Global financial markets rally on the Tuesday’s morning session cheering the synchronized monetary stimulus plans from global central banks and the emergency fiscal programs from the local governments.

The U.S. Federal Reserve announced unprecedented QE measures to combat the COVID-19 pandemic. The Fed pledged for an open-ended asset purchase program under quantitative easing measures without limit. Other measures include maintaining credit flow for businesses and support into corporate bonds.

 

Coronavirus Update:

Global cases: At least 334,981, according to the latest figures from the World Health Organization

Global deaths: At least 14,652, according to the latest figures from the WHO

Italy’s health ministry said as of 6 p.m. local time on March 23, there were a total of 63,927 confirmed cases in the country and about 6,077 people have died. The one-day rise in the number of new infections was the smallest increase for five days, Reuters reported earlier.

 

Market Reaction:

The US futures rose by 3% in the overnight trade after the Federal Reserve announced an unlimited quantitative easing program to combat the economic impact of the pandemic in the US market. The Dow futures rose 800 points, indicating an opening near 19.400 points.

Fig 1, Dow Jones index, 30-minutes chart

Asian markets rallied by 6% this morning following the stimulus measures to support the regional economies and general risk appetite sentiment. Major stock indices such as the NIKKEI and KOSPI led the gains by 8%, while the Chinese and Australian indices rose by 4%.

The overnight moves followed yet another stormy day on the US market yesterday as investors turned back to pessimism and pushed the major indexes to new multiyear lows. The market sell-off was triggered after the US massive stimulus funding package failed for a second time on Monday to get enough votes in the Senate.

The Dow dropped by 3% and remained on pace to clinch its worst calendar month since 1931. The S&P 500 dropped 2.9% and closed 34% below a record set last month as both indexes sank further into bear markets amid the pandemic outbreak.

 

Crude oil:

Crude oil prices jumped by 5% in the Asian morning session on hopes for possible alliance between the US and Saudi Arabia to stabilise the falling energy markets. The U.S. administration has appointed a special energy representative to Saudi Arabia to cooperate with OPEC members and to find a common solution for the oversupplied energy market.

WTI crude price rose near $25 per barrel while Brent price reached to the $28 level as the synchronized stimulus measures could support the weak crude oil demand hammered from the pandemic. Both prices have risen by more than 20% since they bottomed last week.

 

Precious Metals:

Gold, Silver and Palladium prices have gained more than 5% since Federal Reserve announced the aggressive QE program which is bullish for the non-yielding precious metals.

Fig 2, Gold price

Gold price gained almost $100 in a single day, rising from Monday’s intraday lows of $1.480/oz to Tuesday’s highs of $1.580/oz. The Silver price has rallied near 10% since yesterday’s lows of $12 to today’s highs of $14 while the Palladium price gained $200 to $1.800/oz.

 

Forex Market:

The US dollar was pressured yesterday after the Federal Reserve increased the liquidity in the market announcing an unlimited QE in response to the ongoing pandemic-related crisis. The DXY- dollar index dropped near 101.50, down 0.70% on the day. The US dollar was weaker across the board, with the EUR/USD pair rebounding near 1.08 level, while the USD/JPY dropped near 110, down from yesterday’s highs of 112.

Fig 3: USD/JPY pair, 30-minutes chart

The Australian and New Zealand dollars were the strongest currencies across the board supported from the Asian market rally and weaker US dollar. Both currencies suffered huge losses since the outbreak of the virus, falling to decades lows against USD and Yen.

 

Economic Calendar for March 24, 2020 (GMT +2:00):

 

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Vrasidas Neofytou

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