versus the dollar.

“Moving between meetings with a bigger than normal interest rate cut looks like Fed officials are panicking as much as stock market investors did last week,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “They did not need to be so aggressive and the Fed under Powell keeps responding wrongly in our view more to the financial markets than they are to the broader economy. We aren’t in a recession yet and today’s move won’t keep one from coming.”

The OECD warned that growth will sink to levels not seen in more than a decade and ever more businesses are warning about the impact of the illness.

The governor of the Bank of England, Mark Carney, said it would take all necessary steps to help the economy. Australia lowered its benchmark by a quarter percentage point. Its currency rose, however, underscoring how traders’ expectations have rapidly shifted in recent days.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 3.3% as of 2:12 p.m. New York time.The Down Jones Industrial Average dropped 3.5%.The Stoxx Europe 600 Index gained 1.4%.The MSCI Asia Pacific Index rose 0.5%.

Currencies

The Bloomberg Dollar Spot Index fell 0.4%.The euro rose 0.2% to $1.1161.The British pound gained 0.4% to $1.2808.The Japanese yen strengthened 0.9% to 107.33 per dollar.

Bonds

The yield on 10-year Treasuries decreased 21 basis points to 0.95%.The two-year rate lost 25 basis points to 0.66%.Germany’s 10-year yield dropped two basis points to -0.64%.

Commodities

Gold futures added 2.9% to $1,635.10 an ounce.West Texas Intermediate crude was little changed at $46.80 a barrel.

–With assistance from Sophie Caronello.

To contact the reporters on this story: Vildana Hajric in New York at [email protected];Katherine Greifeld in New York at [email protected]

To contact the editors responsible for this story: Jeremy Herron at [email protected], Randall Jensen, Sam Potter

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.

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Stock Futures Rise Ahead of G-7 Teleconference: Markets Wrap(Bloomberg) — U.S. and European equity futures rose ahead of a teleconference with Group of Seven finance chiefs, as expectations build for Federal Reserve easing.President Donald Trump said the Fed “should ease and cut rate big” after Australia lowered its benchmark by a quarter percentage point Tuesday; trading shows expectations for a half-point U.S. move in March. Futures on the S&P 500 Index rose after the benchmark climbed the most since December 2018 Monday. Asian stocks surrendered gains after a report suggested the G-7 would stop short of specifying monetary and fiscal moves. The yen and Treasuries gained.Australia’s dollar rose even after the central bank cut its benchmark rate by a quarter point, underscoring how traders’ expectations have rapidly shifted in recent days. The Reserve Bank of Australia, in its policy statement, noted that expectations are for further monetary stimulus by most economies in coming months, including the U.S. Malaysia also lowered its main rate Tuesday.“If the Fed surprises in a meaningful way, that could help further — but you could argue the market already discounts it,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “I’m also looking to see if we have anything from the fiscal side,” she said. Packages such as Italy’s $4 billion effort “are the sorts of headlines that would boost confidence that governments are prepared to act,” she said.The central banks’ turn follows signs of mounting damage to the global economy. The OECD is warning that growth will sink to levels not seen in more than a decade. Global manufacturing contracted in February by the most since 2009 as the outbreak severely disrupted demand, trade and supply chains.Here are some key events coming up:U.S. citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election.The Bank of Canada has a rate decision on Wednesday.OPEC ministers gather in Vienna on March 5-6.These are the main moves in markets:StocksS&P 500 futures were up 0.1% as of 4:07 p.m. in Tokyo. The S&P 500 Index jumped 4.6%.Topix index dropped 1.4% at the close after rising as much as 1.7% earlier.Euro Stoxx 50 futures rose 0.8%.MSCI Asia Pacific Index rose 0.1%.CurrenciesThe Japanese yen rose 0.4% to 107.92 per dollar.The offshore yuan was down 0.3% at 6.9816 per dollar.The euro was flat at $1.1134.BondsThe yield on 10-year Treasuries fell about four basis points, to 1.12%.Australia’s 10-year bond yield fell about one basis point to 0.79%.CommoditiesWest Texas Intermediate crude climbed 1.3% to $47.36 a barrel.Gold rose 0.5% to $1,597 an ounce.–With assistance from Sophie Caronello.To contact the reporter on this story: Andreea Papuc in Sydney at [email protected] contact the editors responsible for this story: Christopher Anstey at [email protected], Ravil ShirodkarFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


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