Global financial markets rally this morning following the approval by Congress of the well-expected $2 trillion stimulus bill to support the US economy from the pandemic outbreak. The US stock posted a historic one-day percentage gains of 12% on Tuesday, the biggest since 1933, while the Asian-Pacific markets settled this morning with 5% profits.

The White House and Senate leaders reached a deal early Wednesday on a massive $2 trillion coronavirus stimulus bill to combat the economic impact of the outbreak. Senate will vote and pass the legislation later Wednesday.

 

Coronavirus Update:

Global cases: At least 375,498, according to the latest figures from the World Health Organization

Global deaths: At least 16,362, according to the latest figures from the WHO

Top six countries with the highest number of reported cases: China (81,767), Italy (63,927), U.S. (42,164), Spain (33,089), Germany (29,212), Iran (24,811).

The virus has infected more than 50,206 people and killed at least 600 people in the US, according to Johns Hopkins University. The New York state, which has 25,665 confirmed cases as of Tuesday, according to Gov. Andrew Cuomo, accounts for nearly half of all cases in the U.S.

 

Market Reaction:

The US stock markets had a historic rally on Tuesday, with Dow Jones posting 12% gains closing at 20.704, to its biggest percentage gain since 1933. The S&P 500 rallied 9.4% to 2,447.33 for its best day since October 2008. The Nasdaq Composite surged 8.1% to 7,417.86, its best day since March 13. Energy was the best-performing sector in the S&P 500, soaring 16.3%, while industrials and financials each jumped more than 12%.

The US futures extended their overnight gains by 1%, after the US Congress approved the $2 trillion stimulus bill this morning. The Dow futures indicated an opening near 21.000 points.

Fig 1: Dow Jones index, 2-hour chart

Asian markets surged by 5% this morning extending the massive US rally. The Japanese index NIKKEI finished the day with 8% gains, while the Chinese and South Korean indices were also higher by 3%.

 

Crude Oil:

WTI and Brent crude oil prices jumped by 3% this morning, trading at $25 and $28 per barrel respectively, continuing their overnight rally on expectations that the US stimulus package would support the oil demand.

WTI crude price settled at $24, up 2.7% on Tuesday, while the Brent crude finished the day at $27.27 per barrel. Sill the demand for oil is weak as the ongoing travel bans and home quarantines have reduced the global jet fuel and gasoline demand for about 10% or near 10 million barrels per day.

 

Safe Havens:
Gold continued its rally on Tuesday, moving above $1.600 per ounce level. The price of the yellow metal has surged by more than 10% since Monday, supported from the Fed’s stimulus package and zero interest rates.

Fig 2: Gold price, 2-hour chart

However, the price rally has lost some steam this morning as the price retreated from the intraday highs of $1.640/oz to the current lows of $1.605/oz or 1% lower. The Congress agreement and the general risk on mood after the stock market rally has triggered some profit-taking actions.

 

Forex Market:

Commodity currencies such as the Australian, New Zealand and Canadian dollars led the gains in the forex market this morning on improved market sentiment and higher crude oil prices. The Aussie has been stronger against the Yen and the US dollar since Monday, bouncing off its recent multi-year lows.

Fig 3: AUD/USD pair, 1-hour chart

The safe havens Japanese Yen and Swiss Franc were lower while the US dollar was stable after the Congress agreement. The USD/JPY trades near 111.30, just below the record highs of 113 while the DXY- US dollar index holds the 101.50 level.

 

Economic Calendar for March 25, 2020 (GMT+ 2:00):

 

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Vrasidas Neofytou

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