Global stock markets plunged at the first day of the week on ongoing pandemic fear and after US Congress failed to approve the coronavirus rescue package bill. The Dow Jones index fell 5% and hit “limit down” while the Asian-Pacific stock markets also dropped by another 4%. Safe havens Treasuries, Japanese Yen and Gold were the strongest across the board on a general risk aversion sentiment due to worries of a global economic slowdown caused by the pandemic.

The massive US funding package bill to combat the impact of the coronavirus in the US market did not get enough votes in a key Senate procedural vote Sunday evening. The Democrats leaders blocked the package, indicating that the bill was not enough to help workers but only to bail out companies.

 

Coronavirus Update:

Global cases: At least 294,110 according to the latest figures from the World Health Organization

Global deaths: At least 12,944, according to the latest figures from the WHO.

The Italian health ministry said as of 6 p.m. local time on March 22, at least 5,476 people have died due to COVID-19.

 

Market Reaction:

US stock futures fell by 5% and have hit “limit down” on Monday morning following the US Congress failure to approve the coronavirus rescue package bill. The Dow futures dropped by 700 points; indicating an opening near 18.400. The index closed on last Friday with 4% losses, concluding a weekly loss of 18%, its biggest one-week fall since the financial crisis in 2008. All major US stock indices are trading 35% lower from their all-time highs in February.

Fig 1: Dow Jones index, 30-minutes chart

The Asia-Pacific markets have also plunged this morning on pandemic fears. The Indian stock index NIFTY fell by 12% as the virus is spreading in the country, while the Australian and South Korean indices fell by 4%. Only the Japanese index- Nikkei closed in green by 2%.

Safe havens Gold and US Treasuries extended gains on the general risk aversion sentiment. Gold price trades near $1.500 per ounce level, while US 10-Treasury yields dropped near 0.80%.

 

Crude Oil:

Crude oil prices had significant losses during the Sunday night opening, falling by more than 4% as prospects for the OPEC and US Shale producer’s truce failed.

Fig 2, WTI crude oil, 30-minutes chart

The WTI crude price dropped to 18-years low of $21 per barrel before it bounced back to $22.50 while the Brent crude had intraday low at $25 before recovering near $26.50.

Both contract prices collapsed about 40% in the past two weeks since the breakdown of talks between the OPEC and Russia, leading Saudi Arabia to ramp up export supplies to 10 million barrels per day. The pandemic has caused a demand shock for the energy sector due to the travel bans, cancelled flights and global economic lock-downs.

On Friday, OPEC Secretary General Mohammad Barkindo invited Texas Railroad Commissioner Ryan Sitton to the organization's summer meeting in June. Although this invitation quickly raised hopes for a deal to stabilize oil prices, Sitton attracted criticism as he called for decreased production of Texan crude output for the first time since 1970. In addition, oil prices were supported last week by comments from U.S. president Trump that he might get involved in the oil (price) war at an appropriate time.

 

Forex Market:

Japanese Yen rose against major currencies on Monday, supported from the market sell-off during the Asian session. The Yen is gaining 1.5% against commodity currencies such as Australian and New Zealand dollars while is moving higher by 0.30% against the Euro and GBP.
The USD/JPY pair is struggling to hold the 110 level, down by 0.50% despite the stronger demand for US dollars. The dollar rally lost some steam after it jumped by 4.6% against Yen last week, opening at 106.22 on Monday and finishing at 111.28 near the close on Friday.

Fig 3, USD/JPY pair, 2-hours chart

 

Economic Calendar for March 23, 2020: (GMT+2:00)

 

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Vrasidas Neofytou

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